Biden’s new plan would provide $5,000 in debt relief for 10 million borrowers. (iStock)
President Biden just announced his new plan to provide student loan debt relief. When paired with the other cancellations the Biden Administration has provided, this relief would apply to more than 30 million Americans.
The President traveled to Madison, Wisconsin to reveal his plans. If implemented, these plans would eliminate accrued interest for 23 million borrowers and would cancel the debt for more than four million borrowers. An additional 10 million borrowers would receive at least $5,000 in debt relief, a slight adjustment to Biden’s original student loan debt cancellation that would have provided $10,000 in forgiveness for many borrowers. The original plan was struck down by the Supreme Court last year.
“Today, too many Americans — especially young people — are saddled with sustainable debts in exchange for college,” Biden told a crowd while visiting Madison Area Technical College. “The ability for working and middle class folks to repay their student loans has become so burdensome that a lot can’t repay, even decades after being in school.”
Under the new plan, certain borrowers could receive $20,000 in debt cancellation if the borrower’s balance has grown due to unpaid interest. There are no income limits for this potential forgiveness. For low and middle-income borrowers currently enrolled in the SAVE plan or other income-driven repayment plans, Biden’s plan may provide complete forgiveness of their entire debt balance.
If you have private student loans, federal forgiveness and relief doesn’t apply to you. If you’re looking to lower monthly payments, consider refinancing your student loans. Lock in some of the lowest interest rates ever via the online marketplace Credible.
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Students who don’t complete college often deal with worse debt
Students who take out student loans but never finish their degree, struggle to pay their debt down more often than those who complete their degrees. This occurs because the payments are higher than the income provided by the jobs non-graduates secure.
Borrowers who didn’t complete their degrees now owe $918 million overall, which is 6% more than they borrowed in the first place, a study from the HEA Group revealed. The group of borrowers who did complete their degrees owe a combined $3.2 billion — 6% less than the amount they borrowed.
The study found that the degree level also made a difference in repayment timelines. Borrowers who complete four-year degrees owe 8% less on their federal student loans. Those who didn’t complete their four-year degrees now owe 6% more than what they originally took out.
To save on your monthly student loan payments, you may want to consider refinancing. An online tool like Credible can be handy for comparing student loan refinancing rates from multiple lenders without affecting your credit score.
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Student loan debt makes saving for retirement difficult for many
The burden of student loan debt is making saving for retirement a difficult goal for many borrowers. Balancing high-cost payments with retirement contributions is difficult for those already struggling to make ends meet.
For employees with incomes of less than $55,000 who make regular student loan payments, the average percentage the employee contributes toward retirement is 5.3%, the Employee Benefit Research Institute found. Employees without student loan payments contribute 5.7%, on average, to their retirement accounts, the study said.
The difference grows for workers with higher incomes. Employees that make student loan payments and earn $55,000 or more each year contribute 6.1% to their retirement accounts, on average, compared to the 7.3% those without student loans contribute.
If you can qualify for a student loan refinance at a lower rate than you’re currently paying, there are often few downsides to refinancing. You can use Credible to compare student loan refinancing rates from multiple private lenders at once.
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