Most people know that President Biden’s plan to erase $10,000 to $20,000 in student loan debt for eligible Americans failed in 2023, and for reasons that were fairly easy to predict. Ultimately, the Supreme Court ruled the plan was unconstitutional, and that the President doesn’t have the authority to simply wipe away debt with the stroke of a pen.
There were other problems with the student debt forgiveness plan aside from that, including the fact it did nothing to keep college costs down or help future students pay for school.
Still, it feels like something needs to be done about our nation’s student loan debt crisis, whether that “something” comes in the form of a new student loan forgiveness attempt or a different idea altogether. Plus, it’s an election year, which means that more promises are likely coming.
Could More Forgiveness Be On the Way?
Financial advisor Steve Azoury of Azoury Financial says that part of the problem comes with figuring out who should be eligible for forgiveness. Biden has assembled a committee of higher education experts, student loan experts and other educational professionals to help draft a new plan for loan forgiveness, but not much has happened since nobody can seem to agree on how it would work.
For example, should forgiveness be available to low- and middle-income Americans? Those with debts they have been paying for decades? Americans who have a chronic illness? People who have filed for bankruptcy?
“For some reason, this committee can’t come to a consensus on who to fight for and the meetings have dragged on, ultimately going nowhere,” said Azoury.
Even so, the advisor points out that Republicans have made no secret of their belief that any form of student loan debt relief is unfair to Americans who have paid off their loans or never went to college. This means that, if a Republican wins the Presidency in 2024, mass student loan forgiveness is unlikely. Of course, the opposite is also true. If President Biden wins a second term, it’s likely he will continue to push for mass student loan forgiveness.
“Whether or not he would be successful is undetermined,” said Azoury.
Plus, families need to remember that there are already over 80 existing student loan forgiveness programs nationwide.
Some Efforts Have Succeeded Already
Of course, some types of forgiveness have made their way through the system already, albeit mostly for students who are paying back loans with other income-driven repayment plans and Public Service Loan Forgiveness (PSLF). Billions in forgiveness also went to borrowers with a total and permanent disability and students who were cheated by their schools or attended institutions that closed.
Nearly $5 billion in additional student debt relief was just announced in early December as well, including $2.2 billion for nearly 46,000 borrowers through fixes to income-driven plans and $2.6 billion for 34,400 borrowers paying off debt through PSLF.
The Biden administration also managed to bring another plan to fruition that will provide much-needed relief. The Saving on a Valuable Education (SAVE) Plan makes student loan payments more affordable in a few ways, including raising the floor (to 225% of the federal poverty limit) so more people can qualify for $0 monthly payments.
Biden’s SAVE plan also bases undergraduate student loan payments on 5% of a student’s “discretionary income,” which is half of what people have paid under other income-driven repayment plans. Graduate student loan payments are based on 10% of discretionary income. Of course, students pay these minimum amounts for 20 to 25 years before having remaining loan balances forgiven completely.
Just as important as the other benefits of this plan is the fact that interest won’t accrue if your low monthly payment is too low to cover it.
“If you make your full monthly payment, but it is not enough to cover the accrued monthly interest, the government covers the rest of the interest that accrued that month,” reads the studentaid.gov website. “This means that the SAVE Plan prevents your balance from growing due to unpaid interest.”
Keeping College Costs Down
Since nobody knows whether more student loan forgiveness is on the way or what it could look like, your best bet is trying to keep college costs down so you can borrow less overall. There are myriad ways to go about this, but Michael Liersch, Head of Advice and Planning at Wells Fargo, says that a few strategies may lead to the best possible results.
First off, Liersch says far too many families make the cost of college a secondary consideration. Instead, they focus on picking schools based on other factors instead, then try to figure out how to afford it.
“It is one of the most important decisions and one of the most common forms of debt for Americans, next to a home,” he said.
Liersch also says that families cannot avoid the conversation about who is going to pay for what. How much should the student be accountable for? How much should the parents be accountable for? How much in student loans is sustainable to pay back? These conversations must be had no matter what, even if they’re uncomfortable.
Finally, students should consider alternative education options outside of four-year undergraduate degrees.
“There are many affordable, focused and comprehensive paths that students can take, including programs that focus on certain vocations or community colleges,” said Liersch.
Financial advisor Brandon Robinson of JBR Associates in Plano, Texas agrees with that final statement, and he even says to remember that college may not be the best option for every student.
And if the alternative is racking up tens of thousands in student loan debt, it may be better to tap the brakes and enroll in a smaller community college or trade school first.
“By getting the essential courses out of the way in the first two years and then enrolling in a larger college or university, you may save thousands of dollars and avoid going into debt on day one of your career,” said Robinson.