In the ever-changing world of student loans, staying on top of current events and student loan rates is critical. Below are this week’s student loan trends that could affect your loans — and your wallet.
2 current trends within student loans for the week of April 19, 2021
1. Biden student loan cancellation could wipe out debt for a majority of federal borrowers
On April 13, Sen. Elizabeth Warren gave a hearing in which she presented new Department of Education data highlighting the impacts of student loan cancellation. The data outlined the benefits of forgiving $50,000 in federal student loans per borrower, as she has advocated for, versus President Joe Biden’s original proposal to cancel $10,000 of federal debt per borrower.
Under Biden’s plan, approximately 15 million borrowers would see all of their federal student loan debt forgiven; under Warren’s plan, that number would increase to approximately 36 million. With 45 million federal student loan borrowers currently in repayment, Biden’s and Warren’s plans would cancel all federal student loan debt for 33 percent or 80 percent of federal borrowers, respectively.
The cancellation would particularly benefit borrowers in default or delinquency. Approximately 4.6 million borrowers in default would see their entire debt forgiven under Biden’s plan, while 9.8 million would see their debt totally forgiven under Warren’s — a whopping 95 percent of borrowers currently in default on federal loans.
How this affects student loans
The Biden administration appears to be more seriously considering some form of student loan forgiveness. In early April, Biden requested that Secretary of Education Miguel Cardona oversee a legal review as to whether or not cancellation without congressional approval is constitutional.
While the outcome of the review has not yet been made public, the results — and the new Department of Education data — could influence Biden’s next move regarding student loan debt. Even if he does decide to cancel some portion of federal student loan debt, it’s likely a few months away. Fortunately, federal borrowers can continue taking advantage of zero student loan payments in the meantime.
2. New proposal could help low-income college students pay for college
On April 15, Sens. Mitt Romney and Kyrsten Sinema introduced a bipartisan bill that could help students afford college-related expenses. Called the Earn to Learn Act, this program would help students who qualify as low-income pay for expenses through a college-matched savings program. In order to qualify, students would have to be Pell Grant-eligible.
Partnering with nonprofits and states that participate, the college-matched savings accounts would offer $8 for every $1 deposited into the account by the student prior to attending college. The funds could then be used at the school where the student enrolls to pay for tuition, books, fees and more.
How this affects student loans
If the Earn to Learn Act passes, it would help low-income, Pell Grant-qualifying college students save for college expenses and graduate with less debt. In addition to funding, qualifying students would benefit from financial literacy training through the program.
A similar program has been available for Arizona students for almost a decade and has helped the majority of participants graduate with little to no student loan debt.
Whether you’re new to student loans or well into repayment, it’s wise to stay informed about how your student loan rates could change. As 2021 continues, more opportunities for cheaper loans or loan forgiveness could open up; keep an eye on the Bankrate student loans news hub for the latest trends.