College maybe education maybe a little too pricey for other people, especially in the United States of America. It is somewhat expensive; that’s why most US citizen parents save money for the child’s college fees.
On the other hand, there are unfortunate students because their parent’s savings are not enough to pay for expenses. That’s why they resorted to student loans.
The percentage of student loans in the US is much more significant than you think. It takes the second-largest slice in terms of household debts.
With that, you can see that it is hard to finance your children’s education if you’re not prepared for it. But there is new hope for the US citizens today, through President Joe Biden.
What Exactly is Student Loan?
A student loan is a financial aid that helps students to pay for higher education. It is also the money that a student borrows from the federal government.
Even a private lender can help students pay for tuition fees, living expenses, books, and supplies.
There are different kinds of student loans available for undergraduate students.
Subsidized Loan
Subsidized Loan is what you call, “gold standard of student loans.” The taxpayers are the ones that will pay your Loan’s interests in the duration of your stay in the school.
Still, you have to qualify and pick the said Loan. You also start paying your loans six months after you graduate. Or if you suddenly stop going to school.
Another thing, you can also go to graduate school with this kind of student loan. The taxpayers will still pay for the interests from your undergraduate studies.
Although it has good conditions, subsidized loans are only for students with financial needs. Your FAFSA determines the undergraduate students with financial needs.
There is also a limited amount that you can get each year of your college life.
For first-year college students, they can qualify for up to $3,500 in subsidized student loans. In contrast, students with subsidized and unsubsidized loans can get up to $5,500.
The amount of money you can get every year increases.
Unsubsidized Loan
Unsubsidized Loan is the second-best choice for student loans. In unsubsidized loans, you are responsible for paying your Loan interests from the beginning.
But like a subsidized Loan, you can pay everything after six months of graduating or if you suddenly stop going to school.
You can get an unsubsidized loan even if you’re not financially in-need.
It can be an independent student or a student’s parents that do not qualify for the Parent Plus Loan. You can look at the chart above for more details.
Parent PLUS Loans
Parent PLUS Loans are one of those Federal Loans. This kind of loan interest rate is similar to the rate of Subsidized and Unsubsidized Loans.
But there’s a big difference between these kinds of loans.
A Parent PLUS loan is under your parent’s name. This means that it is the student’s parent’s responsibility.
There are some families, though, that conducts an agreement that the student will be the one paying for the Loan.
Even though the student is the one paying, it affects the parents’ credit and financial status. They are responsible for it since the Loan is named after them.
On the other hand, the parents will start paying the Loan after the student gets the borrowed money.
But they can ask for a postponement, wherein they can pay it back, six months after the student’s graduation. Or six months after the student stopped going to his/her classes.
Like Unsubsidized loans, it is the parent’s responsibility to pay the Loan interests in the beginning.
So, a little advice, it is better to pay the interests while the student is in school.
This is only available to borrowers without an adverse credit history. That’s why the parents will undergo a credit check to determine if your parents qualify for the Loan.
You can also appeal if your parents did not qualify. There are two things they can do: 1. Have a cosigner, or 2.
Submit evidence of extenuating circumstances. There is a condition about the maximum amount that your parents can borrow from this Loan.
The cost of attendance, which the school will determine, minus the amount of the financial aid you’re receiving.
Private Loans
Private loans are non-Federal loans. You can get this from a bank, the state, or your school. Typically, you have to start paying this right away.
You also have to establish any credit because you will need a cosigner if you don’t have any credit. This is because the interest rates will be extremely high from some private lenders.
This kind of loan doesn’t come with the protection of Federal Student Loans.
It doesn’t have any security, like Income-Based Repayment, deferment and forbearance choices, and the capability to consolidate your loans.
Private loans are like any other kind of student loan. You will be able to pay the different school fees, but you should avoid private loans at all costs.
Student Loans in the United States
The percentage of students who get student loans increases every year. An average student’s loan debt is $32,731.
The total student loan debt is $1.52 trillion, and the number of student loan borrowers is 44.7 million.
As per Class 2017, Connecticut has the highest student loan debt at $38,510. The total student loan balance since 2004 has increased by $80 billion each year.
On the other hand, the average student loan per state is $28,650. Besides Utah, 45% or more are in debt in each state.
Then, the majority of students (29.7 million) get their loans from the federal government. But the private student loan increased by 20% each year.
Joe Biden’s Proposal for Student Loan
President Joe Biden started sharing his proposal concerning student loans ever since his campaign. He included this in his platform and showed a greater ambition in changing higher education.
This had relief for student loan borrowers. Even on his regime’s first day, he extended the student loan payment pause through September 30, 2021.
Although there is still debate about this, Biden is persistent in giving relief to the borrowers.
Here are the details about the Biden administration’s proposals that, hopefully, fix the higher education’s issues.
The Student Loan Forgiveness Proposal
On January 8, Biden’s officials emphasized the president’s support for the cancellation of $10,000 to the federal student loan.
This includes all the federal student loan borrowers as an inclusion for the COVID-19 relief. With that, it can wipe out the debt of 15 million borrowers who owe $10,000 or less.
On the other hand, 67% of the borrowers have more than $10,000 in debt.
Biden also recommended the cancellation of federal student debt under the following instances:
- Suppose the borrower attended a public college/university. Students from historically private colleges and universities and the minority-serving institutions are also part of this.
- Suppose the borrower used the loans for undergraduate tuition. Students from Graduate school are not eligible and cannot be canceled under this proposal.
- If the borrower earns less than $125,000.
The following instances would not affect the borrowers with private student loans. On the brighter side, Biden shows support in making discharge in personal loans much more accessible.
Biden also proposed additional forgiveness for public service. He introduces a new student loan forgiveness for the ones who give public service.
- Up to $50,000 will be forgiven. In Biden’s plan, $10,000 of a borrower’s debt will be canceled each year automatically that he/she performed eligible service. You can do this for five years.
- It will not replace the Public Service Loan Forgiveness. This is the program for government workers, teachers, and nonprofit employees. It also requires the borrowers to create 120 payments for their balance forgiven.
- Biden will rework the Public Service Loan Forgiveness. He proposes additional federal loans and repayment choices for the borrowers under PSLF. Under this proposal, half of the balance will be forgiven after five years.
The Forbearance of Student Loans
Before Biden extended the pause of student loan forbearance, it began in March. He also extended the forbearance for the second time on December 4, 2020.
Initially, it was set to end on January 31, but he extended it through September 30, 2021.
This means that it automatically pauses the payments of federal student loans. It also remains the new interests on the loan balance and postpones the collection activities on default loans.
The Pell Grants
This plan showcases more extensive Pell grants. These are available to the students who are in financial need.
These grants are worth up to $6,345, covering 60% of public colleges’ tuition fees for four years. It does not need an account for room and board or other fees included in the attendance cost.
Biden also wants to expand eligibility to have more from the middle class.
The Plan for Free College Tuition
Biden also proposed to make some schools tuition-free:
- If the borrower attends a public college/university. If he/she belongs to a family with below $125,000 income, the tuition will be free for four years.
- Suppose the borrower attends a private minority-serving institution. The proposed grants will cover up to two year’s tuition fees. It includes private historically Black colleges or universities, tribal colleges or universities, and MSIs.
- Suppose the borrower attends a community college. The tuition fee would be free for two years if the borrower didn’t pursue a postsecondary degree before. Not just that, the borrower can use the money for a career-training program.
Although the tuition fees are free, the other expenses are not. They still have to pay for it, such as room and board, and books.
How Joe Biden Helped the Students’ Debt Problems
Student loans are the usual financial problems of the fresh graduates of the United States. Some are on the verge of bankruptcy.
According to Biden’s plans, he would like to allow private student loans to be discharged for bankruptcy. This is because private student loans are not backed-up by federal protection.
Joe Biden’s plans show a glimpse of hope for the students who have a big student loan. In this time of the pandemic, it would be a big help.
Postponing the payment of their balances gives them enough time to save money.
Decreasing their debt is a big help for them, especially for those who support their families.
Final Thoughts
Having a high-quality education costs a lot. The expenses are one of a kind that will haunt you for the rest of your life.
Student loans are an aid for people who want to go to college. You have to find out ways to pay them. Few alternatives that will help you to decrease the money you borrowed to pay for your fees.
Student loans allow people to chase their dreams and achieve their goals.
In a vast country like America, we’re supposed to live a comfortable life. But citizens also suffer from debts and loans.
With Biden’s plans, it will be easier for them to pay for it.
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