Feds to Forgive up to $20,000 in Student Loans

In addition, the DOE is proposing to raise the amount of income that is considered nondiscretionary and protected from being included in repayment calculations. No borrower earning under 225 percent of the federal poverty level — $30,578, or the annual equivalent of a $15 hourly wage for a single borrower — will have to make a monthly payment, the department says.

The White House provided this example: “A typical single construction worker making $38,000 a year … would pay only $31 a month, compared to the $147 they pay now under the most recent income-driven repayment plan, for annual savings of nearly $1,400.”

If the payment the borrower is expected to make based on the payment plan is not enough to cover the loan’s interest, the government will cover it. No borrower’s loan balance will grow as long as they make their monthly payments — ending a common problem for many borrowers, especially minorities. For example, 20 years after first enrolling in school, the typical Black borrower who started college in the 1995-96 school year still owed 95 percent of their original student debt, the White House says.

Those who work for certain nonprofit organizations, the military, or federal, state, tribal or local government may be eligible to have all of their federal student loans forgiven after 10 years through the Public Service Loan Forgiveness program. Eligibility requirements for the program were temporarily eased; those who would like to apply should do so before Nov. 1.  

A growing problem for those 50 and older

People may think of student loans as a problem only for younger borrowers, but in 2020, those 50 and older with loans owed $33.6 billion of the $1.6 trillion in student loans outstanding — more than a fivefold increase from 2004. In 1989, 3.1 percent of families headed by someone age 50-plus carried student loan debt, owing an average of $10,073. By 2016, 9.6 percent of families headed by someone age 50-plus carried student loan debt, with the average amount owed more than tripling to $33,053.

Many older Americans took out student loans because they wanted to get more education that could lead to a promotion or higher pay. Others decided to go back to school so they could change careers, particularly after suffering a layoff. And still others are on the hook for loans that paid for their children’s education, either from Parent PLUS loans — federal money borrowed by parents — or as cosigners for debt from private lenders. About 25 percent of borrowers age 50 or older make loan payments on private student loans because their student family member failed to do so.

According to the White House, about 16 percent of borrowers are in default — including nearly a third of senior citizens with student debt. Student loans, unlike most other forms of debt, generally cannot be forgiven in bankruptcy.