Trump vs. Biden: How Their Plans for Student Loan Debt Compare

    Americans with student loan debt have a $1.6 trillion question on their minds: What would President Trump or a President Biden do about all that money these 45 million borrowers owe?

    And what are the chances either would forgive their debt?

    Okay, that’s actually two questions, each worth $800 million.

    We won’t really know the answers until well after the presidential election, but both candidates have signaled increased student debt relief is on the way.

    That’s good news if you’re one of the people who’ve racked up that $1.6 trillion in student loan debt. The average borrower owes $37,000, which is almost enough to buy a Tesla Model 3.

    A diploma is not nearly as much fun to drive, and you still have to make monthly payments. Let’s take a closer look at the odds of that debt going away.

    Will Trump Forgive Student Loans?

    The president’s plan will make it easier to repay loans, but outright student loan forgiveness is probably not in the cards.

    Trump has a revamped approach that would eliminate the Public Service Loan Forgiveness (PSLF) program. That program forgives federal student loans for workers who have a qualified public service job or work for a nonprofit.

    The move would not affect borrowers already in the program. The reason for canceling the program is it might keep the government from having to eat billions of dollars in bad debt.

    This may shock many Americans, but there is no magic debt fairy who waves a magic “Forgiveness” wand and makes all those billions disappear.  Somebody’s got to pick up the tab, and it’s going to be the taxpayer.

    Instead of outright forgiveness, Trump wants to expand income-driven repayment. There are currently four such plans in which people pay an amount based on their income and family size.

    Trump’s plan would reduce it to one simplified plan. It calls for borrowers to pay 12.5% of their discretionary income per month for 15 years.

    In other words, if you have $200 left over after paying your essential bills each month, you’d pay $25 toward your student loan. Whatever’s left after that is forgiven.

    That’s for undergraduate debt. If you’re paying off loans for advanced studies, the balance would not be forgiven for 30 years.

    So there is forgiveness in Trump’s plan, but it’s far from a Get Out Debt for Free card.

    Will Biden Forgive Student Loans?

    Biden was a big proponent of student loan relief during much of his campaign. The coronavirus pandemic and social-justice protests/riots now have him singing a more forgiving tune.

    Biden’s plan would forgive all undergraduate federal student loan debt for people earning less than $125,000 a year who attended public institutions or historically black colleges and private minority-serving schools.

    Biden would keep the PSLF program but rev up the “F” part. Only undergraduate loans would apply, but you’d pay 5% of your discretionary income. So that $25 monthly payment under Trump’s plan would be $10 under Biden’s.

    What’s more, it would be $0 if you make less than $25,000 a year. Forgiveness would come after 20 years, and that unpaid balance would not be taxed.

    Democratic senators have called on the next president to cancel $50,000 in student loan debt for all borrowers. The president could do that via executive order, so he wouldn’t even have to get the approval of Congress.

    Biden had earlier supported lopping $10,000 off everyone’s tab, which was a proposal in the $3 trillion HEROES Act the House of Representatives approved, but the Senate rejected. He reportedly is now in favor of the $50,000 discount.

    Speaking of Congress and coronavirus relief…

    How Will the Second Stimulus Bill Affect Your Student Loans?

    Congress’s next stimulus bill won’t have any effect on your student loans, mainly because there is no next stimulus bill.

    Well, there were actually two proposed bills. The mega-blowout HEROES Act was the Democrats’ baby and the semi-blowout $1 trillion HEALS Act was the Republican plan.

    The two sides haggled for months and couldn’t figure out how to split the baby, so Trump called off negotiations in early October. A bill will probably resurface in the next Congress, but nobody knows who will be running that show or what the political makeup will be.

    All of which leads back to our original $1.6 trillion question…

    Which Candidate Should a Student Loan Borrower Vote for – Trump or Biden?

    First, there are other issues you might want to ponder before picking a candidate.

    We’re not saying the economy, health care, terrorism, immigration reform, violent crime, the Supreme Court and world peace are as important as whether you’re monthly student loan payment is $25 or $10, but they are worth pondering for at least a couple of seconds.

    (Pause).

    You might also consider that the federal government already has upward of $100 trillion in liabilities like Medicare, Social Security and the national debt. There will be a day of reckoning with that, and it’s not going to be pretty.

    (Pause again).

    Okay, that’s enough pondering.

    Our best suggestion is to never depend on politicians for help when you have a financial problem.

    Call a nonprofit and get some advice from a certified credit counselor. He or she can put you on a budget that will get you out of debt without the help of Trump or Biden.

    But if you’re banking on the presidential election to lead to a life free of student debt, go with Joe.

    Biden is more willing to forgive. If only the national debt could forget.

    Author

    Bill Fay
    Staff Writer

    Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it seven years ago, helping birth Debt.org into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering college and professional sports, which are the fantasy worlds of finance. His work has been published by the Associated Press, New York Times, Washington Post, Chicago Tribune, Sports Illustrated and Sporting News, among others. His interest in sports has waned some, but his interest in never reaching for his wallet is as passionate as ever. Bill can be reached at bfay@debt.org.

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