Overlooked Student-Loan Repayment and Forgiveness Programs
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Here's your money briefing for Thursday, March 4th. I'm J.R. Whalen for The Wall Street Journal. Forgiveness of student loan debt has been on the negotiating table in Washington since last year. And while Americans holding more than a trillion dollars in loans wait and see what kind of a deal, if any, emerges, they might not be aware of options they already have.
There are reasons even someone who makes more money might consider being on an income-driven repayment plan. But you would want to look at all the numbers to figure out which way you're paying more and how your payments look each month. There are a whole bunch of factors to consider.
That's our contributor Cheryl Winokur-Monk. Coming up, she'll tell us about several forgiveness programs that are available, including the tax liabilities to go with them. That's after the break.
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What current federal actions are shaping the student-loan forgiveness debate?
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Americans holding federal student loans got some relief earlier this year when President Biden extended the suspension of payments and interest through September. Plus, lawmakers in the White House are debating forgiveness of some amount of federal student debt. But without forgiveness, those holding student loans are going to have to resume making payments sometime. Our contributor Cheryl Winokur-Munk has been looking into some of the forgiveness options that student debt holders already have, and she's here with details. Cheryl, thanks for being with us.
Thanks for having me.
So there's been a lot of talk about student loan forgiveness in Washington, and a couple of proposals have been floated. So what do we know about where things stand as of now?
Well, right now, President Biden has talked about $10,000 in student loan forgiveness. There are Senate Democrats who are really pushing for $50,000 in student loan forgiveness, potentially through executive order. But President Biden has not favored that approach. Obviously, it remains to be seen what happens, but he seems comfortable with $10,000.
Okay, but $10,000 in forgiveness could still leave a lot of people with a hefty balance to pay down. You and I have spoken before about loan forgiveness plans available to borrowers that are based on income. Can you remind us of how these income-based forgiveness plans work?
So when you sign up for a repayment plan, when borrowers sign up for repayment plans with the federal government for their federal student loans, we're not talking about private loans, we're talking about federal student loans here. When they sign up for a repayment plan, the standard plan is repayment in 10 years. And there are a couple other options, but one of the options that people can take is payment based on their income. And that's called an income-driven repayment plan. And that's going to set a monthly student loan payment at the amount that you can afford based on your income and your family size. You don't actually have to make very little money to be on that. There are reasons even someone who makes more money
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