Buffalo, N.Y. (WBEN) - The Biden administration announced Tuesday that they are eliminating federal loan debt for students who attended ITT Technical Institute, after authorities found “widespread and pervasive misrepresentations” at the defunct for-profit college chain, canceling $3.9 billion dollars for over 200,000 students.
The Biden administration has also discussed eliminating up to $10,000 per borrower in student debt, promising a decision by the end of August, but Tuesday's announcement brought forth no new information regarding this.
The big questions on the minds of millions of student borrowers still looms, will there be any student loan debt forgiveness and when will the Biden administration bring forth executive action?
"So the big thing is, at the end of the month, the deferment, which has been in place since March of 2020, ends. Biden is expected to extend that to the end of the year, that's the rumor and the rumor is he would like to forgive $10,000 per borrower of federal loan debt. For those that have under $150,000 of income, that would be about $321 billion in total and would wipe out the balance for almost 12 million borrowers in total," said Jeff Boron, Founder of Send Your Kids To College.
Boron notes that absolving student loan debt is controversial, there are going to be many winners and losers as a result. The Biden administration has their work cut out for them if this plan is going to ensue.
"I'm not sure if it's as easy as it may seem, anytime you do something like this, forgiveness or some other type of social entitlement program, there's always winners and losers and obviously, the people that that don't qualify, are going to be upset about this. For instance, somebody who's got $155,000 worth of income and just misses it, is not going to be very happy," Boron says. "I'm not sure what the next Avenue is or if this could be something he will try to do with executive order."
Some students have been receiving calls from their loan servicers like Nelnet, about income-driven repayment plans, which could be a potential path to pursue lowering your monthly repayment plans, but Boron advises that before you go that route, it would be a wise idea to see what new information comes out on whether or not your loans can be forgiven.
"The way the Income-Based Repayment Program works is that it's obviously based as a pro rata of your current income. There's no way of escaping the interest in effect, what you're doing is just pushing it down the road and you're accruing more interest as it goes along. There is forgiveness at the end, but it's a very long period, very few will qualify for that. In fact, I think less than 100 people have gotten their loans forgiven at the end of Income-Based Repayment because it's such a long period of time. So unless you have to, I would not do Income-Based Repayment because in the long run, you're going to pay more interest," Boron says.
Should students start chipping away at their loans now or later? If you have debt still totaling over $10,000, it would make sense to continue to make regular payments according to Boron.
"I've been advising to pay towards the student loans because they haven't been accruing interest. So you're effectively paying that loan principal down much quicker. I would pay back anything over and above the $10,000 and wait to see what happens at the end of August. I'm not sure if it's going to be a decision or if it's going to be recommendation by the White House. But there's a strong possibility that there's going to be a big push for $10,000 in forgiveness. So I'd hate to see somebody you know, pay back their $10,000 student loan with money that they've saved up during this time," said Boron.
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