Tackling inflation was the “top priority” during President Joe Biden’s first State of the Union address on March 1. One aspect of the president’s economic plan, he said, is to reduce student debt by investing in community colleges, Pell grants and historically black colleges. and universities (HBCU).
“Let’s increase the Pell Grants and increase our historic support for HBCUs, and invest in what Jill [Biden] — our First Lady who teaches full time — calls it America’s best-kept secret: community colleges,” Biden said.
The US bailout has “helped more than 5,000 universities and community colleges make higher education more affordable,” the White House reports.
However, Biden has already canceled parts of his program to deal with the student debt crisis. The president has so far been unable to deliver on his campaign promise to cancel student loans. Additionally, the Biden administration removed tuition-free community colleges from the Build Back Better spending bill, which has so far failed to garner enough support among Senate lawmakers.
Keep reading to learn how the president plans to increase investment in higher education and community colleges. And if you’re struggling to repay your student loans when the forbearance expires, consider other repayment options like refinancing. You can compare student loan refinance rates on Credible for free without affecting your credit score.
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Biden’s agenda to make higher education more affordable
As a presidential candidate, Biden pledged to forgive at least $10,000 in student loan debt per borrower — but after more than a year in office, the president has yet to deliver on that campaign promise . However, canceling student debt was just one aspect of Biden’s plan to lower the price of post-secondary education. Here are some other agenda items that the President wants to implement:
- Provide two years of debt-free community college. Biden also wants to create a new financial aid program to help improve community college student success and invest $8 billion in community college facilities and technology.
- Expand the Pell Grant program. The President plans to double the maximum value of Pell Grants and automatically increase the value based on inflation. He also wants to loosen eligibility requirements to include more middle-class students, DREAMers and formerly incarcerated Americans.
- Make HBCUs more affordable. The president wants to invest $18 billion in grants to HBCUs and Tribal Colleges and Universities (TCUs) to make education more affordable for these students. He said that equates to about two years of tuition per low-income student in financial need.
- Offer free tuition at four-year colleges. Biden has embraced Sen. Bernie Sanders’ proposal to make public colleges and universities free for families with incomes below $125,000. He estimates that this would help about 8 out of 10 families finance university expenses.
- Simplify the income-based reimbursement program (IBR). Under current IBR plans, federal student borrowers can pay between 10 and 20 percent of their discretionary income for their loans. Biden’s plan would reduce that to 5% of their Discretionary Income over $25,000.
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Notably, the Biden administration has extended the federal student loan payment pause three times since the president took office. However, this debt relief is set to expire in May when the forbearance period ends. If you are unable to resume your student loan payments in two months, you may be considering refinancing to lower your monthly payment. You can learn more about student loan refinancing by visiting Credible.
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How to Prepare for the End of Student Loan Forbearance
Biden’s extension of the student loan payment pause has brought much-needed relief to millions of borrowers, but the vast majority (93%) are not ready to resume monthly payments in May, according to a recent poll. Here’s how you can better prepare yourself financially when student loan forbearance ends:
- Request an additional deferral. The Department of Education is offering up to 36 months of deferral to federal borrowers who meet certain eligibility criteria. Remember that interest may accrue during the deferral, which may increase the total cost of borrowing over time.
- Sign up for an IDR plan. It may be possible for borrowers to reduce their federal student loan repayments to between 10% and 20% of their disposable income by registering for income-based repayment on the Federal Student Aid (FSA) website.
- Refinance at a lower interest rate. Refinancing student loans can help some borrowers reduce their monthly payments by $250. However, refinancing your federal loans into a private student loan would make you ineligible for IBR, forbearance, and some student loan forgiveness programs.
Student loan refinance rates are still near all-time lows, meaning graduates may be able to save more money than ever by refinancing their student debt. You can browse the current interest rates from private lenders in the table below and use Credible’s student loan calculator to decide if this debt repayment plan is right for your financial situation.
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