Personal Finance

Joe Biden’s Student Loan Plan: What It Could Mean for You

The student loan platform of President Donald Trump or former Vice President Joe Biden might not be the reason you vote for either in November. But the winning candidate’s policies could affect your financial future if you’re planning to attend college or have student loans to repay.

Remember: Each candidate’s proposals may or may not happen. Those that are passed could evolve significantly between now and then. Here’s where Biden stands on some of the biggest higher education issues.

Free college

Biden has proposed making college tuition-free at some schools:

  • If you attend a public college or university. Tuition would be free for four years if your family has an income below $125,000.

  • If you attend a private minority-serving institution. Grants would cover up to two years’ tuition at private historically Black colleges and universities, tribal colleges and universities, and additional MSIs.

  • If you attend a community college. Tuition would be free for two years if you hadn’t previously pursued a postsecondary degree. You could also use these funds for a career-training program if it meets to-be-determined graduation and job placement rates.

As with existing free college options, you’d still need to pay non-tuition costs such as room and board and books. Those expenses averaged more than $14,600 and $16,000 in 2019-20 at two-year and four-year schools, respectively, according to the College Board.

Canceling existing student debt

Biden has recommended canceling federal student debt in the following instances:

  • If you attended a public college or university. Attendees of private HBCUs and additional MSIs would also be eligible.

  • If you used the loans for undergraduate tuition. Graduate student debt would not be canceled under Biden’s proposal.

  • If you earn less than $125,000. Biden’s plan references a phase-out of this benefit but does not offer further details.

Biden also supports forgiving $10,000 for all federal student loan borrowers as COVID-19 relief.

Student loan forgiveness programs

Biden would introduce a new student loan forgiveness program for borrowers who provide public service.

  • Up to $50,000 would be forgiven. Under Biden’s plan, $10,000 of your debt would be automatically canceled for each year you perform eligible service, for up to five years total.

  • It wouldn’t replace Public Service Loan Forgiveness. That program, which is available to government workers, teachers and other nonprofit employees, requires borrowers to make 120 eligible payments to have their remaining balance forgiven.

  • Biden would rework PSLF. Biden proposes qualifying additional federal loans and repayment options for PSLF. Half your balance would also be forgiven after five years. Roughly 98% of PSLF applications have been rejected to date, according to Department of Education data.

Revised income-driven repayment

  • Only undergraduate loans qualify. Graduate student loans — for which the average student debt is $71,000, according to the National Center for Education Statistics — would be ineligible.

  • You’d pay 5% of discretionary income. Current income-driven options set payments between 10% and 20% of your discretionary income, depending on the plan.

  • Monthly payments would be $0 if you make less than $25,000. You can currently qualify for $0 payments based on your income, the federal poverty line and your family size.

  • Forgiveness won’t be taxed. Biden’s income-based plan would forgive any remaining undergraduate balance tax-free after 20 years. Existing options offer forgiveness after 20 or 25 years, depending on the plan, but tax that amount.

  • You’d have to opt out. All new and existing borrowers would be automatically enrolled in this new plan with the option to opt out.

Additional proposals

Topics like free college and student loan forgiveness grab headlines, but Biden has additional proposals that could impact student loan borrowing, including:

  • Doubling Pell Grants. These grants, which are available to students who demonstrate financial need, are currently worth up to $6,345. That covers less than 60% of tuition and fees at public four-year colleges, according to a NerdWallet analysis.

  • Restoring borrower defense to repayment rules. Eligibility criteria was recently tightened for this program, which forgives the loans of borrowers defrauded by their schools.

Biden also hopes to invest $50 billion in workforce training, $8 billion toward community colleges and over $70 billion for minority-serving institutions, among other proposals.

Information in this article is based on the education plan listed on Biden’s official website, as well as the former vice president’s Unity Task Force Recommendations from July 2020. The Biden campaign did not respond to requests for comment.

This article originally appeared on NerdWallet