As the Board of Trustees continues to evaluate options for approving student loan waiver, should you do anything now to increase your future eligibility? Probably – but some actions can have significant and lasting consequences. Here is what you need to know.

Biden Student Loan Forgiveness Legal Review

In March, White House President Biden Education Secretary Miguel Cardona and the legal team announced that they had asked for a formal letter of recommendation from law enforcement officials that could be used to approve an extended student loan waiver. The ongoing legal review is being conducted in conjunction with the Department of Justice and has been reviewing legal questions related to the cancellation of many student debts.

Student creditors and their advocates in Congress, as well as various civil rights, labor and consumer protection groups, have been involved in an ongoing campaign to persuade President Beden to use his executive powers to abolish student debt. But Biden has not yet backed down.

Student Loan Lawyers argue that the Higher Education Act gives the Secretary of Education more power to pardon student debt. The key provisions of the law give the author “the right to enforce, pay, negotiate, revoke or relinquish any right, including title, claim, lien, claim, or any other right.” Proponents of her case have been working to make the actual transcript of this statement available online. Debt advocates also note that President Trump and President Biden, who have pledged to cancel billions of dollars in student loans, give the author the power to waive or amend any legal or regulatory provision. Assistance programs to respond to national emergencies. ”

However, lawyers under Betty Davos, former education secretary, concluded that neither the Higher Education Law nor the Heroes Lawyers would give the president the power to argue. The Department of Education’s Devos Department of Law has argued that student loans are unconstitutional because there is no enactment of mass student debt when lawmakers pass legislation. Proponents of her case have been working to make the actual transcript of this statement available online.

If Biden forgives a student loan, who will qualify?

Since the Biden administration is still reviewing the law, there is no way to know for sure whether President Biden will forgive student loans, and if so, who will be eligible. Lawyers and many Democrats in Congress have called for him to resign, but Biden has denied public support for canceling 50,000 student loans.

Biden may include certain eligibility requirements for bulk student loans, but it is too early to know what that will look like. Administration may limit eligibility for borrowers based on their income, credit balance, or school or education program. In addition, depending on the type of loan the borrower may have, the loan may be limited. However, such restrictions may make it difficult for logistics to implement a large student loan waiver. And borrowers are in a difficult situation when they are waiting without knowing any details about what a mass student loan forgiveness looks like.

Do you need to strengthen your student loan to qualify for forgiveness?

If Biden forgives a student loan, eligibility may be limited to certain types of student loans. For example, if Biden initiates executive action, it will not have the power to cancel private student loans under federal law. Under the Higher Education Act and the Heroes Act, it will only have the power to settle federal student loans.

But even for federal student loans, there may be additional restrictions. For example, the CARES Act, which was passed by Congress last year to block payments, interest, and deposits on federal student loans – only applies to direct federal student loans (loans granted directly by the US Department of Education). Other federal student loans, such as the Family Federal Loans (FFEL) and Federal Perkines loans, are not included. Some existing federal student loan forgiveness programs, such as public service debt forgiveness, are limited to direct loans.

Borrowers with FFEL and Perkins loans can consolidate their loans through the Federal Direct Debt Consolidation Program to convert these loans into direct loans. If Biden limits any future student loan waiver programs to direct loans, this could make FFEL and Perkins borrowers a viable alternative loan consolidation option, and some borrowers are considering consolidating their FFEL loans and Perkines loans in advance. (Private student loans are not directly eligible for loan consolidation).

However, direct loan consolidation can sometimes have significant negative side effects, including interest capitalization and the borrower’s repayment period, which in turn destroys any progress made by the borrower towards their repayment date or loan repayment period. Biden recently demonstrated that executive action is not limited to direct loans, including the use of fraudulent FFEL loans under CARES law under the Heroes Act.

Do you need to improve your student loans again?

High-interest student borrowers may be interested in refinancing through a private lender. Improving student loans can lead to lower interest rates and better payment terms, especially for student loan borrowers with good loans and adequate income.

However, redesigning federal student loans through private student loans poses some risks, including loss of consumer protection (such as flexible payment options, default settlement programs, and generous delay and tolerance options), as well as access to federal loan-based loan programs. Forgiveness of payments and loans. And reforming federal student loans poses more risks than usual. Because federal student loans covered by CARES law currently have a 0% interest rate of at least September 30, 2021 – borrowers do not easily get a lower interest rate than a private lender.

In addition, if President Biden decides that he has the power to cancel student debt through executive action, his authority will be limited to federal student loans. Once a borrower repays a federal student loan through a federal lender, that loan cannot be converted into a federal student loan. So upgrading these loans now will ensure that you make sure no I do not Eligibility for any student loan.

Do you have to file taxes separately from your spouse?

Possible Biden Student Loan Forgiveness One big question is whether there are eligibility restrictions based on the borrower’s income. He has previously publicly expressed concern that the bulk of the student loan waiver could derail benefits for high-income earners. For marriage borrowers, does the spouse’s income go to work?

There is no way to find out at this time, but we can look at a few schemes. For example, income-based return (IBR) The borrower plans income in marriage when determining student loan repayments, but only when they file taxes together. If the debtor and the spouse file separately, the spouse’s income is not excluded. However, this is not true of the REPAYE plan, which is for taxable reasons, regardless of the tax situation.

Borrowers should be aware that taxing “alone” can sometimes have serious tax consequences, so it is wise to first consult with a qualified tax advisor before changing your application.

Further reading

Why doesn’t $ 10,000 help student borrowers with income-based payments?

New details Student loan forgiveness can eliminate the debt of many borrowers

Biden does not include student loan forgiveness from the budget proposal, but calls for more financial support for senior Eddie – Key details

72,000 borrowers get $ 1 billion in student loans – are you eligible?