More student loan cancellation
More student loan cancellation is on the way.
Here’s what you need to know.
Student Loans
First, President Joe Biden cancelled $1 billion of student loans. Now, another 147,000 people will get student loan cancellation too. Students who attended the University of Phoenix, one of the nation’s largest for-profit college, will get the following as part of a settlement with the U.S. Federal Trade Commission (FTC):
- $50 million in direct payments to students; and
- $141 million in cancelled unpaid balances owed to the school.
The payments stem from the 2019 settlement between the University of Phoenix, and its parent company, Apollo Education Group, with the FTC. This settlement is distinct from the $1 billion of student loans that Biden cancelled last week.
Student loan cancellation: who qualifies
As part of the $191 million settlement, the FTC is mailing 146,804 checks and issuing 677 PayPal
- You enrolled in a masters, bachelors, or associates degree program at the University of Phoenix between October 15, 2012 and December 31, 2016;
- You paid more than $5,000 with cash, grants, private and federal student loans, or military benefits;
- You didn’t get student loan cancellation as part of this settlement; and
- You didn’t opt out of the University of Phoenix sending your contact information to the FTC.
“This is the largest settlement the [FTC] has obtained in a case against a for-profit school,” Andrew Smith, Director of the FTC’s Bureau of Consumer Protection, said in 2019 when announcing the settlement. “Students making important decisions about their education need the facts, not fantasy job opportunities that do not exist.”
The FTC alleged that the University of Phoenix used advertising from 2012 to 2014 to target primarily military and Hispanic consumers. The company’s advertisements featured employers including Microsoft
“The University continues to believe it has acted appropriately and has admitted no wrongdoing,” University of Phoenix said in 2019. “This settlement agreement will enable the University to maintain focus on its core mission of improving the lives of students through career-relevant higher education, and to avoid any further distraction from serving students that could have resulted from protracted litigation, as well as the time and expense of the litigation itself.”
How to get your student loans cancelled
What are other ways to get student loan cancellation?
How can you get student loan cancellation? There are several ways to get student loan cancellation. The two most popular programs through the federal government are public service loan forgiveness and income-driven repayment. Public service loan forgiveness is available for borrowers who work for a qualified non-profit or public service employer and make 120 monthly student loans payments and meet other requirements. If you don’t work for a non-profit or public service employer, consider an income-driven repayment plan.
Income-Driven Repayment: Get a lower student loan payment
If you want student loan cancellation, and none of the student loan forgiveness to date has impacted you, one strategy is to enroll in an income-driven repayment plan. The four major income-driven repayment plans include Income-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE) and Income Contingent Repayment (ICR). You can get a lower monthly payment based on your discretionary income, family size and state of residence. If you’re already enrolled, now is a good time to update your income with your student loan servicer. After 20 years (undergraduate student loans) or 25 years (graduate student loans) of monthly payments, you can get federal student loan cancellation of your remaining student loan balance. As part of the new stimulus package, Congress made student loan forgiveness tax-free through December 31, 2025, which means if your student loans get forgiven before then, you won’t owe any tax on the amount of student loan forgiveness. Congress may extend the deadline, or alternatively, could make tax-free student loan forgiveness permanent.
Will your student loans get cancelled?
Congress has a proposal on the table — which calls on Biden to cancel up to $50,000 of student loan cancellation through an executive order. However, as Biden has indicated he is unlikely to cancel student loans by executive order, Congress has the power to act next. However, there’s no official timetable to get student loan forgiveness or a guarantee that your student loans will get cancelled. Congress has yet to craft a bipartisan legislative proposal that Democrats and Republicans can support. Rather than hoping for one-time student loan forgiveness (which may or may not come), make sure you have a student loan game plan in place today so you have a clear path for student loan repayment. Here are some potential options to consider to save money:
