Written By Travis Hornsby, CFA®, CFP®
For this milestone 100th episode of the Student Loan Planner® podcast, we want to celebrate. The podcast has six-figures of downloads over the show's life, so thank you for your support and for letting us do what we love: help you figure out the stress of student loans.
It’s my first podcast episode in nearly two months, and it’s good to be back. During my paternity leave, I thought a lot about politics. I’m a political junkie – I look at 538, Politico, Real Clear Politics, and other sites.
Because we’re just one week away from the election, I want to talk about what we expect could happen to your student loans regardless of who wins the 2020 presidential election.
Your student loans after the election
“The Biden Plan is definitely a lot more accommodative than any other plan out there,” said Rob Bertman, CFA, CFP® and senior consultant at Student Loan Planner®. “With it being 5% of income versus PAYE and REPAYE, and with the loan forgiveness, PSLF could get even better.”
It may not be the first priority for the Biden administration if he wins, but we're expecting some student loan reform in the next few years.
“The one thing that we know for sure – there seems to be bipartisan support for something that’s better – that’s more borrower-friendly,” said Justin Harvey, CFP® and former student loan consultant at Student Loan Planner®.
“It’s as good of a time as there’s ever been to be a federal student loan borrower.”
Meagan McGuire, CSLP® and student loan consultant at Student Loan Planner®, has noticed a trend among political parties as she’s read and researched the language of the student loan proposals.
“The Republican side wants to simplify,” said McGuire. “And the Democrat side wants to improve the affordability of payments.” She's also noticed that PSLF is a hot topic but points out that simplification of repayment options doesn't automatically translate to more affordability of payments.
I’ve seen instances where both sides have favored simplification, but applying simplification looks different depending on which side of the aisle you’re on.
Regardless of your political persuasion, the Democratic student loan plan is more expensive than they’ve forecasted.
How long can the payment and interest freeze last?
The CARES Act froze payments and interest on most federal student loans starting March 13, 2020. President Trump extended the suspension through December 31, 2020, and payments are expected to start back up in January 2021.
Because it’s been extended once, there’s the possibility of it being extended again.
“I think there’s going to be some kind of extension, regardless,” said McGuire. “I’m not convinced payments are kicking in in January.”
Bertman points out that most people have spent the stimulus check and exhausted any emergency savings they may have had, so there may be no other choice but to extend the suspension period.
“They probably will end up extending it again, through at least the spring,” said Bertman.
If the Democrats win, I think we'll see a stimulus bill passed with a payment restart date of September 30, 2021. However, I don't think they'll extend it past that point.
But if Trump is re-elected, I think payments will probably start back up in January 2021.
Where we go from here
If you’re a professional, the worst of the financial problems relating to the pandemic and recession are probably behind you. I don’t think we’ll see massive shutdowns across the country like we had in the spring, but it’s anyone’s guess what could happen.
Regardless, student loan consultant Lauryn Williams, CFP®, CSLP®, leaves us with excellent advice: “The world is divisive enough – all the craziness that's going on – don't pick a side… we are all American.”
Not sure what to do with your student loans?
Take our 11 question quiz to get a personalized recommendation for 2024 on whether you should pursue PSLF, Biden’s New IDR plan, or refinancing (including the one lender we think could give you the best rate).
Hi Travis,
Thanks for all the work you and your team do. I am currently in my first year of a three-year program at a Chiropractic College. If student loan policy changes will this affect my repayment options upon graduation even though I am already in a program? Will borrowers, who are in school now, income-based repayment options change/increase both on a payment amount (% of income) basis and also the longer-term (30 year) if there is reform? If you are in a program now do you need to worry about these changes?
Your repayment options are part of the promissory note that you signed to take out your student loans. There’s no word on if the changes will be retroactive, and right now it’s all just speculation. There isn’t too much to worry about right now – just something to keep on your radar.