Is Cancellation of Student Debt the Next Step?
Here is what you need to know.
President Joe Biden has a big decision to make next, and it could involve canceling a student loan. After Biden postponed restarting student loan payments for the third time until May 1, 2022, progressive Democrats and student loan advocates are hopeful that Biden’s next step will be the large-scale student loan cancellation. Let’s explore.
Student loan cancellation: 6 things Biden will assess
If Biden decides to act on the student loan cancellation, he’ll likely assess at least 6 things to make a final decision:
- Total cost of canceling a student loan
- state of the american economy
- state of the Covid-19 pandemic
- impact on student loan borrowers if there is no student loan forgiveness
- student loan cancellation to date
- other ways to provide student loan relief
If there is student loan relief, there must be student loan cancellation
Proponents of large-scale student loan relief have focused on one thing: canceling student loans. After pressuring Biden to extend the student loan payment hiatus for another 90 days, all efforts will now be focused on lobbying Biden to cancel student loans for borrowers. At the end of December, Biden extended the student loan relief for federal student loans, which means a temporary forbearance of student loans. Federal student loan borrowers will not be required to make federal student loan payments, earn 0% interest rates, and face no debt collection for delinquent student loans. Now supporters say large-scale student loan cancellation is the next logical step. They see the cancellation of large-scale student loans as intrinsically linked to the temporary forbearance of student loans. In their view, increased student loan relief is helpful, but only canceling student loans will make student loan relief permanent.
Student Loan Relief May Be The Last Step – Without Student Loan Forgiveness
While progressives will focus on canceling student loans, that doesn’t mean the Biden administration has immediate plans to cancel student loans. Importantly, there is no guarantee that Biden will write off student loans through executive action or extend student loan relief again. (Here’s why Biden extended student loan relief.) First, Biden has repeatedly stated that he does not believe he has the legal authority to enact large-scale student loan forgiveness. Second, temporary student loan relief and student loan cancellation are separate. Congress passed the Cares Act – the $ 2.2 trillion stimulus package – in March 2020 in response to the emerging Covid-19 pandemic. The Cares Act, which provided more than 40 million student loan borrowers with significant student loan relief, was only supposed to last six months. Thanks to Biden and President Donald Trump, this temporary student loan forbearance has been extended five times. (What Biden’s Latest Student Loan Relief Means for Your Student Loans). However, the Cares Act contained no large-scale student loan forgiveness. On the contrary, lawmakers such as Sen. Bernie Sanders (I-VT) and Sen. Elizabeth Warren (D-MA) have argued for a student loan forgiveness for student loan borrowers, separate from temporary relief. student loans. While Biden may cancel student loans, this is not directly related to the temporary student loan relief.
Student loan cancellation might come next, but it might sound different than you think
If the student loan cancellation comes next, it may not seem like what you think. (Here’s how to get a student loan discount during the Biden administration). Some student loan borrowers are considering a large-scale student loan forgiveness to mean all student loan borrowers will get all of their student loans canceled. The reality is quite different. These two scenarios will not happen. First, all student loan borrowers are unlikely to get their student loan forgiveness. Second, all student loan debt is unlikely to be canceled. Biden supports $ 10,000 student loan cancellation for borrowers, but has never indicated his willingness to support up to $ 50,000 student loan cancellation as proposed by Warren and Sen. Chuck Schumer (D -NY). (Biden is ready to cancel student loans for millions of borrowers, but Congress hasn’t passed any laws). Warren and Schumer’s proposal also limits student loan cancellation only to federal student loan borrowers who earn up to $ 125,000. This means no student loan forgiveness for private student loans, and there would likely be an income cap, which could be even lower than what Warren and Schumer proposed. (How student loan payments will be easier in 2022).
Student loans: next steps
Will your student loans be canceled? Progressives in Congress say it’s the next step after Biden extends student loan relief. However, while Biden may consider a larger student loan forgiveness, there is no guarantee that he will write off all student loan debt. As of now, student loan payments will resume on May 1, and the Biden administration has given no indication of a full-scale student loan forgiveness. If you have student loans, don’t plan for any student loan forgiveness so you won’t be surprised if this doesn’t happen. Instead, start understanding all of your student loan repayment options now. Here are some popular ways to pay off student loans faster: