Here are 3 ways that President Joe Biden could cancel student loans.
Here’s what you need to know – and what it means for your student loans.
Will your student loans get canceled? That’s the question progressives in Congress have been asking. It’s the same question at least some student loan borrowers are asking too as the student loan payment pause is scheduled to end after May 1, 2022. If you ask Sen. Elizabeth Warren (D-MA), she’ll tell you that the president has existing legal authority to enact wide-scale student loan cancellation. However, Biden has remained skeptical and has encouraged Congress to pass legislation that would cancel your student loans.
That said, here are 3 ways that Biden could cancel student loans.
1. Biden could enact wide-scale student loan cancellation
While this would be counter to his public assertions, there is a scenario in which Biden could enact wide-scale student loan cancellation. (Biden could deliver student loan cancellation and student loan payment pause). Biden could proceed to cancel student loans for borrowers through executive action. This is the scenario that Warren and her colleagues have championed. Biden likely would cancel $ 10,000 of student loans, however, rather than the $ 50,000 that Warren supports. Under Warren’s plan, 36 million student loan borrowers would have their federal student loans completely canceled and the total cost could be 1 trillion. Under Biden’s plan, the cost would be under $ 400 billion. (Here are 6 major changes to student loan forgiveness). If Biden enacts wide-scale student loan cancellation, there may be challenges regarding his legal authority. It’s not universally accepted that Biden has legal authority to cancel everyone’s student loans without further approval of Congress. Any potential legal challenges could result in a court delaying any implementation of student loan cancellation.
(New proposal would extend student loan payment pause and cancel student loans)
2. Biden could increase targeted student loan cancellation
As an alternative to wide-scale student loan cancellation, Biden could increase targeted student loan cancellation. Since becoming president, Biden has canceled 15 billion of student loans. Last week, Biden announced he would cancel 6.2 billion of student loans. Biden’s strategy has been to increase student loan forgiveness for specific constituencies within the larger student loan borrower population. For example, Biden has canceled student loans for public servants, borrowers with a permanent disability and borrowers who got student loan cancellation under borrower defense to repayment. Biden could continue with targeted student loan cancellation and expand the number of eligible student loan borrowers. For example, Biden made major changes to public service loan forgiveness. Until October 31, 2022, student loan borrowers who are pursuing public service loan forgiveness can complete a limited waiver. This limited waiver will enable them to “count” previously ineligible student loan payments toward the requirements for public service loan forgiveness.
(Here’s who won’t qualify for $ 6.2 billion student loan cancellation)
3. Biden could cancel student loans for these student loan borrowers
A third possibility is a hybrid between wide-scale student loan cancellation and targeted student loan cancellation. Rather than cancel everyone’s student loan debt or focus on a specific type of borrower, Biden could find middle ground. For example, Biden could cancel student loans for student loan borrowers who are struggling financially. This could include student loan borrowers with a low income, who are in student loan delinquency or who are in student loan default. In aggregate, this could potentially include millions of student loan borrowers. The Biden administration would have to determine who would qualify, which may include an income cap or proof of hardship from the Covid-19 pandemic, for example. Focusing on student loan borrowers who need student loan relief the most could help combat criticism that student loan cancellation would benefit high-income earners.
(Biden could extend the student loan payment pause forever)
Student loans: next steps
Biden hasn’t committed to wide-scale student loan cancellation through executive action. There’s also no guarantee that he would cancel student loans through mass forgiveness now or in the future. To date, Biden has called on Congress to cancel up to $ 10,000 of student debt. That said, hoping for wide-scale student loan cancellation as your chief strategy for student loan repayment is not a smart strategy. Evaluate all your option to get our of student loan debt.
Here are some of the best ways to pay off student loans faster:
Student Loans: Related Reading
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