President Joe Biden could cancel $ 10,000 of student loans for these student loan borrowers.
Here’s what you need to know – and whether you may qualify.
There’s a new push for Biden to enact wide-scale student loan cancellation. Interestingly, it’s not coming from progressive Democrats in Congress. Nor is it coming from student loan borrowers or student loan forgiveness advocates. This time, student loan cancellation is coming directly from student loan companies. Let’s explore.
Student loan cancellation for these student loan borrowers
As reported by Politicsseveral student loan companies want Biden to end the student loan payment pause after May 1, 2022 because:
- it could drive significantly higher inflation;
- would be counter to Biden’s messaging that the economy is recovering;
- could be conflicting with a “return to normal” plan after the Covid-19 pandemic; and
- benefits wealthier and higher-income earning student loan borrowers who can afford their student loan payments.
(New proposal would extend student loan payment pause and cancel student loans)
Student loan companies also have pitched targeting student loan cancellation for student loan borrowers who are financially distressed or unemployed, for example. One student loan company CEO said that the federal government would save 35 billion if Biden ended the student loan payment pause. Then, those funds could be used to help fund Biden’s legislative agenda.
(Here’s who won’t qualify for $ 6.2 billion student loan cancellation)
Who would qualify for $ 10,000 of student loan cancellation
Some private student loan companies are urging Biden and Congress to focus on student loan cancellation on student loan borrowers who are struggling financially. This is different than canceling student loans for most or all student loan borrowers. For example, a plan from Senate Majority Leader Chuck Schumer (D-NY) and Sen. Elizabeth Warren (D-NY) would provide up to $ 50,000 of student loan forgiveness for student loan borrowers who earn up to $ 125,000 annually. In contrast, this plan would focus on directing financial relief only to borrowers who fit the following criteria:
- low-income earners;
- “Struggling financially”;
- have student loans in default; or
- student loans are delinquent.
(Biden could extend the student loan payment pause forever)
Student loan default means a student loan borrower hasn’t made a student loan payment in at least 270 days. Student loan delinquency means a student loan borrower hasn’t made a student loan payment in at least 90 days. The student loan payment pause has been ongoing since March 2020 and paused the payment of federal student loans. Therefore, most borrowers in student loan default or student loan delinquency were in these situations before the Covid-19 pandemic. If Congress or the president considered this proposal, they would need to formally define “low-income earner” or “struggling financially,” for example, to determine who qualifies. That said, the goal of this proposal is to deliver student loan relief to borrowers who need it most. Then, all other student loan borrowers – including higher-income earners – would restart student loan payments as planned after May 1, 2022.
(Biden has canceled 15 billion of student loans)
Student loans: next steps
Biden could deliver student loan cancellation and student loan payment pause. There are no guarantees, but Biden is considering extending the student loan payment pause for a fourth time. While this plan from student loan companies isn’t a legislative proposal, members of Congress or the president could consider this type of student loan relief. Why? This student loan relief helps more student loan borrowers than targeted student loan cancellation, but it stops short of wide-scale student loan cancellation in which most or all student loan borrowers benefit. This could help satisfy at least some moderates who view student loan cancellation as expensive and poorly targeted towards higher income earners. This does not mean Congress or the president would agree to such a proposal nor has either committed to such a plan. However, if adopted, this plan could help provide more financial relief to student loan borrowers who are struggling the most.
The student loan payment pause is scheduled to end after May 1, 2022. Now is the time to prepare for student loan repayment. Learn your best options to manage your student loans so you lead from a position of strength. Here are some popular ways that student loan borrowers pay off student loans:
Student Loans: Related Reading
Here’s who won’t qualify for $ 6.2 billion student loan cancellation
New proposal would extend student loan payment pause and cancel student loans
Biden could extend the student loan payment pause forever
Student loan refinancing rates just got ridiculously cheap