Student Loan Forgiveness: Biden Has 3 Major Decisions
President Joe Biden has 3 major decisions to make regarding your student loans.
Here’s what you need to know — and what it means for you.
In the coming weeks, you can expect Biden to make three major decisions that will directly impact your student loans:
- Student loan cancellation;
- Student loan payment pause; and
- Student loan forgiveness limited waiver
1. Student loan cancellation
First, Biden is deciding whether to enact wide-scale student loan cancellation for millions of student loan borrowers. Supporters say wide-scale student loan cancellation is an overdue policy to give millions of people a fresh start on their financial life. Opponents say it’s wealth redistribution to wealthy student loan borrowers at the expense of working Americans who didn’t attend college. That said, there are several sub-decisions regarding broad student loan forgiveness. First, Biden must decide whether he will cancel student loans. Biden has canceled more than $30 billion of student loans since becoming president. Last week, for example, Biden canceled $6 billion of student loans for 200,000 student loan borrowers. Now, he must determine whether wide-scale student loan forgiveness is the best policy in light of the economy, inflation and equality, among other considerations. Second, if Biden decides to cancel student loans, he must decide how much student loan debt he will cancel. The White House has denied that Biden has decided to cancel $10,000 of student loans, even as progressive members of Congress try to convince the president to cancel $50,000 of student loans. Biden could cancel any amount of student loans, although $10,000 is the most likely scenario. The Biden administration has said to expect an announcement on wide-scale student loan forgiveness before August 31, 2022.
2. Student loan payment pause
Second, the student loan payment pause ends August 31, 2022. Congress passed historic student loan relief as part of the Cares Act, the $2 trillion stimulus package, in March 2020. Since then, federal student loan payments have been paused, federal student loan interests have been set to 0%, and collection of student loan debt in default has been halted. President Donald Trump and Biden used executive authority to extend this student loan relief a combined six times. Student loan borrowers haven’t been required to pay a single dollar of federal student loans since Biden became president in January 2021. If the student loan payment pause ends next month as scheduled, then student loan payments will restart beginning on September 1, 2022. While Biden hasn’t commented publicly, there is some speculation Biden could extend student loan relief beyond the November midterm election. For example, U.S. Secretary of Education Miguel Cardona said last month it’s possible that Biden could extend the student loan payment pause.
3. Student loan forgiveness limited waiver
Third, Biden must decide how to address the limited waiver for student loan forgiveness. This game-changer for student loan forgiveness expires on October 31, 2022. Last October, the Biden administration made major changes to student loan forgiveness, including relaxing the rules for public service loan forgiveness. With these changes, student loan borrowers can qualify for student loan forgiveness more easily through a one-time limited waiver. For example, student loan borrowers can get credit toward student loan forgiveness for previously ineligible student loan payments. This includes student loan payments made under the wrong student loan repayment plan as well as late or partial student loan payments. The limited waiver is especially helpful for student loan borrowers pursuing public service loan forgiveness who need 120 monthly payments to get their student loans canceled. Biden could extend the limited waiver for student loan forgiveness so that more student loan borrowers can take advantage of the limited waiver for student loan forgiveness. Ultimately, Biden will need to determine whether he wants to extend the limited waiver or let it expire as scheduled on October 31.
Student loans: next steps
Expect Biden to make these three major decisions soon. Biden could decide to implement any, all or none of these initiatives. The president likely will address wide-scale student loan cancellation and the student loan payment pause next month or sooner. Biden has until October to decide on the limited waiver, although he could announce any decision when he decides how to proceed with student loan forgiveness and the student loan payment pause. In the meantime, make a gameplan for student loan repayment. You don’t know which policies, if any, Biden will implement. Consider these popular options to pay off student loan debt and save money:
- Student loan refinancing (lower interest rate + lower payment)
- Income-driven repayment (lower payment)
- Student loan forgiveness (federal student loans)