Student loan forgiveness could mean the end of student loan relief.
Here’s what you need to know — and what it means for your student loans.
President Joe Biden is potentially weeks away from announcing historic student loan forgiveness for millions of student loan borrowers. While there is no guarantee that Biden will proceed with wide-scale student loan forgiveness, Biden could decide to cancel up to $10,000 or more of student loans for millions of student loan borrowers. What does student loan cancellation mean for student loan relief? Let’s explore.
Student loan relief: what’s at stake
Since March 2020, more than 40 million student loan borrowers have enjoyed the following student loan relief as a result of the Covid-19 pandemic:
- no mandatory federal student loan payments;
- 0% interest rate on federal student loans and no accrual of new student loan interest; and
- no collection of student loans in default.
After Congress passed this historic student loan relief, President Donald Trump and Biden collectively extended the student loan payment pause six times. Currently, the student loan payment pause is extended through August 31, 2022.
What student loan cancellation means for student loan relief
Student loan payments are scheduled to restart beginning September 1, 2022. What does student loan cancellation mean for student loan relief? White House Press Secretary Jen Psaki has given some guidance on the future of student loan relief. Previously, Psaki said that Biden will either extend the student loan payment pause or cancel student loans before August 31. “So between now and August 31, [the student loan pause is] either going to be extended or we’re going to make a decision, as [White House Chief of Staff] Ron [Klain] referenced, about canceling student debt,” PSAKI said. Biden recently said that he is considering wide-scale student loan forgiveness and could make a decision within weeks. Previously, it was expected that Biden would extend student loan relief beyond August 31 and potentially cancel student loans before the November 8 midterm election. Why? Progressive Democrats in Congress have warned Biden that the failure to enact wide-scale student loan forgiveness could hurt Democrats in the midterms. However, if Biden cancels student loans now, he could end student loan relief on August 31. Why? The Biden administration extended the student loan payment pause to help student loan borrowers who are struggling financially. However, multiple extensions of temporary student loan relief also provided more time for Biden to decide whether to cancel student loans. If Biden decides to enact wide-scale student loan forgiveness, then his rationale for another extension may be weakened.
Will Biden cancel student loans?
Biden has canceled $17 billion of student loans since becoming president. Will Biden cancel student loans for all borrowers? No, don’t expect Biden to cancel everyone’s student loan debt. Biden also won’t cancel most student loan debt. If Biden enacts wide-scale student loan forgiveness, expect limits on student loan forgiveness. (Here’s who could qualify for student loan cancellation). For example, Biden could impose an income threshold of $125,000, $75,000 or another amount. Biden also could limit student loan forgiveness to federal student loans and college student loans only. If this happens, graduate school student loans and private loans could be excluded. (Biden confirms he won’t cancel $50,000 of student loans—5 key takeaways).
Student loans: next steps
Expect a potential announcement on student loan forgiveness within weeks. While Biden could cancel student loans and extend student loan relief, he also could choose to do neither or only one of these options. If Biden doesn’t extend temporary student loan relief, student loan borrowers can still access other student loan relief programs such as public service loan forgiveness or income-driven repayment. Politically, progressive Democrats in Congress seem more focused on student loan cancellation (although they also champion the extension of the student loan payment pause). If Biden ends student loan relief this August, then you need to start planning now. Are you prepared? Understand all your options for student loan repayment. Here are several ways to get started and save money: