President Joe Biden (Photo by Chip Somodevilla/Getty Images)
Student loan cancellation from Joe Biden means these 3 things.
Here’s what you need to know.
Student Loans
In the past week, Biden has cancelled $6.8 billion of student loans. This brings his total student loan cancellation to more than $9 billion since becoming president in January. (Learn here whether you qualify for $9 billion of student loan cancellation). Here are 3 things Biden’s student loan forgiveness means for your student loans:
1. Student loan forgiveness hasn’t been wide-scale student loan cancellation
Biden has focused entirely on targeted student loan cancellation rather than wide-scale student loan cancellation. Targeted student loan cancellation means specific groups of student loan borrowers get student loan forgiveness. Wide-scale student loan cancellation means that every student loan borrower or most student loan borrowers get student loan forgiveness. To date, Biden has cancelled student loans for two categories of federal student loan borrowers. This includes student loan borrowers with a total and permanent disability and student loan borrowers who were misled by their college or university under borrower defense to student loan repayment.
2. It’s less likely there will be wide-scale student loan forgiveness
To many student loan borrowers, it feels like student loan cancellation got cancelled. Many student loan borrowers who are struggling financially are asking: “Should you stop paying student loans?” After months of waiting for student loan forgiveness, it never came. While Biden has actively cancelled student loan debt, Biden hasn’t enacted wide-scale student loan cancellation. Biden supports $10,000 of student loan cancellation for student loan borrowers, but he has said Congress should cancel the student loan debt. Sen. Elizabeth Warren (D-MA) and Senate Majority Leader Chuck Schumer (D-NY) have championed student loan forgiveness up to $50,000 for student loan borrowers, but legal issues remain. Student loan cancellation may help more student loan borrowers, but it doesn’t mean that Biden will cancel everyone’s student loans. While it’s possible that Biden can enact both targeted student loan cancellation and wide-scale student loan cancellation, there’s no clear indication that he will enact the latter. The U.S. Department of Education has been preparing a legal analysis and recommendation on the president’s ability to cancel student loans unilaterally without further authorization from Congress, but that non-binding memorandum hasn’t been made public. Biden has successfully cancelled student loans on a targeted, piecemeal basis, and there is no indication that he will stop doing so. Student loan cancellation has become a focus on Capitol Hill. However, at the same time, it seems like Congress hasn’t prioritized student loan forgiveness. For example, Congress is set to pass a historic budget deal, but wide-scale student loan forgiveness has been excluded — again.
3. Biden is committed to student loan relief
Even if student loan borrowers are frustrated about the lack of upfront, wide-scale student loan cancellation, Biden has been committed to student loan relief. (Here’s how Biden will continue to focus on student loans and student loan cancellation). In addition to more than $9 billion of student loan cancellation, Biden has extended student loan relief from the Cares Act (the $2.2 trillion stimulus package due to Covid-19) twice, resulting in temporary student loan forbearance with no new interest accrual for student loan borrowers for an additional year. Biden has also said he’s committed to simplifying income-driven repayment plans, which also result in federal student loan forgiveness after 20 years (undergraduate student loans) or 25 years (graduate student loans). He also wants to fix the Public Service Loan Forgiveness program so that more student loan borrowers can qualify for student loan cancellation. The Education Department is also holding hearings on student loans and is expected to implement changes that can help more student loan borrowers get financial relief.
Make sure you understand all your options for student loan relief. Upfront student loan cancellation likely won’t be available for everyone, so make sure you have a game plan for student loan repayment. If you have student loans, here are some popular options to save money:
- Student loan refinancing (get a lower interest rate + lower monthly payment)
- Income-driven repayment plans (get a lower monthly payment)
- Public service loan forgiveness (get student loan forgiveness)
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