President Joe Biden is days away of potential student loan foreclosures for more than 40 million student borrowers.
Here’s what you need to know – and what it means for your student loans.
Biden is just days away from one of the most influential decisions of his presidency — whether to enact large-scale student loan foreclosures for millions of student loan borrowers. The President confirmed that he would announce his decision on student loan forgiveness before the end of the student loan payment pause on August 31, 2022. With just days until the end of the historic student loan exemption, student loan borrowers should expect a response from Biden imminently.
Student Loan Forgiveness: What to Expect
Student loan borrowers are wondering what to expect from student loan forgiveness. Importantly, the White House has said Biden did not opt for sweeping student loan forgiveness. He could call off student loan cancellations for millions of borrowers, or Biden could choose not to enact student loan cancellations. If Biden cancels student loans, here’s what to expect, based on internal US Department of Education student loan enactment documents (which are subject to change):
- $10,000 student loan cancellation for federal student loans;
- all state student loans would qualify for student loan relief, including direct loans; FFELP Loans, Perkins Loans, Parent PLUS Loans, and Grad PLUS Loans;
- Income limit of $150,000 for individual student borrowers and $250,000 for families; and
- Student loan cancellation in as little as 45 days for student loan borrowers whose income is on file with the US Department of Education.
Progressive Democrats in Congress still want Biden to cancel $50,000 in student loans. However, Biden has never committed to calling more than $10,000 in student loans. However, these student loan borrowers could qualify for student loan forgiveness.
How Biden could cancel student loans
The US Department of Education leaked documents include a Suggestion for canceling the student loan. However, the Department of Education needs Biden’s approval to implement his proposed student loan forgiveness plan. Biden wants to expand access to student loan forgiveness, simplify student loan forgiveness rules, create a new student loan plan, and fundamentally change student loan forgiveness. One way to get approval is through an executive order. As Sen. Chuck Schumer (D-NY) quipped, Biden could approve broad student loan forgiveness with “the stroke of a pen.” Alternatively, Biden could use the student loan rulemaking process through the Department of Education. Whatever approach Biden takes, the president will seek to protect his decision from legal challenges that could thwart the implementation of a sweeping student loan cancellation.
Blockbuster Student Loan Forgiveness Plan
While Biden is yet to come up with a detailed plan for sweeping student loan forgiveness, three congressional Republicans have proposed a sweeping blockbuster plan to eliminate student loans. Republicans have accused Biden of calling in $400 billion in student loans and they want to end the large-scale student loan forgiveness and student loan pause. Their proposed legislation would ban large-scale student loan cancellations, end the public service loan forgiveness program, and eliminate capitalized student loan interest. Unlike the Democrats, the Republican plan would change student loan repayments to be capped at repayment of a borrower’s principal debt plus 10 years of student loan interest. Republicans also want easy income-related payback by introducing a new, single plan similar to income-related payback. While Biden could oppose several facets of this proposed legislation, he could include some features such as eliminating student loan interest capitalization and simplifying income-based repayment.
Student loans: next steps
Is Your Student Loan Called Out? The Biden administration has not officially confirmed whether Biden will enact a sweeping student loan forgiveness. The student loan payment pause ends in days. Will Biden extend student loan relief? Biden has remained silent on the prospect of a seventh extension of the student loan moratorium. Student loan borrowers hope the answer to both questions is yes so they can avoid a nightmare scenario of no student loan foreclosure and no student loan payment pause extension. Speculators believe Biden will extend student loan relief and possibly cancel student loans to win Democrats for the midterms. However, the Biden administration has remained silent on both policies. Without guidance, student loan borrowers should prepare for the resumption of federal student loan payments beginning September 1, 2022. Here are some of the best ways to pay off student loans and save money: