President Biden is expected to make momentous decisions regarding student loans soon, and borrowers are awaiting the news with bated breath. Here’s everything you need to know:
Biden previously said he would decide whether to extend the current student loan repayment pause before it expires on Aug. 31 — but the exact timing of the announcement is otherwise unclear. He had previously extended the repayment moratorium started under ex-President Donald Trump four times.
There is also speculation that Biden could grant the kind of widespread loan forgiveness favored by progressive lawmakers who are asking the president to cancel $50,000 or more in debt per borrower. But Biden has been dodgy on the matter — and seemed more comfortable with a $10,000 amount “limited to borrowers making $125,000 a year or less.” forbes writes. A decision is also expected shortly at this point.
Any clues as to where Biden might be headed?
Yes. As for a further extension of the moratorium on repayments, “most debt-forgiveness advocates, policy pundits, and credit servicers don’t expect Biden to resume federal loan payments so close to the midterm elections,” writes NBC News. There’s also the issue of inflation, which administrators have said would affect their decision-making process about forgiving loans. forbes adds; In other words, the overall economic picture is another indication that a fifth renewal is on the way.
One could also argue that Biden currently has the “political momentum” to make such a far-reaching, consistent decision, especially now that the Democrats’ big spending package has been approved by the Senate. And perhaps in anticipation of moves to end Biden, Congressional Republicans recently introduced the Responsible Education Assistance Through Loan (REAL) reform bill that would end the credit moratorium and “specifically prohibit President Biden from incurring large-scale student loan debt to brush”. forbes writes. The legislation will almost certainly fail in both houses of Congress, but its very existence suggests Republicans are preparing for a pro-borrower decision from their commander in chief. If the President does To extend the moratorium, it’s possible he’ll put the payments on hold until next summer, NBC News reports from a person familiar with White House discussions.
As for a broader forgiveness program, there are indications that it may also be in the pipeline. According to documents checked by Politically, the Department of Education has developed a plan to implement widespread student-loan forgiveness if and when Biden gives the green light. The paperwork describes “how the agency intends to manage and operate a potential mass debt relief program on a scale that would be unprecedented in the history of the federal student loan program,” it said Politically. Still, some proponents worry that current levels of inflation may actually deter Biden from making such a decision, adds NBC News.
How might a $10,000 cancellation help?
Forgiving $10,000 per borrower “would forgive a total of $321 billion in federal student loans and eliminate the entire outstanding balance for about 11.8 million borrowers,” CNBC reports, according to the Federal Reserve. The average borrower “would receive $8,478 in student loan forgiveness.” According to CNBC, over 40 million Americans have student loan debt, and about 25 percent of them are in default or in default.
What can borrowers do in the meantime?
While awaiting news from the White House, borrowers should first find out if they’d be included in any potential debt relief, CNBC reports, since forgiveness could exclude those earning a certain amount annually. As for Type of the loan included the Ministry of Education documents obtained from Politically point out that “graduate student loans; student loans for parents, known as Parents PLUS Loans; and Federal Family Education Loans (FFEL), which are federal loans held by private companies, could qualify for federal student loans in addition to major direct loans, although the administration will ultimately have the final say, CNBC writes.
Borrowers should also be wary of counting their chickens before they hatch, warned higher education expert Mark Kantrowitz: “[U]Nothing can be counted on until the law is signed, he told CNBC. “Borrowers should not take rash action in anticipation of a loan forgiveness.”
What are the arguments for and against debt relief for students?
It’s a hotly contested topic! Proponents of widespread loan forgiveness claim that student debt delays and prevents borrowers from starting their lives — whether that means buying a home or having children — and also puts a greater strain on black and Hispanic families. nerd wallet reports. There is also the claim that “not all borrowers have degrees that increase income”.
As for arguments versus Student Debt Relief, the opposition often claims that forgiveness is unfair to those who have already paid off their loans or have not attended college; wealthy borrowers tend to benefit disproportionately (those with the highest debt often have college degrees or higher, resulting in higher earnings); and can’t solve the underlying student debt crisis, per nerd wallet.
Has the administration done anything else regarding student debt relief?
Yes. In addition to freezing loan payments, the administration has taken a “more targeted approach to debt relief,” explains CNBC, “with a focus on a backlog of bad borrower cases.” For example, in June the Department of Education announced it would cancel $6 billion in loans from about 200,000 borrowers who claimed to have been misled and defrauded by their college.
The government also approved a $26 billion loan forgiveness for “about 1.3 million borrowers, including government employees and cheated students,” CNBC writes.