Student Loan Forgiveness: What Could Go Wrong – Forbes | Vette Leader

When it comes to student loan forgiveness, Here’s what could go wrong.

Here’s what you need to know – and what it means for your student loans.

student loans

President Joe Biden could be days away from canceling student loans for more than 40 million Americans. This could be life-changing news for student loan borrowers in the wake of the Covid-19 pandemic and ongoing economic uncertainty. What could possibly go wrong? Here are 5 things that could totally wreak havoc on widespread student loan forgiveness.

1. Biden could choose not to call in student loans

First, Biden could choose not to enact large-scale student loan forgiveness. That may be the last thing you want to hear, but it must be considered as a possibility. There has been speculation that Biden will reverse $10,000 in student loan forgiveness. Leaked internal US Department of Education documents confirmed historic student loan relief, including a $10,000 student loan waiver for all federal student loan borrowers earning up to $150,000. However, Biden could choose to forgo broad student loan forgiveness for a number of reasons. For example, Biden could fear that a large-scale foreclosure of student loans would increase inflation, which is already at a 40-year high. Alternatively, Biden could be concerned about the cost to the federal government. Finally, after nearly 30 months of student loan payments, Biden may feel that further student loan relief is not warranted.

2. Biden does not have the authority to cancel student loans

Second, Biden may not have the legal authority to call in student loans. As three student loan deadlines approach, Biden could be barred from using executive power to cancel student loan debt for millions of Americans. Progressive Democrats in Congress say Biden has broad legal authority in the Higher Education Act of 1964. According to Senator Elizabeth Warren (DMA), this landmark law gives the President the power to call in unlimited student loans for an unlimited amount of student loan borrowers. Others, including Biden, have questioned the president’s legal authority over student loan forgiveness. For example, Congress did not expressly grant this unqualified authority in the statute. Congress, not the executive branch, has power over the purse. Canceling the student loan is a form of spending, one argument goes. Therefore, the President has no legal authority — without prior approval from Congress — to unilaterally decide how the federal government spends money.

3. You do not qualify for student loans

Third, Biden could enact a large-scale cancellation of student loans. If Biden cancels student loans, here’s what could happen. However, being a Biden student loan forgiveness does not mean you qualify for a student loan forgiveness. There are several ways for Biden to implement broad student-loan foreclosures by tailoring student-loan relief to specific borrower groups. For example, Biden could exclude certain government student loans (such as FFELP, Perkins, and Parent PLUS Loans). Alternatively, Biden could impose an income cap that could exclude higher-income borrowers. Biden’s decision on student loans could also be influenced by this new blockbuster plan for student loan forgiveness.

4. Student loan cancellation is less than you think

Fourth, the student loan foreclosure could be less than you think. For example, some student loan borrowers are still hoping for $50,000 student loan forgiveness. However, Biden could forgive $10,000 on student loans, which is significantly less but consistent with his campaign platform. Alternatively, you can expect $10,000 in student loan forgiveness, but Biden decides to cancel $5,000 in student loans instead. Importantly, the large-scale cancellation of student loans doesn’t mean you’ll get a $10,000 check from the federal government. If there was $10,000 in student loan relief instead, your student loan balance would be reduced by $10,000, saving you a few hundred dollars in student loan payments each month.

5. No Cancellation of Student Loan and Restart of Student Loan Payments

Fifth, student loan borrowers could face a nightmare scenario: no student loan cancellation and student loan payments could resume. Student loan borrowers enjoy continuous student loan relief since March 2020. However, Biden could end the pause in student loan payments and widespread student loan cancellations. The disbursement of the student loan ends within a few days. Biden said he will decide on a broad freeze on student loans before the end of the student loan moratorium on August 31, 2022. However, the Biden administration has not provided specific guidance on the student loan payment pause, nor has it issued a comprehensive student loan forgiveness. With no clear signs that the pause will be extended, student loan borrowers should prepare now for student loan payments to resume on September 1. Here are some of the smartest ways to pay off student loans faster:

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