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 the historic cancellation of student loans for millions of student borrowers. While there’s no guarantee that Biden will conduct large-scale student loan forgiveness, Biden could decide to forgive up to $10,000 or more in student loans for millions of student borrowers. What does student loan forgiveness mean for student loan relief? Let’s explore.
Student loan relief: what are the issues
Since March 2020, over 40 million student borrowers have received 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 new interest accumulation on student loans; and
- no recovery of defaulted student loans.
After Congress passed this historic student loan relief, President Donald Trump and Biden collectively extended the student loan payment break six times. Currently, the student loan payment break is extended until August 31, 2022.
What Student Loan Forgiveness Means for Student Loan Relief
Student loan repayments are expected to resume beginning September 1, 2022. What does student loan forgiveness mean for student loan relief? White House press secretary Jen Psaki offered some insight into the future of student loan relief. Earlier, PSAKI said Biden would extend the student loan payment break or cancel student loans by Aug. 31. “So by August 31, [the student loan pause is] either it’s going to be extended or we’re going to make a decision, like [White House Chief of Staff] Ron [Klain] referenced, on canceling student debt,” Psaki said. Biden recently said he was considering a large-scale student loan forgiveness and could make a decision within weeks. Previously, Biden was expected to extend student loan relief beyond Aug. 31 and potentially cancel student loans ahead of the Nov. 8 midterm election. Why? Progressive Democrats in Congress have warned Biden that failure to enact a large-scale student loan forgiveness could hurt midterm Democrats. However, if Biden cancels student loans now, he could end student loan relief on August 31. Why ? The Biden administration has extended the student loan payment pause to help financially struggling student borrowers. However, several extensions of temporary student loan relief have also given Biden more time to decide whether or not to forgive student loans. If Biden decides to enact a large-scale student loan forgiveness, his rationale for another extension could be weakened.
Will Biden cancel student loans?
Biden has canceled $17 billion in student loans since becoming president. Will Biden cancel student loans for all borrowers? No, don’t expect Biden to write off everyone’s student loan debt. Biden also won’t forgive most student loan debt. If Biden enacts full-scale student loan forgiveness, expect limits on student loan forgiveness. (Here’s who might be eligible for student loan forgiveness). For example, Biden could impose an income threshold of $125,000, $75,000 or some other amount. Biden could also limit student loan forgiveness to federal student loans and student loans only. If this happens, graduate student loans and private loans could be excluded.
Student loans: next steps
Expect a potential student loan forgiveness announcement in a few weeks. While Biden could cancel student loans and extend student loan relief, he could also choose to do none or only one of those options. Politically, progressive Democrats in Congress seem more focused on canceling student loans (although they also advocate extending the student loan payment pause). If Biden ends student loan relief in August, you need to start planning now. Are you ready? Understand all of your student loan repayment options. Here are several ways to get started and save money: