President Joe Biden will decide on student loan forgiveness and the student loan payment pause within weeks.
Here’s what you need to know — and what it means for your student loans.
Biden has two monumental decisions on student loans, which could impact tens of millions of student loan borrowers. Broad student loan forgiveness could cancel student loans, while an extension of the student loan payment pause could delay the restart of federal student loan payments. Here’s what to expect.
Student loan forgiveness: decision coming
Biden confirmed he will announce his decision on wide-scale student loan forgiveness this month. What’s at stake? The answer: potential student loan cancellation of $10,000 or higher for student loan borrowers. The White House has denied that Biden has decided to cancel $10,000 of student loans for student loan borrowers. Progressives in Congress, including Sen. Elizabeth Warren (D-MA) and Senate Majority Leader Chuck Schumer (D-NY), are still lobbying the president to cancel $50,000 of student loans. However, if Biden enacts wide-scale student loan cancellation, student loan borrowers should expect $10,000 of student loan forgiveness. Why? Since running for president, Biden has consistently championed $10,000 of student loan cancellation. Of course, Biden could choose a higher or lower amount, or he could decide not to enact wide-scale student loan relief. Leaked documents from the U.S. Department last week show a plan to cancel $10,000 of student loans. The proposal, which hasn’t been finalized, would include all federal student loans and potentially include an income cap of $150,000 for individual student loan borrowers.
Student loan payment pause: will Biden extend?
The student loan payment pause is scheduled to end on August 31, 2022. The end of the student loan moratorium means that federal student loan payments will restart on September 1, 2022. Federal student loan payments have been paused continuously since March 2020. Congress passed the Cares Act — the $2 trillion stimulus package — which included historic student loan relief for student loan borrowers. This included no mandatory federal student loan payments and 0% interest rates on student loans. President Donald Trump extended the student loan payment pause twice, while Biden has extended this student loan relief four times. Education Secretary Miguel Cardona says Biden could extend the student loan payment pause beyond August 31. If that happens, student loan borrowers wouldn’t have to make any federal student loan payments until the payment pause expires. The Biden administration dropped a major clue about potentially extending student loan relief. The Education Department recently instructed student loan servicers not to send student loan bills to borrowers, fueling speculation of another extension of the student loan payment pause.
Student loans: next steps
Biden could announce the decision on student loan forgiveness and the student loan payment pause simultaneously. Student loan borrowers have been waiting several years to determine whether Biden would enact wide-scale student loan cancellation. Biden has canceled more than $25 billion of student loans since becoming president. With wide-scale student loan cancellation, Biden could cancel another $300 to $350 billion of student loans. The Education Department says it’s ready to implement wide-scale student loan cancellation. Based on the leaked proposal, student loan forgiveness could start as soon as 45 days after the announcement. In contrast, if Biden extends the student loan payment pause, the student loan moratorium would continue automatically after August 31, 2022.
Student loan borrowers are trying to avoid a nightmare scenario: no student loan forgiveness and the restart of student loan payments. Republicans in Congress have criticized Biden for considering wide-scale student loan forgiveness or an extension of the student loan payment pause. For example, Republicans have said Biden already has canceled $400 billion of student loans and that additional student loan forgiveness will increase inflation. They’re concerned about additional government spending in an uncertain economy and say wide-scale student loan forgiveness is unfair wealth redistribution that hurts Americans who didn’t go to college or who don’t have student loans. With decision day approaching, there’s no guarantee what Biden will decide. That’s why it’s critical to be prepared for the restart of student loan payments. Even if there is an extension of the student loan payment pause, it will only be temporary and payments will restart at some point. Here are some smart ways to pay off student loans and save money:
- Student loan refinancing (lower interest rate + lower payment)
- Income-driven repayment (lower payment)
- Student loan forgiveness (federal student loans)
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