The U.S. Department of Education has a plan to cancel $10,000 of student loans.
Here’s what you need to know — and what it means for your student loans.
According to reporting from Politico, the Education Department has “detailed plans” to implement wide-scale student loan cancellation for millions of student loan borrowers. If President Joe Biden approves these plans, which hasn’t happened yet, millions of student loan borrowers could get $10,000 of student loan forgiveness.
Student loan forgiveness: here are the details
Here’s what the historic student loan relief could look like, per Politico, although plans haven’t been finalized and are subject to change:
- $10,000 of student loan forgiveness;
- applies to all federal student loans;
- student loan forgiveness would also include Parent PLUS Loans and graduate PLUS loans;
- includes federal student loans not owned by the federal government, which suggests that FFELP Loans and Perkins Loans could be included;
- borrowers with Pell Grants could be eligible for additional student loan forgiveness;
- individual borrowers with an income of $150,000 and $250,000 per family could get student loan forgiveness, although an income threshold hasn’t been finalized;
- student loan forgiveness could be automatic within months for student loan borrowers for whom the Education Department has income information;
- alternatively, student loan borrowers could apply online and attest their income to qualify for student loan forgiveness, if there is an income threshold;
- potential automatic student loan forgiveness for approximately 8 million student loan borrowers who are in student loan default; and
- the first student loan cancellation could happen within 45 days of an announcement of wide-scale student loan forgiveness, with potentially millions of student loan borrowers getting student loan cancellation within 90 days.
“The Department’s review of broad based debt cancellation remains ongoing and no decisions have been made,” an Education Department spokesperson told Politico. “We are not going to comment on any alleged internal documents or internal deliberations about hypothetical scenarios.”
Student loan cancellation: Biden makes the final decision
Importantly, the White House has said Biden hasn’t decided on wide-scale student loan forgiveness. Ultimately, the decision to enact wide-scale student loan relief rests with Biden, not the Education Department, and any potential plans are subject to change. Biden said he will decide on broad student loan forgiveness by August 31, when the student loan payment pause expires. While Biden proposed $10,000 of student loan forgiveness, progressive members have been lobbying Biden to cancel $50,000 of student loans. However, Republicans in Congress oppose wide-scale student loan forgiveness, calling it wasteful spending, wealth redistribution and a recipe to increase inflation. For example, Rep. Virginia Foxx (R-NC), the top Republican on the House Committee on Education and Labor, said Biden has canceled $400 billion of student loans, and wide-scale student loan cancellation is a “political ploy” for Democrats to win votes in the midterm election this November. While 107 members of Congress urged Biden to extend the student loan payment pause, Republicans want student loan payments to restart on September 1. If federal student loan payments restart, millions of student loan borrowers will begin making payments within weeks. Make sure you are prepared for the potential restart of student loan repayment. Here are some of the best ways to pay off student loans faster and save money:
- Student loan refinancing (lower interest rate + lower payment)
- Income-driven repayment (lower payment)
- Student loan forgiveness (federal student loans)