Here’s what happens next if President Joe Biden cancels student loans.
Here’s what you need to know — and what it means for your student loans.
Any day now, Biden will announce his major decision on whether to enact wide-scale student loan cancellation. Biden could deliver historic student loan relief to more than 40 million student loan borrowers who have waited years for student loan cancellation. If Biden proceeds with broad student loan forgiveness, here’s what could happen next.
1. Student loan forgiveness: here’s what could be inside Biden’s plan
Leaked documents from the U.S. Department of Education show a potential plan for student loan forgiveness that could form the framework for Biden. The plan includes $10,000 of student loan forgiveness, which is consistent with the amount of student loan cancellation that Biden has supported since he ran for president. Importantly, the White House says Biden hasn’t decided whether to cancel student loans or if he would consider canceling $10,000 of student loans. Progressive Democrats in Congress, such as Sen. Elizabeth Warren (D-MA), are still renewing their push for Biden to cancel $50,000 of student loans. Biden isn’t the only one with a plan for student loan forgiveness. There’s also another blockbuster plan to cancel student loans — here’s what’s inside.
2. Here’s who like to qualify for student loan cancellation
Here’s who could qualify for student loan forgiveness. While eligibility could change, the leaked plan showed that student loan forgiveness would include more than 40 million federal student loan borrowers. This is a big win for student loan borrowers with FFELP and Perkins Loans, which historically have been excluded from historic student loan relief. The proposed plan for student loan cancellation also would include Parent PLUS Loans for parents who borrowed student loans for their dependent child and Grad PLUS Loans for graduate school student loan borrowers. Finally, wide-scale student loan cancellation could include an income threshold of $150,000 for individual student loan borrowers and $250,000 for families.
3. Student loan forgiveness: timing
If Biden enacts broad student loan forgiveness, many student loan borrowers wonder when their student loans will get canceled. The Biden administration hasn’t released formal guidelines on the timing of any student loan cancellation. However, internal documents from the U.S. Department of Education show that some student loan borrowers could get student loan forgiveness as soon as 45 days after Biden’s potential announcement. Other student loan borrowers could wait 90 days or more. This timeline assumes no legal challenges to potential student loan cancellation, which could delay implementation through an injunction, for example.
4. Here’s how to apply for student loan forgiveness
The Biden administration hasn’t communicated a formal application process to get wide-scale student loan cancellation. However, internal documents from the U.S. Department of Education indicate that the application process could be streamlined for student loan forgiveness. For example, if the Biden administration includes an income threshold, Biden could provide student loan forgiveness automatically to student loan borrowers who previously provided their income to the U.S. Department of Education. If the Education Department doesn’t have your income, you may be able to apply online and self-report your income to determine if you qualify for student loan forgiveness.
Student loans: next steps
The student loan payment pause ends within days. Biden said he would decide on student loan forgiveness before the expiration of the student loan payment pause on August 31, 2022. If that happens, here are 4 things to expect with student loan forgiveness. Alternatively, Biden could decide not to enact wide-scale student loan cancellation. Student loan borrowers have enjoyed historic student loan relief, including no mandatory federal student loan payments and 0% interest rates on student loans, since March 2020. If Biden enacts wide-scale student loan cancellation, expect the student loan cancellation to be a one-time occurrence. That said, student loan borrowers should prepare now for the restart of student loan payments beginning on September 1. Here are some of the best ways to save money on your student loans:
- Student loan refinancing (lower interest rate + lower payment)
- Income-driven repayment (lower payment)
- Student loan forgiveness (federal student loans)
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