Here are 4 things to expect if President Joe Biden enacts student loan forgiveness.
Here’s what you need to know — and what it means for your student loans.
President Biden is only weeks away from making one of the biggest announcements of his presidency. By August, Biden will decide whether to enact wide-scale student loan forgiveness for millions of student loan borrowers. The White House has denied that Biden has decided to cancel student loans. However, leaked documents from the U.S. Department of Education show a detailed plan to enact broad student loan cancellation. If Biden cancels your student loans, here are 4 things to expect.
1. You could get $10,000 of student loan forgiveness
If there is broad student loan relief, expect $10,000 of student loan forgiveness. Throughout his presidency, Biden campaigned on this amount of student loan cancellation and messaged $10,000 of student loan forgiveness. After Congress failed to pass legislation, Biden could act through executive action or rulemaking at the U.S. Department of Education. Some progressive lawmakers in Congress want Biden to cancel $50,000 of student loans. However, Biden hasn’t given any indication he supports $50,000 of student loan cancellation.
2. Student loan forgiveness could be automatic
With three important deadlines for student loans approaching, Biden could decide to make student loan forgiveness automatic. Based on a proposed plan from the U.S. Department of Education, you could automatically get broad student loan forgiveness if the Education Department has your income information. In that case, expect student loan cancellation in as soon as 45 days. If the Education Department doesn’t have your income information, one proposal is to allow you to apply online and self-report your income. In either case, the Education Department says it’s prepared to implement broad student loan relief for millions of student loan borrowers.
3. You may not qualify for student loan cancellation
While virtually everyone qualifies for a federal student loan, this doesn’t mean you will automatically qualify for Biden’s student loan forgiveness. Based on leaked documents from the U.S. Department of Education, the good news is that the requirements to qualify are more generous for student loan borrowers. For example, the leaked plan shows that all federal student loans — including FFELP Loans, Perkins Loans, Parent PLUS Loans and Grad PLUS Loans — could be eligible for student loan forgiveness. That said, private loans won’t qualify for student loan relief. The Education Department also is considering an income threshold of $150,000 per individual and $250,000 per family to get student loan forgiveness. This threshold could limit how many student loan borrowers ultimately get their student loans canceled.
4. Not all your student loans may be canceled
Importantly, broad student loan forgiveness may only cancel some of your student loans. Most student loan borrowers will still have significant student loan debt after any wide-scale student loan relief. Therefore, unless you have less than $10,000 of student loans, consider wide-scale student loan relief as partial student loan forgiveness. This means you need a game plan to pay off student loans beyond student loan cancellation. For example, student loan refinancing, income-driven repayment or other student loan forgiveness are all viable options. Here’s how 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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