Biden days away from potential student loan cancellation

President Joe Biden is days in a row potentially cancel student loans for over 40 million student borrowers.

Here’s what you need to know — and what that means for your student loans.

Student loans

Biden is days away from one of the most impactful decisions of his presidency — whether to enact large-scale student loan forgiveness for millions of student borrowers. The President has confirmed that he will announce his decision on student loan forgiveness before the student loan payment pause expires on August 31, 2022. With just days to go until the relief ends student loan history, student borrowers should expect a response from Biden. imminently.

Student loan forgiveness: what to expect

Student borrowers wonder what to expect from student loan forgiveness. Importantly, the White House has said Biden has not decided on a large-scale student loan forgiveness. He could cancel student loans for millions of borrowers, or Biden could choose not to enact student loan cancellations. If Biden cancels student loans, here’s what to expect based on internal US Department of Education student loan waiver documents (which are subject to change):

  • $10,000 student loan forgiveness for federal student loans;
  • all federal student loans would be eligible for student loan relief, including direct loans; FFELP loans, Perkins loans, Parent PLUS loans and Grad PLUS loans;
  • income threshold of $150,000 for individual student borrowers and $250,000 for families; and
  • student loan cancellation within 45 days for student borrowers whose income is registered with the US Department of Education.

Progressive Democrats in Congress still want Biden to forgive $50,000 in student loans. However, Biden has never pledged to forgive more than $10,000 in student loans. That said, these student borrowers might qualify for student loan forgiveness.

How Biden could cancel student loans

Leaked US Department of Education documents include a proposal for the cancellation of a student loan. However, the Department of Education needs Biden’s approval to implement his proposed plan to cancel student loans. Biden wants to expand access to student loan forgiveness, simplify student loan forgiveness rules, create a new plan for student loans, and make major changes to student loan forgiveness. One route to approval is through an executive order. As Sen. Chuck Schumer (D-NY) joked, Biden could approve a large student loan forgiveness with “the stroke of a pen.” Alternatively, Biden could use the student loan rule-making process through the Education Department. Whichever approach Biden chooses, the president will seek to protect his decision from legal challenges that could thwart the implementation of broad student loan forgiveness.

Success Plan for Canceling Student Loans

While Biden has yet to offer a detailed plan on blanket student loan forgiveness, three Republicans in Congress have offered a comprehensive and successful plan to forgive student loans. Republicans have accused Biden of canceling $400 billion in student loans, and they want to end the large-scale student loan forgiveness and suspension of student loan payments. Their bill would ban large-scale student loan forgiveness, end the civil service loan forgiveness program, and eliminate capitalization of interest on student loans. Unlike Democrats, the Republican plan would change student loan repayment to be capped at repayment of the borrower’s primary student loan balance plus 10 years of student loan interest. Republicans also want to simply reimburse based on income by introducing a new single plan similar to reimbursement based on income. While Biden could oppose several facets of this bill, it could incorporate some features such as eliminating capitalization of interest on student loans and simplifying income-contingent repayment.

Student loans: next steps

Will your student loans be forgiven? The Biden administration has not officially confirmed whether Biden will adopt a broad student loan forgiveness. Student loan payment break ends in days. Will Biden extend student loan relief? Biden has remained silent on the prospect of a seventh extension to the student loan moratorium. Student loan borrowers are hoping that the answer to both questions is yes, so they can avoid a nightmare scenario of no student loan cancellation and no extension of the student loan payment break. Speculators speculate that Biden will extend student loan relief, and potentially forgive student loans, to rally Democrats in the midterm elections. However, the Biden administration has remained silent on both policies. Without any guidance, student borrowers should prepare for the restart of federal student loan repayments starting September 1, 2022. Here are some of the best ways to repay student loans and save money:

Student Loans: Related Reading

Cancellation of student loans: Congress proposes 0% interest rates for student loans

What Your New Student Loan Manager Means for Student Loan Cancellation

Senators propose major changes to student loan forgiveness

Student loan forgiveness must be extended, Biden attorneys general warn

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