Here’s what President Joe Biden will consider if he decides to cancel student loans.
Here is what you need to know.
There is direct pressure on Biden to enact full-scale student loan cancellation for more than 40 million student loan borrowers. Progressive members of Congress and student loan advocates want the president to use an executive order to grant a one-time student loan forgiveness of up to $ 50,000 for federal student loan borrowers. To date, Biden has neither supported $ 50,000 of student loan cancellations nor a large-scale student loan forgiveness by Order in Council. However, Biden urged Congress to pass legislation that would write off up to $ 10,000 in student loans. (Here are 5 major changes for student loans in 2022).
If Biden decides to act on a large-scale student loan forgiveness, he’ll likely assess at least 7 things to make a final decision:
- Total cost of canceling a student loan
- State of the American economy
- State of the Covid-19 pandemic
- Impact on student loan borrowers if there is no student loan forgiveness
- Student loan cancellation to date
- Other Ways to Provide Student Loan Relief
- Impact on the midterm elections
1. Total cost of canceling a student loan
When considering any potential large-scale student loan cancellations, the cost will be the top priority of the Biden administration. There are several proposals for canceling student loans for student loan borrowers. The total cost depends on several factors, which may include the number of student loan borrowers, the amount of student debt forgiven, and any limitations, if any, applied. In any of these scenarios, a large-scale student loan cancellation could cost hundreds of billions of dollars and potentially $ 1,000 billion. (Student loans are on hold, but here are 6 things to do right now).
Total cancellation of student loan: cost of $ 1.5 trillion
Senator Bernie Sanders (I-VT) has proposed to write off all private and federal student debt. If Biden were to write off all federal student loan debts – which is highly unlikely – the total cost would be around $ 1.5 trillion.
$ 50,000 student loan cancellation: $ 1,000 billion in cost
Senate Majority Leader Chuck Schumer (D-NY) and Senator Elizabeth Warren (D-MA) have proposed canceling up to $ 50,000 in student loans for federal borrowers earning up to 125,000 $ per year. (Here’s who qualifies for the student loan waiver right now). The US Department of Education estimates that this would completely write off student loans for 36 million borrowers. If Biden implemented this proposal, which is also highly unlikely, the total cost could be around $ 1,000 billion.
$ 10,000 student loan cancellation: $ 400 billion cost
Biden’s plan to write off up to $ 10,000 in student loans could cost around $ 400 billion.
Alternatively, if Biden enacted student loan cancellation, he could choose a different student loan cancellation amount and could limit the number of eligible student loan borrowers.
2. Student Loan Cancellation: State of the US Economy
Biden will assess the health of the US economy before making a decision on a large-scale student loan forgiveness. The Biden administration has argued for months that the economy is recovering. That said, Biden’s legislative Build Back Better program has stalled in Congress, but it’s a major component in helping to spur economic growth. If Biden enacts a large-scale student loan cancellation, it could be seen as contrary to his economic message. On the one hand, a student loan cancellation would be granted to help financially troubled student loan borrowers. On the other hand, the economy is supposed to recover, which would suggest that more relief on student loans is not warranted. (More student loan relief may be coming).
3. Student loan cancellation: state of the Covid-19 pandemic
Biden will also review the progress of the Covid-19 pandemic, including the impact of the Covid-19 pandemic, before implementing any student loan cancellations. The Covid-19 pandemic is impacting student loan borrowers in several ways, including from a health and economic perspective. With daily Covid-19 cases exceeding 1 million, Biden would examine whether cases have peaked and whether Covid-19 will continue to impact the ability of student loan borrowers to repay their student loans.
4. Impact on student loan borrowers if there is no student loan forgiveness
Is Cancellation of Student Debt the Next Step? Maybe, but Biden will also consider what happens if there isn’t a full-scale student loan cancellation. Some say there will be a major default on student loans. For example, citing a recent study, Warren warned that 89% of student loan borrowers are not financially ready to restart student loan payments. (Biden extended student loan relief, but advocates really want student loan cancellation). Warren also said millions of student loan borrowers could default on their student loans if student debt isn’t canceled. In his announcement to extend student loan relief for the third time, Biden encouraged student loan borrowers to do these 3 things. These strategies suggest that the President is encouraging student loan borrowers to prepare for the restart of student loan payments and to pursue student loan repayment strategies beyond student loan cancellations. (Student loans are on hold, but here are 6 things to do now).
5. Cancellation of student loan to date
While progressives have criticized Biden for failing to implement large-scale student loan cancellation, Biden has canceled more student loans than any president in US history. (Here’s how to get a student loan discount during the Biden administration). Since becoming president last year, Biden has canceled $ 12.7 billion in student loans. This includes student loan cancellation for government officials, totally and permanently disabled student loan borrowers, and student loan borrowers who have been misled by their college or university under the defense of the rule. borrower against repayment. (Student loan borrowers will now receive $ 15 billion in student loan cancellations.) While Biden has focused on targeted student loan cancellation, he will evaluate this approach when considering large-scale student loan cancellation. While progressives will say there is no limit to the amount of student loan cancellation Biden can implement, Biden will likely balance the amount of federal spending to date through previous student loan cancellation and In progress.
6. Other Ways to Provide Student Loan Relief
Instead of a large-scale student loan cancellation, Biden may consider other ways to provide student loan relief. First, although less likely, Biden could extend student loan relief beyond May 1, 2022. Second, Biden could encourage more financially struggling student loan borrowers to sign up for a repayment plan. income-based. Third, Biden can make more resources available through the US Department of Education that can help student loan borrowers transition to federal student loan payments. Fourth, Biden could create a grace period for student loan borrowers when student loan payments restart, with special attention to student loan borrowers who are in default or in default.
7. Cancellation of student loans: impact on the midterm elections
Biden will also examine the impact of the cancellation of student loans on the midterm elections in November 2022. Biden has been in politics for almost 50 years and understands the elections and the political landscape well. Progressives in Congress say canceling student loans is essential if Democrats are to win the midterm election. They argue that failure to cancel up to $ 50,000 in student loans will mean Democrats lose the midterm election. Others say the student loan cancellation could be the reason Democrats lose the midterm election. While popular among student loan borrowers and congressional progressives, large-scale student loan cancellation is not universally popular with the U.S. electorate or Congress. Progressives support large-scale student loan cancellation, but some moderate and independent voters – especially in swing districts – may view large-scale student loan cancellation as a form of wealth redistribution and a lack of funding. personal responsibility. Whether you support or oppose a large-scale student loan forgiveness, Biden is sure to consider the political implications.
The cancellation of the student loan will not last forever. The cancellation of the student loan is not guaranteed. Therefore, make sure you fully understand your student loan repayment options. Here are some popular ways to pay off student loans: