Here’s why Biden won’t cancel everyone’s student loans this year.
Here’s what you need to know.
If you’re hoping for a large-scale student loan forgiveness this year, keep your expectations moderate. With the end of student loan relief from the Covid-19 pandemic nearing end, there does not appear to be a direct path to massive student loan cancellation. Here’s why:
1. Biden Focuses on Targeted Student Loan Cancellation
As president, Biden canceled $ 11.5 billion in student loans. This week, the US Department of Education announced that $ 2 billion in student loans would be canceled in a matter of weeks. Biden has enacted major changes to student loan cancellation that will ensure more student loan borrowers have access to student loan relief. Expect more student loan cancellations, but they will continue to target specific borrowers (rather than the general population of student loan borrowers). (Here’s who qualifies for the student loan waiver right now).
2. Biden lacks the legal authority for massive student loan cancellation
Progressives in Congress firmly believe that today, by signing a single executive order, the President can write off an unlimited amount of student loan debt for an unlimited number of student loan borrowers. Senate Majority Leader Chuck Schumer (D-NY) and Senator Elizabeth Warren (D-MA) have been the main advocates for the large-scale student loan cancellation and have urged the president to cancel until $ 50,000 in student loans under the authority granted. him in the law on higher education. (How to get a student loan discount). However, despite pressure from members of his own political party, Biden – who supports up to $ 10,000 for student loan cancellations for borrowers – doesn’t believe he has the existing power to write off debt. student loan for all, if not most, student loan borrowers. . Why? First, there is a separation of powers argument that only Congress has power over federal spending (and canceling student loans is a form of federal spending). Second, the Higher Education Act does not explicitly state that Congress gives the president an unlimited right to write off anyone’s student loan debt an unlimited number of times. Third, Congress is unlikely to have abdicated full control over the delivery of student loans to the president and unilaterally removed its own constitutional control. (Here’s how to apply for a limited student loan forgiveness).
3. Student Loan Cancellation Can Cost $ 1,000 Billion
It turns out that canceling the student loan is expensive. (The cancellation of the student loan has a major problem). While it depends on what student loan forgiveness is ultimately passed, the student loan forgiveness would be a significant expense for the federal government. As part of Senator Bernie Sanders’ plan, all private and federal student debt would be canceled. The total cost of Sanders’ plan would be $ 1.7 trillion, which is the total amount of student debt. Under Schumer and Warren’s plan, canceling the student loan could cost $ 1,000 billion. Under Biden’s plan of up to $ 10,000 in student loan cancellations, the cost could rise to $ 377 billion. As Biden faces pressure from conservatives and moderates to cut federal spending (e.g., the Build Back Better plan), it becomes more difficult to push for a large-scale student loan forgiveness given the price. (Here are 3 ways to get a lower student loan repayment). The counter-argument of proponents of large-scale student loan cancellation is that while the overall price is high, the economic, social and psychological impact of massive student loan cancellation may outweigh the negative. financial cost. (How to Apply for a Limited Student Loan Discount).
4. Student loan borrowers to get $ 110 billion in student loan cancellation
Biden canceled $ 11.5 billion in student loans. (Here’s how to get a student loan discount during the Biden administration). However, that does not include $ 110 billion in student loans that will have been canceled as of January 31, 2022, during the temporary forbearance of student loans in the Covid-19 pandemic. In March 2020, Congress passed the Cares Act, the $ 2.2 trillion stimulus package, which suspended federal student loan payments and temporarily set interest rates on federal student loans at 0%. President Donald Trump has twice extended this student loan relief, and Biden has done the same. In total, the Department of Education estimates that student loan borrowers saved $ 5 billion per month in student loan interest for 22 months. Proponents of large-scale student loan cancellation argue that the amount of student loan cancellation to date is paltry compared to the total student loan debt of $ 1.7 trillion. However, it’s hard to ignore the more than $ 120 billion in student loan cancellations passed by Congress, Trump and Biden that will impact millions of student loan borrowers.
Make sure you know all of your student loan repayment options. Since massive student loan cancellation is unlikely, focus on other strategies for paying off student loans. Here are some popular ways to pay off student loans faster: