Here are President Joe Biden’s 5 main options for student loan relief.
Here’s what you need to know – and what it means for your student loans.
With Biden reportedly planning to extend student loan relief for four months, more than 40 million student loan borrowers can now rejoice. However, what happens next? Here are 5 main options for student loan relief:
1. Biden extends the student loan payment pause
Once Biden extends student loan relief, federal student loan borrowers will not be required to make any federal student loan payments until after August, 31, 2022. (Student loan payment pause: Senator says extending student loan relief is unfair to most Americans). This would be Biden’s fourth extension – and the sixth overall, including President Trump’s two extensions – of student loan relief. In March 2020, Congress passed the Cares Act – the $ 2.2 trillion stimulus package – that included historic student loan relief. (Student loan relief: Biden will decide this month whether to extend the student loan payment pause). Since Biden has become president, student loan borrowers haven’t been required to make a single federal student loan payment. Advocates and progressive members of Congress say that restarting student loan payments now will lead to massive student loan default and create additional financial stress for borrowers during the Covid-19 pandemic. (Student loan cancellation and the student loan payment pause are confusing. Here’s what to know).
2. Biden extends the student loan payment pause and cancels student loans
A second option is that Biden extends the student loan payment pause and cancels student loans. (Biden could extend the student loan payment pause forever). This student loan relief is on the wish list of many student loan borrowers. How would it work? For example, following an extension of the student loan payment pause, Biden could announce a plan to enact wide-scale student loan cancellation for all or most student loan borrowers. If Biden chooses this path, it would align most with Sen. Elizabeth Warren (D-MA) and Senate Majority Leader Chuck Schumer (D-NY), who have been championing comprehensive student loan cancellation. However, Biden has favored $ 10,000 of student loan cancellation, rather than the $ 50,000 amount that Warren and Schumer support. (Student loan cancellation does not mean what you think it means).
3. Biden extends student loan relief, but cancels student loans for certain student loan borrowers only
A third option is that Biden extends student loan relief, but he decides to cancel student loans for certain student loan borrowers only. (New proposal would extend student loan payment pause and cancel student loans). This is similar to the second option, but it would limit the amount of student loan cancellation. Biden has preferred targeted student loan cancellation for specific groups of student loan borrowers. For example, since becoming president, Biden has canceled $ 17 billion of student loans for public servants, borrowers with disabilities, and borrowers who for student loan forgiveness through borrower defense to repayment. Sen. Patty Murray (D-WA) proposed that Biden prioritize student loan cancellation for those who “have been struggling the most.” For Murray, this includes student loan borrowers of color, with low income, who have been making student loan payments for at least 20 years, or who left college without a degree. Therefore, this option would not be wide-scale student loan cancellation, but rather student loan cancellation for certain segments of the broader student loan population. (Here’s who won’t qualify for $ 6.2 billion student loan cancellation).
4. Biden ends the student loan payment pause, but cancels student loans
A fourth option is that Biden ends the student loan payment pause after August 31, but he cancels student loans. (Biden could cancel student loans while ending student loan relief). There has been speculation that Biden will extend the student loan payment pause until after the midterm election on November 8, 2022. Why? Progressive Democrats in Congress have warned Biden that without wide-scale student loan cancellation, Democratic voters will not vote in the upcoming election or vote for Republicans instead. (If student loans do not get canceled, student loan borrowers threaten to vote against Democrats). One scenario is that Biden ends student loan relief but replaces it with wide-scale student loan cancellation. This would end ongoing student loan borrower subsidies, but could forgive a meaningful amount of student loan debt.
5. Biden ends student loan relief and does not cancel student loans
A fifth option is that Biden finally ends the student loan payment pause and decides not to enact wide-scale student loan cancellation. This scenario would be most consistent with Biden’s stated intentions. How? While Biden has extended temporary student loan relief multiple times, he has expressed doubts about canceling student loans for all student loan borrowers without further authorization from Congress. Biden has called on Congress to cancel up to $ 10,000 of student loans for borrowers and has said he will sign the legislation. However, the US Senate hasn’t even voted on wide-scale student loan forgiveness, despite multiple legislative proposals. Biden could stand firm on not canceling student loans for all student loan borrowers and simply call on Congress to act. Biden could then to continue to cancel student loans on a targeted basis for select groups of student loan borrowers.
There’s no guarantee which strategy the president may pursue. In the meantime, your best strategy is to prepare for student loan repayment so you’re not surprised.
Here are some popular ways to pay student loans and save money:
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