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Will President Joe Biden cancel your student loans?
Here’s what you need to know–and what it means for your student loans.
Here are 7 questions about Biden’s plan for student loan cancellation:
The answer is: it depends. Progressives in Congress want to cancel student loan debt. Many moderate Democrats in Congress don’t support wide-scale student loan cancellation. Republicans in Congress oppose wide-scale student loan forgiveness. Biden, who is a former U.S. senator, supports $10,000 of student loan cancellation, but he wants Congress to cancel the student loan debt. There are policy arguments in support and opposition, but there are other factors that could influence a decision. For example, there are legal and political considerations. The evolution of the Covid-19 pandemic and the state of the economy also could influence whether Congress or the president thinks wide-scale student loan cancellation is necessary at this juncture. Biden’s original proposal for student loan forgiveness wasn’t really tied to forgiving student loans in general. Rather, it was tied to the economic hardship as a result of the Covid-19 pandemic. As more people get vaccinated and more businesses reopen, the Biden administration and members of Congress will be looking to the economy and health statistics to help inform their decision.
There are two main paths to student loan cancellation. The first path is through Biden, as president, who student loan borrowers are hoping will cancel student loans through an executive order. The second path, and the more traditional one, would be for Congress to pass legislation to cancel student loans. Based on the latest update on student loan cancellation, the leading proposal in Congress from Senate Majority Leader Chuck Schumer (D-NY) would cancel up to $50,000 of student loans. However, Schumer doesn’t have enough votes to pass any legislation on student loan cancellation, whether it’s for $10,000 or $50,000. While a contingent of progressive Democrats support $50,000 of student loan cancellation, most Democrats don’t and no Republicans do. Therefore, don’t count on Congress cancelling student loans. However, Congress could work in a bipartisan manner to reform student loan forgiveness with these 4 changes.
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There could be an announcement on student loan cancellation — one way or the other — any day. In early April, Biden said he would ask the U.S. Department of Education to review his legal authority to cancel student loan debt. At the time, White House Chief of Staff Ron Klain said he expected to get the legal memo from the Education Department within weeks. Referring to Biden, Klain said: “He’ll look at that legal authority. He’ll look at the policy issues around that, and he’ll make a decision.” The memo is expected to explore various areas related to student loan forgiveness:
However, don’t get your hopes up. There are at least 5 signs that Biden won’t enact student loan cancellation.
Deciding to cancel student loans is one thing; who gets student loan forgiveness is another. Even if there is wide-scale student loan forgiveness, everyone will not qualify. For example, under Schumer and Warren’s plan, only federal student loans are eligible and student loan borrowers must earn less than $125,000 annually. Any final decision to cancel student loans could include limitations on the amount of student loan debt, the type of student loans, income, debt-to-income ratio and other criteria. Biden has already cancelled at least $2.3 billion of student loans since becoming president. (You can find out here if you qualify for this student loan cancellation). First, Biden cancelled $1 billion of student loans for 72,000 student loan borrowers and second, he cancelled another $1.3 billion of student loans for 41,000 borrowers with total and permanent disability. America has reacted to Biden’s student loan cancellation in different ways. So far, Biden has focused strategically on helping specific groups of student loan borrowers rather than wide-scale student loan forgiveness. It’s possible this trend will continue, as Biden seeks to take a piecemeal approach to student loan cancellation.
Will your student loans get cancelled? Legally, no. It would be challenging, although not impossible, for the Biden administration to show the president has unlimited, unilateral authority to enact student loan cancellation. Progressives say that Biden has existing legal authority to cancel student loans unilaterally without further congressional authorization. However, Biden has said repeatedly that he doesn’t believe he has legal authority to act unilaterally without an explicit authorization from Congress. There are several reasons why Biden may not have legal authority. For example, the language in the Higher Education Act is ambiguous and doesn’t explicitly state that the Education Department has unilateral authority. It’s unlikely that members of Congress in 1965 would have granted full authority to the executive branch to one day cancel all student loan debt. Courts also prefer clear statutory language before one branch of government usurps power from another, particularly on a controversial topic such as wide-scale student loan cancellation. Second, under the Property Clause and the Appropriation Clause of the U.S. Constitution, the executive branch can’t forgive debt that is owed to the federal government without an explicit statutory grant from Congress. Third, while Congress created an appropriation to issue student loans, Congress hasn’t created an explicit appropriation for student loan cancellation, which could be required first before Biden seeks to enact any wide-scale student loan cancellation.
The two most popular amounts of student loan cancellation are $10,000 and $50,000. Biden proposed $10,000 of student loan forgiveness, and has called on Congress to cancel $10,000 of student loans immediately for student loan borrowers. Warren and Schumer proposed $50,000 of student loan cancellation, which the U.S. Department of Education estimates would wipe out all the federal student loan debt of 36 million student loan borrowers. Importantly, these amounts of student loan forgiveness are “up to” these threshold amounts. For example, if you have $8,000 of student loans, you would only get $8,000 of student loans forgiven. That said, there’s no guarantee that these proposals are enacted. There could be student loan forgiveness of a lower amount, or there could be no student loan forgiveness at all. Biden has said repeatedly that he doesn’t support up to $50,000 of student loan cancellation, and it’s unlikely he would change his position. So, Congress would need to pass legislation to cancel that amount of student loan debt because Biden won’t do it through an executive order.
Biden wants to cancel student loans three ways. First, in addition to wide-scale student loan cancellation, Biden also wants to cancel student loans for student loan borrowers who attend four-year public colleges and universities and whose families earn less than $125,000 annually. He also wants to cancel student loans for student loan borrowers at Historically Black Colleges and Universities (HBCUs) and Minority-Serving Institutions (MSIs). Biden also wants to simply income-driven repayment plans so that student loan borrowers only pay 5% of their discretionary income. This change would lower your monthly student loan payment and help you get student loan forgiveness sooner. Finally, Biden also would rework the Public Service Loan Forgiveness program to provide for $50,000 of student loan forgiveness after only five years of qualified employment (60 monthly student loan payments) compared with the current requirement of 10 years (120 monthly student loan payments).
We should know soon whether Biden will enact student loan cancellation. The results of the legal memo from the Education Department could make or break your chances for student loan forgiveness. There’s no guarantee that you’ll get student loan forgiveness, and the chances that you will are relatively low. Overall, regardless of the outcome, make sure you have a student loans game plan.
If you have student loans, you have many choices to pay off student loans faster. Here are some potential options, all of which have no fees:
