President Joe Biden has confirmed that he won’t cancel $50,000 in student loans.
Here’s what you need to know — and what it means for your student loans.
In a major announcement Thursday, Biden said he was do not considering $50,000 student loan cancellation. For some student loan advocates, this latest update on student loan forgiveness is a big disappointment. For others, Biden’s announcement is consistent with his earlier statements. Here are 5 key points:
1. Biden won’t forgive all student loan debt
First, it may seem obvious, but Biden will not forgive all student loan debt. (If it does not cancel $50,000 in student loans, it does not cancel any amount above that, including full student loan cancellation). That said, members of Congress have consistently called on Biden to enact large-scale student loan forgiveness of all private student loan debt. They are entitled to their views, but there was no way Biden would write off everyone’s student loan debt. This is likely a major disappointment for millions of student borrowers who were hoping for student loan relief that could have included full student loan forgiveness. However, after months of speculation, it’s now official: no cancellation of all student loan debt.
2. Biden never said he would forgive $50,000 in student loans
Second, Biden has remained consistent in his stance on student loan forgiveness. Some student borrowers have also hoped for up to $50,000 in student loan forgiveness. Why? Senate Majority Leader Chuck Schumer (D-NY) and Sen. Elizabeth Warren (D-MA) have championed the proposal. It has also become a constant narrative and topic of discussion among progressive members of Congress. However, Biden never backed $50,000 in student loan forgiveness. Therefore, Biden’s decision should come as no surprise.
3. Biden considering student loan forgiveness
The good news is that Biden is considering student loan forgiveness and expects to announce his decision in a few weeks. “I’m looking to face debt reduction,” Biden said Thursday. “I’m not looking at a $50,000 debt reduction. But I am in the process of looking closely at whether or not there will be additional debt forgiveness. Notably, it is the most definitive statement Biden has made on directly canceling student loans. (Student Loan Relief: 5 Ways Biden Can Offer Student Loan Forgiveness).
4. There’s no guarantee Biden will embrace large-scale student loan forgiveness
Biden specifically says he decides “whether or not there will be additional debt forgiveness.” To date, Biden has canceled $17 billion in student loans. However, it is possible that after completing his process, Biden may decide not to use executive action to enact student loan forgiveness. Biden’s student loan forgiveness was based on existing federal programs. On the other hand, if Biden seeks to use an executive order to cancel student debt, one of the risks is that opponents will delay the implementation of any student loan cancellation through legal challenges. This week, Republicans in Congress introduced legislation that would prevent Biden from canceling student loans.
5. Student loan forgiveness will not be available to all borrowers
If Biden proceeds with student loan forgiveness, he has not released details on the potential amount of student loan forgiveness and who will be eligible. Previously, Biden had asked Congress to rescind up to $10,000 for student borrowers. If Biden enacts student loan forgiveness, consider $10,000 a reasonable, minimum benchmark. However, expect limits on who is eligible for this one-time student loan forgiveness. For example, Biden could limit student loan forgiveness with income thresholds, which could target student loan forgiveness for low-income student borrowers. (Student Loan Relief: How to Qualify for a “Fresh Start” on Your Student Loans). Schumer and Warren proposed an annual income threshold of $125,000. In contrast, Congress has set an annual income limit of $75,000 for Covid-19 stimulus checks. If there is an income limit and Biden decides to target student loan forgiveness to low-income student borrowers, expect a lower income threshold than that proposed by Schumer and Warren.
Student loan forgiveness isn’t the only major topic taking center stage for student borrowers. Temporary student loan relief is scheduled to end on August 31, 2022. If you don’t qualify for student loan forgiveness or have a higher student loan balance, you need a student loan repayment. Here are some popular options to evaluate so you can save money: