Here are President Joe Biden’s top 5 options for student loan relief.
Here’s what you need to know — and what it means for your student loans.
While Biden reportedly plans to extend student loan relief by four months, more than 40 million student borrowers can now rejoice. However, what happens next? Here are 5 main options for student loan relief:
1. Biden extends student loan payment break
After Biden extends student loan relief, federal borrowers will no longer be required to make federal student loan payments until August 31, 2022. (Student loan payment pause: Senator says extending the student loan relief is unfair to most Americans). It would be Biden’s fourth extension — and 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 — which included historic student loan relief. (Student loan relief: Biden will decide this month whether to extend the student loan payment pause). Since Biden became president, student borrowers have not been required to make a single federal student loan payment. Advocates and progressive members of Congress say restarting student loan repayments will now lead to massive student loan default and create additional financial stress for borrowers during the Covid-19 pandemic. (Student loan cancellation and student loan payment suspension are confusing. Here’s what to know).
2. Biden extends student loan payment pause, cancels student loans
A second option is for Biden to extend the student loan payment pause and cancel student loans. (Biden could extend the student loan payment break indefinitely.) This student loan relief is on the wish list of many student borrowers. How would that work? For example, following an extension of the student loan payment pause, Biden could announce a plan to implement large-scale student loan forgiveness for all or most student borrowers. If Biden goes that route, it would most align with Sen. Elizabeth Warren (D-MA) and Senate Majority Leader Chuck Schumer (D-NY), who have championed complete student loan forgiveness. However, Biden preferred $10,000 in student loan forgiveness, rather than the $50,000 amount that Warren and Schumer support. (Student loan forgiveness doesn’t mean what you think it means).
3. Biden extends student loan relief, but cancels student loans for some student borrowers only
A third option is for Biden to extend student loan relief, but he decides to forgive student loans for certain student borrowers only. (The new proposal would extend the student loan payment break and cancel student loans). This is similar to the second option, but would limit the amount of student loan forgiveness. Biden favored targeted student loan cancellation for specific groups of student borrowers. For example, since becoming president, Biden has forgiven $17 billion in student loans for government officials, borrowers with disabilities, and borrowers seeking student loan forgiveness through Borrower Defense Until Repayment. . Sen. Patty Murray (D-WA) has proposed that Biden prioritize student loan forgiveness for those who are “struggling the most.” For Murray, that includes low-income student borrowers of color who have been paying off their student loans for at least 20 years or who left college without a degree. Therefore, this option would not be large-scale student loan forgiveness, but rather student loan forgiveness for certain segments of the broader student loan population. (Here’s who won’t qualify for $6.2 billion in student loan forgiveness).
4. Biden ends student loan payment pause, but cancels student loans
A fourth option is for Biden to end the student loan payment pause after Aug. 31, but cancel student loans. (Biden could cancel student loans while ending student loan relief). There has been speculation that Biden will extend the student loan payment break until after the November 8, 2022 midterm elections. Why? Progressive Democrats in Congress have warned Biden that without large-scale student loan cancellations, Democratic voters won’t vote in the next election or vote Republicans instead. (If student loans aren’t canceled, student borrowers are threatening to vote out Democrats). One scenario is that Biden ends student loan relief but replaces it with large-scale student loan cancellation. This would end ongoing subsidies for student loan borrowers, but could forgive a significant amount of student loan debt.
5. Biden is ending student loan relief and not canceling student loans
A fifth option is for Biden to finally end the student loan payment pause and decide not to enact full-scale student loan forgiveness. This scenario would be most in line with Biden’s stated intentions. How? ‘Or’ What? Although Biden has repeatedly extended temporary student loan relief, he has expressed doubts about canceling student loans for all student borrowers without further authorization from Congress. Biden called on Congress to cancel up to $10,000 in student loans for borrowers and said he would sign the legislation. However, the US Senate has not even voted on large-scale student loan forgiveness, despite multiple legislative proposals. Biden could stand firm on not canceling student loans for all student borrowers and simply call on Congress to act. Biden could then continue to cancel student loans in a targeted manner for certain groups of student borrowers.
There is no guarantee on the strategy that the president can pursue. In the meantime, your best strategy is to prepare for the repayment of your student loan so that you are not surprised.
Here are some popular ways to pay off student loans and save money: