Here are 3 things to watch for when it comes to student loan cancellation.
Here’s what you need to know — and what it means for your student loans.
President Joe Biden is potentially weeks away from a major announcement on student loan cancellation. Biden, who has canceled more than $25 billion of student loans since becoming president, could announce whether he will enact wide-scale student loan cancellation for millions of student loan borrowers. In the coming weeks, pay close attention to these 3 key things for your student loans.
1. The restart of student loan payments
Student loan payments for federal student loans are scheduled to restart on September 1, 2022. Biden and President Donald Trump extended the student loan payment pause six times since Congress passed the Cares Act in March 2020. That historic student loan relief also includes 0% interest on federal student loans. The end of the student loan payment moratorium is one of three important deadlines for your student loans. Biden is unlikely to forgo canceling student loans and restarting student loan payments simultaneously. Therefore, at a minimum, expect Biden to support wide-scale student loan cancellation, an extension of the student loan payment pause, or both. So, for example, if Biden doesn’t extend the student loan payment pause, this decision could increase the odds for some amount of wide-scale student loan cancellation.
2. Student loan cancellation: how to qualify
The prospect of wide-scale “student loan cancellation” is exciting for student loan borrowers. That said, pay attention to the details of who qualifies. For example, the headline amount of $10,000 of student loan forgiveness or $50,000 of student loan cancellation may seem like a win for all student loan borrowers. However, the qualifications to get that student loan forgiveness may exclude millions of student loan borrowers. For example, the Biden administration likely will limit student loan cancellation to federal student loans only, particularly Direct Loans. If this happens, FFELP student loans and Perkins Loans could be excluded from student loan cancellation unless the Biden administration allows these student loan borrowers to consolidate student loans before student loan cancellation. Biden also could impose a maximum income limit of $150,000 per borrower, for example, preventing student loan borrowers with higher incomes from qualifying for student loan forgiveness.
3. Student loan forgiveness: timing
The timing of a potential announcement for student loan forgiveness is critical. The student loan payment pause ends on August 31, and Biden has said he plans to announce his decision on wide-scale student loan cancellation before that date. However, student loan cancellation doesn’t simply happen once Biden announces his decision. The U.S. Department of Education has to implement any student loan cancellation. At a minimum, implementing student loan forgiveness involves careful coordination with different student loan servicers, communication with student loan borrowers, and detailed oversight and transparency to ensure every student loan borrower gets the intended student loan forgiveness. Republicans in Congress claim that the Education Department is not prepared to implement student loan forgiveness, which could either delay student loan relief or hurt student loan borrowers. While Biden could announce wide-scale student loan cancellation before the November midterm election, there is no clear timeline regarding implementation. Given the uncertainty regarding student loans, student loan payments and student loan forgiveness, your best approach is to prepare for the restart of student loan payments. Understand all your options based on your unique financial situation. Here are popular ways that student loan borrowers are conquering student loan debt and saving money:
- Student loan refinancing (lower interest rate + lower payment)
- Income-driven repayment (lower payment)
- Student loan forgiveness (federal student loans)