If President Joe Biden decides to enact wide-scale student loan cancellation, he’ll decide before this date.
Here’s what you need to know.
The speculation regarding wide-scale student loan cancellation apparently is over. After years of back-and-forth debate on student loan forgiveness, it appears that Biden is prepared to decide the fate of more than 40 million student loan borrowers. If Biden decides to enact wide-scale student loan cancellation, he plans to decide before August 31, 2022. Here’s why.
Student loan forgiveness: what Biden will decide and when
The news happened so fast that you may have missed the announcement. Rather than issue a press release or make a formal statement during a White House daily press briefing, White House Press Secretary Jen Psaki simply responded to a question on a episode of the podcast, Pod Save America. Here’s what Psaki said: “So between now and August 31, [the student loan pause is] either going to be extended or we’re going to make a decision, as [White House Chief of Staff] Ron [Klain] referenced, about canceling student debt.”
What this means for your student loans
What does this mean for student loan borrowers? First, Biden could announce his fifth extension of student loan relief between now and August 31. Currently, following Biden’s major announcement earlier this month, federal student loan payments are paused through August 31. Congress granted historic student loan relief in March 2020 in response to the Covid-19 pandemic, and both Biden and President Donald Trump extended student loan relief a combined four times. Second, Biden could decide to cancel student loans through an executive order. While Biden has resisted wide-scale student loan forgiveness, he could change course and deliver unprecedented student loan cancellation for millions of student loan borrowers. Third, Psaki has confirmed that Biden is actively considering student loan forgiveness as an option for student loan relief. However, Psaki also has noted that Biden wants Congress to pass legislation to cancel up to $10,000 of student loans, and he will sign the legislation.
Student loan cancellation: what we don’t know about a Biden announcement
Despite Psaki’s comments, there are many things that we don’t know for certain about Biden’s potential plans to cancel student loans. (Student loan cancellation may look different than you expect). For example, we don’t know how many student loan borrowers would be impacted. Biden is unlikely to cancel student debt for all 45 million student loan borrowers. It’s unclear how much student loan debt would be canceled and what the qualification criteria would be. Based on Psaki’s response and use of the word “or,” it’s possible that Biden could simply extend student loan relief beyond August 31 and not make any decision on wide-scale student loan cancellation. If that scenario happens, it’s unclear whether Biden would cancel student loans in the future or if any failure to cancel student loans by August 31 means he has decided not to enact wide-scale student loan forgiveness. Progressive Democrats in Congress have warned Biden that he must extend student loan relief and cancel student loans now to empower voters to vote for Democrats in the midterm election this November. Democrats are facing uncertain election prospects and may lose control of Congress. Moderate and conservative Democrats in Congress are concerned that wide-scale student loan cancellation will alienate independent voters and hurt Democrats, particularly in swing states. (Both Democrats and Republicans are unhappy with Biden on student loan forgiveness).
Student loans: next steps
The good news for student loan borrowers is that Biden is still considering wide-scale student loan cancellation. The bad news is there is no guarantee that he will cancel your student loans. Even with any potential wide-scale student loan cancellation, there are uncertainties that warrant details and explanation. It’s also conceivable that the Biden administration delays an announcement on student loan cancellation beyond August 31, which could leave borrowers in student loan limbo. Whatever transpires next, now is the time to invest in your financial future. Currently, student loan payments are scheduled to restart on September 1. Here are some smart ways to pay off student loans faster:
- Student loan refinancing (lower interest rate + lower payment)
- Income-driven repayment (lower payment)
- Student loan forgiveness (federal student loans)