Biden to decide on student loan cancellation and student loan payment suspension in days
President Joe Biden will decide whether to cancel the student loan and suspend student loan payments in a few days.
Here’s what you need to know — and what it means for your student loans.
Biden has two monumental decisions on student loans before August 31, 2022, which could impact tens of millions of student borrowers. A broad student loan forgiveness could cancel student loans, while an extension of the student loan payment pause could delay the restart of federal student loan payments. Here’s what to expect.
Student loan forgiveness: decision to come
Biden has confirmed he will announce his decision on large-scale student loan forgiveness this month. What’s at stake? The answer: Potential student loan forgiveness of $10,000 or more for student borrowers. The White House has denied that Biden decided to forgive $10,000 in student loans for student borrowers. Progressives in Congress, including Sen. Elizabeth Warren (D-MA) and Senate Majority Leader Chuck Schumer (D-NY), are still pressing the president to forgive $50,000 in student loans. However, if Biden enacts large-scale student loan forgiveness, student borrowers should expect $10,000 in student loan forgiveness. Why? Since running for president, Biden has consistently defended $10,000 in student loan forgiveness. Of course, Biden could choose a higher or lower amount, or he could decide against enacting large-scale student loan relief. Documents released by the US Department last week show a plan to forgive $10,000 in student loans. The proposal, which has not been finalized, would include all federal student loans and potentially include a $150,000 income cap for individual student borrowers.
Student loan payment break: Will Biden extend?
The suspension of student loan payments is scheduled to end on August 31, 2022. The end of the student loan moratorium means that federal student loan payments will resume on September 1, 2022. Federal student loan payments have been continuously suspended since March 2020. Congress passed the Cares Act – the $2 trillion stimulus package – which included historic student loan relief for student borrowers. This included no mandatory payments on federal student loans and 0% interest rates on student loans. President Donald Trump has extended the student loan payment break twice, while Biden has extended student loan relief four times. Education Secretary Miguel Cardona said Biden could extend the student loan payment break beyond Aug. 31. If this happened, student borrowers would not have to make federal student loan repayments until the payment break expired. The Biden administration has dropped a major clue about the potential extension of student loan relief. The Department of Education recently instructed student loan officers not to issue student loan invoices to borrowers, fueling speculation that the student loan payment break could be extended further.
Student loans: next steps
Biden could simultaneously announce the decision on canceling the student loan and suspending the student loan payment. Student borrowers have been waiting for several years to determine whether Biden would enact large-scale student loan forgiveness. Biden has forgiven more than $25 billion in student loans since becoming president. With large-scale student loan cancellation, Biden could cancel an additional $300 billion to $350 billion in student loans. The Ministry of Education says it is ready to implement the large-scale cancellation of student loans. Based on the leaked proposal, student loan forgiveness could begin as soon as 45 days after the announcement. In contrast, if Biden extends the student loan payment pause, the student loan moratorium would automatically continue after August 31, 2022.
Student borrowers are trying to avoid a nightmare scenario: no student loan forgiveness and the restarting of student loan repayments. Republicans in Congress have criticized Biden for considering large-scale student loan cancellations or extending the student loan payment pause. For example, Republicans have said Biden has already canceled $400 billion in student loans and that further student loan cancellation would increase inflation. They worry about extra government spending in an uncertain economy and say the large-scale cancellation of student loans is an unfair redistribution of wealth that hurts Americans who didn’t go to college or don’t have student loans. As Decision Day approaches, there is no guarantee what Biden will decide. That’s why it’s essential to be ready for the restart of student loan repayments. Even if there is an extension to the student loan payment pause, it will only be temporary and payments will resume at some point. Here are some smart ways to pay off student loans and save money: