If Biden Extends Student Loan Payment Suspension, These 3 Things Would Happen
If President Joe Biden extends the student loan payment pause, expect these 3 things to happen.
Here’s what you need to know.
Biden could extend the student loan payment break beyond May 1, 2022, which would be a big win for student borrowers. These 3 things would happen if Biden decides to extend temporary student loan relief for an unprecedented fourth time.
1. Student borrowers would save $5 billion every month
If Biden extends the student loan payment pause, student borrowers would collectively save $5 billion a month in interest. Federal student loan repayments have been suspended since March 2020, saving student borrowers more than $120 billion. For every month Biden extends student loan relief, student borrowers would save an additional $5 billion in interest. Why? During temporary student loan relief, borrowers are not required to make federal student loan payments. There is also no new accrued interest and no collection of defaulted student loans. Borrowers could use savings from defaulting on student loans to pay off other debt, save to buy a home, or invest for retirement.
(Student loan refinance rates have gotten ridiculously cheap)
2. Student loans could impact the midterm elections
November’s midterm elections could determine the balance of power in Washington for the next two years. (The student loan forgiveness could be the reason the Democrats lose the midterm elections). If Republicans win control of the U.S. House of Representatives, it would weaken Biden’s legislative agenda. Some Democrats say failure to extend the student loan payment freeze could mean Democrats lose the midterm election. The same goes for canceling the student loan. If Biden does not enact large-scale student loan cancellations, some Democrats say their party is doomed in the election because voters won’t show up to vote. Others disagree with this sentiment. For example, others have argued that extending student loan relief beyond May or enacting large-scale student loan forgiveness could alienate moderate and independent voters Democrats need to retain a majority in Congress. . In that regard, student loan relief could be the reason the Democrats lose the midterm elections.
(210 organizations call on Biden to extend student loan relief and cancel student loans)
3. Student Loan Forgiveness Could Come Next
If Biden extends the student loan payment break, it could be a precursor to student loan forgiveness. (6 major changes to student loan forgiveness). White House Chief of Staff Ron Klain hinted that Biden could decide on student loan forgiveness after deciding whether or not to extend student loan relief. Canceling student loans could mean large-scale student loan cancellation for millions of student borrowers. Biden backed $10,000 in student loan forgiveness. (Biden canceled $15 billion in student loans). Sen. Elizabeth Warren (D-MA) wants $50,000 in student loan forgiveness, so it will be interesting to know how much student debt, if any, will ultimately be forgiven. (Another plan would only forgive $25,000 in student loans). The second question will be who is eligible for student loan forgiveness. (What if you don’t qualify for student loan forgiveness). The most popular plan in Congress limits student loan forgiveness to only federal borrowers earning up to $125,000. If Biden cancels student loans, he could choose different qualifications, such as limiting student loan cancellation to low-income borrowers or who meet the conditions for targeted student loan cancellation.
Biden has not decided whether he will extend student loan relief beyond May 1, 2022. Currently, you should expect federal student loan payments to resume as scheduled starting May 2. As such, prepare now and these student loan repayment strategies might help. to save money: