President Joe Biden could enact wide-scale student loan cancellation if these 5 things are true.

Here’s what you need to know — and what it means for your student loans.

Student Loans

Biden is weeks away from announcing his decision on canceling student loans for millions of student loan borrowers. If Biden proceeds with broad student loan forgiveness, borrowers are expecting $10,000 of student loan cancellation but hoping for $50,000 of student loan forgiveness. However, wide-scale student loan cancellation isn’t guaranteed and multiple roadblocks could prevent Biden from implementing this policy with the “stroke of a pen.” That said, Biden could enact student loan forgiveness if these 5 things are true:

1. Student loan cancellation will stimulate the economy

The economy will be the number one issue for voters in the midterm election on November 8. If wide-scale student loan cancellation will stimulate the economy, Biden likely would enact broad student loan forgiveness. Why? Biden needs to pull every lever he can to save the economy from a potential recession. Sen. Elizabeth Warren (D-MA) and Senate Majority Majority Chuck Leader (D-NY) say that wide-scale student loan relief not only will stimulate the economy but also will provide a clean financial slate to borrowers so they can get married, start a family, save for retirement and launch a business. A top lawmaker in Congress says Biden has already canceled $400 billion of student loans and therefore no more student loan forgiveness is needed.

2. Student loan cancellation won’t increase inflation

If student loan cancellation won’t increase inflation, Biden would have another reason to cancel student loans. The White House has said student loan cancellation would be a minimal impact on inflation, which has crushed consumers on everything from groceries to gas. However, Republicans in Congress have argued that wide-scale student loan forgiveness will make monster inflation substantially worse. Why? Student loan cancellation, the argument goes, will put more money back into the pockets of student loan borrowers. While that’s a win for student loan borrowers, that excess money could be spent in the economy, which creates a supply-demand imbalance and could fuel inflation higher.

3. Student loan forgiveness will help Democrats win the midterm election

Student loan cancellation is about good policy and good politics. Democrats in Congress agree, but their Republican colleagues say only the latter is true. Republicans argue that if Biden implements student loan forgiveness, he will be putting his political interests of helping Democrats retain control of Congress ahead of protecting the American people from increased federal spending. Democrats such as Rep. Alexandria Ocasio-Cortez (D-NY) say Biden promised Democrats he would cancel at least $10,000 of student loans. That said, since becoming president, Biden has canceled more than $25 billion of student loans. Last week, Biden canceled another $6 billion of student loans. (Here’s how to qualify for $6 billion of student loan forgiveness). If he doesn’t keep his campaign promise, Ocasio-Cortez says Democrats could alienate young, progressive voters. Biden, however, is weighing the political implications of broad student loan forgiveness, which could alienate independent and moderate voters, which are two constituencies Democrats may need to win in November.


4. Student loan cancellation won’t cost significant money

With all the major changes to student loan forgiveness, Biden has to navigate the total cost of broad student loan forgiveness. Student loan cancellation could cost anywhere from $300 billion to $1 trillion, depending on which plan Biden could enact. For Biden to cancel student loans, he would need to convince the American people that the price tag on any potential student loan forgiveness is not cost prohibitive. Alternatively, Biden could argue that wide-scale student loan cancellation will be a net positive to the economy. Finally, Biden could point to social benefits of student loan cancellation, including a reduction of societal disparities and increased family formation.

5. Biden has the legal authority to cancel student loans

If Biden can demonstrate that he has the existing legal authority to cancel student loans, Biden would be more likely to enact wide-scale student loan cancellation. Warren and Schumer say Biden has existing legal authority through the Higher Education Act of 1965. To date, Biden has been skeptical of such authority and has suggested only Congress has the power to enact wide-scale student loan cancellation. If Biden is convinced that he currently holds the legal authority to enact wide-scale student loan cancellation, he would be more open to signing an executive order.

Student loan repayment: next steps

As Biden considers wide-scale student loan cancellation, he hasn’t commented publicly on the end of student loan relief on August 31, 2022. With temporary student loan relief ending, this means federal student loan payments restart beginning on September 1. That said, the U.S. Department of Education has said Biden could extend student loan relief. That said, remember this: even if Biden cancels your student loans, you could still owe other student loan debt. What’s your game plan? Now is the time to prepare for student loan repayment. Evaluate all your options, including these popular ways to pay off student loans faster:

Student Loans: Related Reading

9 million borrowers now qualify for student loan forgiveness

Senators propose major changes to student loan forgiveness

How to qualify for $6 billion of student loan forgiveness

Education Department announces major overhaul of student loan servicing


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