President Joe Biden has canceled $400 billion of student loans, according to a top Republican in Congress.
Here’s what you need to know — and what it means for your student loans.
Will Biden enact wide-scale student loan cancellation? Millions of student loan borrowers are awaiting his decision, which is expected within weeks. However, with all the debate about wide-scale student loan cancellation, what if Biden already canceled $400 billion of student loans? Rep. Virginia Foxx (R-NC), the top Republican on the House Committee on Education and Labor, writes that Biden has already approved $400 billion of wide-scale student loan cancellation with the “stroke of a pen.” According to Foxx:
- Forget the debate about potential wide-scale student loan cancellation; it’s already happening;
- Student loan borrowers have received $150 billion of student loan cancellation through the student loan payment pause;
- The student loan payment pause and the revised rules for public service loan forgiveness equate to $400 billion of student loan cancellation;
- Broad student loan cancellation will “lead to more inflation-filled deficit spending”;
- College tuition will continue to rise because colleges and universities know that there could be future student loan forgiveness; and
- Biden has used student loan forgiveness to offer “retroactive free college” for high-income households that hold 60% of the student loan debt being forgiven.
Student loan forgiveness: limited waiver will cancel $211 billion of student loans
According to Foxx, the limited waiver for student loan forgiveness will cancel $211 billion of student loans for more than 4 million student loan borrowers, many of whom were never eligible for student loan forgiveness. Foxx is referring to Biden’s announcement last fall that he would make major changes to student loan forgiveness, including a one-time waiver for student loan forgiveness. As a result, more student loan borrowers will qualify for student loan cancellation due to a relaxation of requirements. For example, through October 31, 2022, the Biden administration will allow federal student loan borrowers to count previously ineligible student loan payments toward “credit” for student loan forgiveness. This includes payments such as late payments, partial payments and student loan payments made under the wrong repayment plan. Foxx argues that this retroactive student loan forgiveness, combined with the ongoing student loan payment pause and potential future student loan forgiveness, is a “political ploy” to win votes for Democrats in the mid-term election this November.
Student loan cancellation: next steps
Biden is deciding whether to enact wide-scale student loan cancellation, which could include $10,000 of student loan relief for borrowers. That said, progressives in Congress are lobbying Biden to consider $50,000 of student loan cancellation. Excluding the student loan payment pause, Biden has canceled more than $25 billion of student loans. Last week, the Biden administration also agreed to cancel $6 billion of student loan debt. Foxx argues that Biden has already enacted de facto student loan cancellation to the tune of $5,000 for every student loan borrower (and $10,000 for medical school graduates). Supporters of wide-scale student loan cancellation say it will stimulate the economy, won’t increase inflation, and will help borrowers have extra money to get married, start a family, buy a home and save for retirement. Foxx wants the Consumer Financial Protection Bureau to “go after the Department of Education for its predatory lending practices or halt student lending altogether.” The next milestone for student loan borrowers is the end of temporary student loan relief, which ends August 31, 2022. That means federal student loan payments restart beginning September 1. Here are some popular ways to save money and pay off student loans:
- Student loan refinancing (lower interest rate + lower payment)
- Income-driven repayment (lower payment)
- Student loan forgiveness (federal student loans)