President Joe Biden may not decide whether to forgive student loans until July or August.
Here’s what you need to know — and what it means for your student loans.
In a frustrating setback for millions of student loan borrowers, Biden may not announce his decision on wide-scale student loan forgiveness until later this summer. According to the Wall Street Journal, citing Biden administration officials, the president will “continue to weigh the political and economic fallout of any such move” to cancel student loans. In late April, the president said he would announce a decision within weeks. However, six weeks later, Biden hasn’t announced whether he will enact wide-scale student loan forgiveness.
Why student loan forgiveness has been delayed
There are several reasons why student loan forgiveness has been delayed. For example, Biden may still be weighing the policy advantages and disadvantages of such a monumental policy decision. The White House denied a report that Biden decided to cancel $10,000 of student loan debt. Advocates of wide-scale student loan forgiveness such as Sen. Elizabeth Warren (D-MA) say that this essential student loan relief will stimulate the economy and help student loan borrowers save additional money to get married, start a family, buy a home and save for retirement. Opponents such as Sen. Tom Cotton (R-AR) say broad student loan forgiveness is a giant wealth transfer that hurts people who didn’t go to college or who don’t have student loans. Biden has canceled $25 billion of student loans since becoming president. He has focused on targeted student loan forgiveness for specific groups of student loan borrowers. While Biden could continue with targeted student loan relief, the question is whether he will agree to deliver wide-scale student loan forgiveness to most or all 45 million student loan borrowers.
Biden could reconsider $50,000 of student loan forgiveness
Biden definitively ruled out the possibility of $50,000 of student loan forgiveness. He has supported $10,000 of student loan forgiveness but never the higher amount that Warren and Senate Majority Leader Chuck Schumer (D-MA) championed. However, a renewed push from major civic and social groups could sway Biden to support $50,000 of student loan forgiveness. Why would Biden support more student loan relief? The primary reasons to support $50,000 of student loan cancellation are the reduction of disparities and inequalities as well as the ability to cancel all federal student loan debt for 36 million student loan borrowers. That said, the most likely scenario for student loan forgiveness is $10,000 of student loan cancellation with an income cap of at least $125,000.
Biden also could be weighing the political fallout
In addition to evaluating the policy implications and amount of any potential student loan forgiveness, Biden must weigh the political ramifications. The midterm election is on November 8, and Democrats are expected to lose congressional seats. This could result in Republicans capturing at least one house of Congress, which would lead to divided government and stall the president’s legislative agenda. Progressive members of Congress have argued that wide-scale student loan forgiveness is essential to rally Democrats to vote this November. Without student loan cancellation, they argue, voters will choose Republican candidates or simply not vote. The counterargument is that if Biden enacts wide-scale student loan forgiveness, it could alienate independent and moderate voters. Democrats need these two constituencies to hold into power in Congress.
Student loans: next steps
If Biden delays an announcement on student loan forgiveness until July or August, it would be closer to the end of temporary student loan relief on August 31, 2022. That could have significant implications for student loan borrowers who are waiting to learn whether they will get at least some student loan cancellation. With student loan payments starting on September 1, 2022, now is the time to prepare. Regardless of the president’s decision, you should be prepared with a game plan for student loan repayment. Here are smart ways to save money:
- Student loan refinancing (lower interest rate + lower payment)
- Income-driven repayment (lower payment)
- Student loan forgiveness (federal student loans)