President Joe Biden could deliver both student loan cancellation and an extension of the student loan payment pause this year.
Here’s what you need to know — and what it means for your student loans.
Student Loans
Student loan borrowers could get a surprise, double-win this year: student loan cancellation and a sixth extension of the student loan payment pause. If implemented, student loan borrowers could get the largest student loan relief in U.S. history. Here’s how it could happen and what it means for you:
Biden could extend student loan relief beyond May
It’s possible that Biden will extend the student loan payment pause, his fourth time since becoming president. Currently, the payment pause will end on May 1, 2022. In March 2020, Congress passed historic student loan relief in the Cares Act, which was the $2.2 trillion stimulus package in response to the Covid-19 pandemic. President Donald Trump extended the student loan payment twice as well. With the extension of student loan relief, student loan borrowers haven’t had to make any federal student loan payments during the entire Biden presidency. (6 major changes to student loan forgiveness). Plus, interest rates on federal student loans have been set at 0%, so there is no new interest accrual. Through May 1, 2022, when the student loan payment pause is scheduled to end, student loan borrowers collectively will have saved more than $120 billion in student loan interest. For every month that Biden extends the student loan payment pause, student loan borrowers will save another $5 billion. For example, a three-month extension would save borrowers another $15 billion on their student loans.
This huge change indicates why Biden could extend student loan relief
Sen. Elizabeth Warren (D-MA) and progressives in Congress have warned Biden that student loan borrowers aren’t prepared financially or psychologically to restart student loan payments. The impact of the Covid-19 pandemic is still present, according to these legislators, and student loan borrowers need more time until student loan payments restart. A huge change at the U.S. Department of Education is the latest proof that Biden is planning to extend the student loan payment pause. The Education Department has instructed student loan servicers — the companies that collect and manage your student loan payments — to stop notifying student loan borrowers about the restart of student loan payments. This suggests that the Biden administration may be planning to push back student loan payments, which would be an unexpected development. Previously, the Education Department had been contacting borrowers regarding student loan payments restarting in May.
Student loan cancellation could happen before student loan payments restart
Will your student loans get cancelled? That’s what advocates for student loan cancellation are hoping will happen this year. According to White House Chief of Staff Ron Klain, the White House could decide this year whether Biden will act on wide-scale student loan cancellation. “The president is going to look at what we should do on student debt before the pause expires, or he’ll extend the pause,” Klain said on the podcast Pod Saves America. This suggests that Biden could announce student loan cancellation before May 1. Alternatively, Biden could extend the student loan payment pause, and then address student loan cancellation before that student loan payment pause expires. There’s no guarantee that Biden will cancel student loans through an executive order. Previously, Biden has said he didn’t have unilateral authority to enact wide-scale student loan cancellation for all student loan borrowers. Instead, Biden has called on Congress to cancel up to $10,000 of student loans for borrowers. Politics may come into play too. Progressives warn that Democrats could lose the midterm congressional election in November if Biden doesn’t extend student loan relief and cancel student debt. However, some argue that extending student loan relief and wide-scale student loan cancellation will alienate moderates and independents, whose votes Democrats need to hold their majorities in Congress.
There’s no guarantee that Biden will extend the student loan payment pause or enact wide-scale student loan cancellation. So, your best move is to prepare for the restart of student loan payments and assume there won’t be more student loan relief. That said, if there is an announcement either way on student loan payments, it could come soon.
Here are some popular ways to save money on your student loans:
- Student loan refinancing (lower interest rate + lower payment)
- Income-driven repayment (lower payment)
- Student loan forgiveness (federal student loans)
Student Loans: Related Reading
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