This is President Joe Biden’s approach to canceling student loans.
Here’s what you need to know – and what it means for your student loans.
Since taking office in January, Biden has canceled $ 3 billion in student loans. Biden has focused on targeted student loan cancellation, which means Biden has canceled student loans for certain constituencies that have a specific, identifiable reason for having their student loan canceled. In some cases, these student loan borrowers have obtained a total cancellation of their student loan and in other cases, they have obtained a partial cancellation of their student loan. For example:
- Biden wrote off $ 500 million in student loan debt for 18,000 student loan borrowers under the borrower’s defense against student loan repayment rule.
- Biden canceled $ 1 billion in student loans for 72,000 student loan borrowers.
- Biden canceled an additional $ 1.3 billion in student loans for 41,000 totally and permanently disabled borrowers.
- Biden has provided student loan relief to 1.1 million student loan borrowers who defaulted on their FFELP loans.
Here are 3 reasons Biden focused on targeted student loan cancellation:
1. Targeted student loan cancellation is specific and measurable
Targeted student loan cancellation is specific and measurable. Unlike large-scale student loan cancellation – which cancels student loans for a wide range of student loan borrowers based on loan type or income, for example – targeted student loan cancellation is tied to a particular economic or legal wrong, or seeks to remedy another specific and societal wrong. When Biden canceled his first $ 3 billion in student loans, he can clearly explain why the student loans were canceled in each specific case. This does not mean that a large-scale student loan cancellation could not amount to “economic harm” or “societal harm,” but it is a more difficult public policy issue to sell than targeted cancellation. student loan. Perhaps this is one of the reasons Congress has not passed legislation for the large-scale cancellation of student loans.
2. Targeted cancellation of student loans is based on the law
The targeted cancellation of student loans is based on clear, existing and unambiguous law. There is no doubt that the cancellation of student loans due to total and permanent disability or the borrower’s defense against repayment rule are clearly defined rules available to the Biden administration for canceling debt. student loans. In comparison, the legal basis for large-scale student loan cancellation is arguably ambiguous. For example, Senate Majority Leader Chuck Schumer (D-NY) and Senator Elizabeth Warren (D-MA) argued that the Higher of Education Act of 1965 gave Biden the unilateral power to cancel student loans. through a decree. They cite Section 432A of the Higher Education Act of 1965 as evidence that the US Department of Education can cancel student loans because Higher Education grants the Department of Education the power to “modify, compromise, waive or release any right, title, claim, lien, or demand, however acquired, including any equity or right of redemption. However, the law does not explicitly state that the President or the US Department of Education can unilaterally cancel student loans from each student loan borrower without further authorization from Congress. Even if Biden were to write off hundreds of billions of dollars in student loans, legal challenges are likely. Moreover, the courts are unlikely to allow any branch of government to act unilaterally on the basis of arguably ambiguous text.
3. Targeted student loan cancellation costs taxpayers less
Canceling a student loan doesn’t come cheap. Depending on the amount of large-scale student loan cancellations, estimates have been set at $ 400 billion to $ 1,000 billion. There have also been concerns about who is benefiting from the cancellation of student loans. New research indicates that canceling student loans may benefit the rich more than low-income student loan borrowers. Of course, the amount of student loan cancellation depends on several factors including the amount of student debt, the number of student loan borrowers and other limiting factors such as income and type of loan, for example. example. By using targeted student loan cancellation, Biden saved taxpayers money. Opponents of targeted student loan cancellation say it does not go far enough: not enough student loan borrowers and not enough student loan debt have been canceled. Opponents also claim that canceling student loans will boost the economy, as student loan borrowers who get student loan forgiveness will spend their money elsewhere in the economy. In the context of the cancellation of student loans, Biden is however managing an economic recovery after the Covid-19 pandemic. There are several moving parts, from stimulus checks to infrastructure spending. The question is how the cancellation of student loans fits into this larger puzzle and, if so, how much money to allocate to the cancellation of student loans, as Biden is helping the American recover. economically.
Student loan cancellation: next steps
Will your student loan be canceled? Yes it’s possible. Has Biden Completed Student Loan Cancellation? Probably not. The question is, what will student loan cancellation look like in the future. Will there be large-scale student loan cancellation, targeted student loan cancellation, or both? At a minimum, there will likely be more targeted student loan cancellation. To date, there have been no large-scale student loan cancellations by Congress or the President. As the Department of Education examines legal options for canceling student loans, it has been almost four months since this process began. It’s unclear when the Education Department will provide the president with non-binding legal advice on large-scale student loan cancellation, whether the president can legally order large-scale student loan cancellation, or whether Congress will need to act. . Last month, the Department of Education held hearings on the cancellation and cancellation of student loans, including ways to improve these programs to help more student borrowers get relief on their student loans. . The Biden administration also emphasizes that existing student loan cancellation programs work effectively and help achieve student loan cancellation for qualifying student loan borrowers.
What does this mean for your student loans? There is no guarantee of large-scale student loan cancellation. Targeted student loan cancellation is possible if you qualify, but most people won’t. Therefore, make sure you have a student loan game plan for your unique financial situation. Here are some smart options to consider for your student loans:
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