President Joe Biden just canceled $ 1.3 billion student loans, and his student loan cancellation plan becomes clear.
Here’s what you need to know.
If you followed the last on student loan cancellation, Biden canceled student loans for the second time this month. First, Biden canceled $ 1 billion in student loans for 72,000 student borrowers. Today, he canceled an additional $ 1.3 billion in student loans for 41,000 borrowers with total and permanent disabilities. Collectively, Biden has canceled $ 2.3 billion in student loans for more than 110,000 student borrowers. Biden will also not ask 190,000 additional disabled student borrowers to present documents proving their income.
While many student loan borrowers applaud Biden’s actions, America reacted to student loan cancellation in different ways. For example, some student loan borrowers are grateful to get student loan relief. Others say this student loan cancellation does not go far enough. For example, $ 2.3 billion in student loans is only 0.1% of the $ 1.7 trillion in outstanding student loans, according to the latest statistics on student debt. While approximately 110,000 student loan borrowers will receive relief, this is only 0.2% of the 45 million student loan borrowers.
Biden’s double actions indicate his approach to student loan cancellation and could serve as a guide for any future student loan cancellations. Here are the key elements:
Biden Focuses on Canceling Federal Student Loans
Biden’s focus has been on the cancellation of federal student loans. The two measures to cancel student loans have focused on federal student loans, not private loans. It doesn’t mean that there couldn’t be private student loan cancellation. For example, in the new stimulus package – the 2021 US bailout – Congress included a provision that would make any cancellation of a non-taxable student loan for the borrower. So Congress may be considering some form of private student loan cancellation. However, so far, Biden has focused solely on federal student loans to provide student loan relief for borrowers who have suffered fraud or school closures as well as student borrowers with disabilities.
Biden focuses on student loan cancellation
One of the biggest objections to large-scale student loan cancellation is the apparent lack of targeting. While critics of student loan forgiveness cite many reasons why student loans shouldn’t be canceled, they say too many people would qualify for student loan cancellation. Simply put, if everyone gets their student loan canceled, wealthier student borrowers with relatively higher income would get the same amount of student loan cancellation as a borrower with limited means. Biden is directly addressing this problem by focusing on two specific groups within the larger universe of student loan borrowers. Rather than student loan forgiveness target based on income, Biden has so far focused on student loan borrowers who need student loan cancellation due to unique circumstances.
Biden takes piecemeal approach to student loan cancellation
Clearly, Biden is taking a piecemeal approach to student loan cancellation. Rather than enacting large-scale student loan cancellation for every student borrower (or even most student borrowers), Biden carefully targets segments of the student borrower population. It’s a different approach from what Senate Majority Leader Chuck Schumer (D-NY) or Senator Elizabeth Warren (D-MA) have advocated. They want Biden to write off up to $ 50,000 in student loans for all borrowers who earn less than $ 125,000. More importantly, they want Biden to cancel student loans in the blink of an eye through executive order. While Biden could still cancel student loans by executive order, he does not believe in having legal authority do this. That’s why he called on Congress to immediately cancel $ 10,000 in student loans. It’s not that Biden doesn’t support large-scale student loan cancellation – he does – but he clearly approached student loan cancellation with a piecemeal strategy.
Student loan cancellation: next steps
Biden’s actions to cancel student loans indicate his willingness to provide student loan relief. With $ 2.3 billion in student debt canceled, Biden took early action to help needy student borrowers. Will your student loans be canceled? While critics say Biden should cancel more student loans to help more student borrowers, Biden is going his own way and at his own pace. There is no indication that he is considering canceling a large-scale student loan by executive order. This means Congress should act to implement large-scale student loan cancellation. However, Congress has not made a single bipartisan proposal to write off student loan debt. If Schumer believes his colleagues will rally around Schumer-Warren’s student loan bill, then Schumer should submit the bill to the Senate for a vote. However, at this time, it is not known whether Schumer could get at least 50 votes, let alone 60 votes, to pass the student loan cancellation with a $ 50,000 student debt relief.
The next step for you is to take control of your student loans. You can wait for your student loan forgiveness, but you can also make sure you understand all of your student loan repayment options. Here are some potential options to consider to save money:
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