More student loan relief could look like this.
Here’s what you need to know — and what it means for your student loans.
President Joe Biden shocked everyone when he extended student loan relief for another 90 days after the Biden administration said there would be no further extensions of temporary student loan forbearance. Now, with the Covid-19 pandemic continuing and pressure from Democrats in Congress to cancel student loans, there could be more student loan relief. If Biden enacts more student loan relief, it could look like these options:
Biden could extend temporary student loan forbearance for several more months
If Biden decides to enact more student loan relief, the most likely scenario is that Biden would extend the student loan payment pause for a fourth time. (Here’s why Biden extended student loan relief). If this happens, and there’s no guarantee that it will, this would mark the sixth extension of temporary student loan forbearance from the Cares Act, which is the $2.2 trillion stimulus package that Congress passed, and President Donald Trump signed into law, in March 2020. Biden could extend student loan relief for several more months. For example, his latest extension was from February 1 until May 1, so he could consider another 90-day extension. Alternatively, he could extend for a shorter period (such as 30 days) or a longer period (such as 120 days). Biden will likely evaluate several factors, including the progression of the Covid-19 pandemic and the state of the U.S. economy, among other considerations. (What Biden’s latest student loan relief means for your student loans).
Biden could extend student loan relief until the end of the Covid-19 pandemic
Some progressive members of Congress want Biden to extend student loan relief until the end of the Covid-19 pandemic. While these legislators are happy with the latest 90-day extension, some say it’s insufficient to protect student loan borrowers who are struggling in the wake of the Covid-19 health emergency. Their solution is to extend temporary student loan forbearance indefinitely, which would enable the most vulnerable student loan borrowers to recover financially and generate extra cash flow to pay for living expenses, pay off debt, and begin to build a financial future. The decision also comes at a time when student loan interest rates likely will increase in the coming year. Despite these requests from progressives, Biden is unlikely to extend student loan relief until the end of the Covid-19 pandemic.
Biden could cancel up to $10,000 of student loans through an executive order
While Biden has paused student loan payments, advocates really want student loan cancellation. In the coming weeks, expect more rhetoric on wide-scale student loan cancellation from Democrats in Congress as well as civic and social organizations. Supporters say wide-scale student loan cancellation will stimulate the economy, reduce disparities, help struggling borrowers, and enable young Americans to get married, start a family, buy a home and save for retirement. Biden has been consistent in his position on wide-scale student loan forgiveness. He supports up to $10,000 of student loan forgiveness, but he doesn’t believe he has executive authority to cancel student loan debt through an executive order. To date, Biden hasn’t enacted any wide-scale student loan cancellation and it doesn’t appear that he has any plans to do in the near-term. (Here’s how to qualify for automatic student loan forgiveness).
Biden could cancel up to $50,000 of student loans through an executive order
Would Biden cancel up to $50,000 of student loans? It’s no secret that Senate Majority Leader Chuck Schumer (D-NY), Sen. Elizabeth Warren (D-MA), Rep. Alexandria Ocasio-Cortez (NY), Rep. Ayanna Pressley (D-MA), Rep. Ilhan Omar (D-MN) and others have voiced their support for widespread student loan cancellation of up to $50,000 for student loan borrowers. (Here’s how to get student loan forgiveness during the Biden administration). However, if Biden ever tried to cancel student loans for all borrowers through an executive order, there’s a low likelihood that he would consider up to $50,000 of student loan forgiveness. Biden has never supported this amount of student loan cancellation, nor does Biden seem open to changing his position. (Biden won’t cancel student loans before student loan relief ends).
Biden could encourage Congress to pass legislation to cancel student loan debt
As both president and a presidential candidate, Biden has consistently called on Congress to cancel up to $10,000 of student loans for student loan borrowers. Biden never said he would directly cancel $10,000 of student loans. Rather, as a former U.S. senator, Biden knows that Congress has the authority to pass legislation on student loan forgiveness. As such, Biden has urged Congress to provide more student loan relief for student loan borrowers. Biden has said he’s ready to cancel student loans for millions of student loan borrowers, but Congress hasn’t passed any student loan forgiveness. If Congress passes this legislation on student loans, Biden has said he would readily sign any bill into law.
Biden could enact more targeted student loan cancellation
If Biden enacts more student loan relief, he could continue to focus on targeted student loan cancellation. For example, the Education Department will cancel $2 billion of student loans within weeks. It’s likely that Biden will continue with targeted student loan forgiveness to build on his strategy to date. Biden has cancelled $12.7 billion of student loans since becoming president. This includes student loan forgiveness for public servants, student loan borrowers with a total and permanent disability, and borrowers who were misled by their college or university. Biden’s strategy for student loan cancellation has been targeted at specific student loan borrowers rather than all student loan borrowers. Biden could continue more student loan cancellation to these impacted groups of borrowers, or he could target new constituencies.
Student loans: next steps
What are the next steps for your student loans? Most importantly, prepare now to pay off student loans. There’s no guarantee that Biden will extend student loan relief again. The most likely scenario is that this is the final extension of student loan relief and Biden won’t extend temporary student loan forbearance again. Therefore, expect to restart student loan payments beginning May 1. While Biden could extend the student loan payment pause, prepare as if he won’t. Make sure you understand all your options, and start now. Here are some popular ways to pay off student loans faster: