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Cancellation of student loans is Democrats’ next goal after Biden extends student loan relief

By on August 7, 2021 0

The unexpected happened yesterday, and student loan cancellation could be next.

Here’s what you need to know.

Student loans

After months of silence and uncertainty, Biden offered a windfall for student loan borrowers yesterday: four more months of student loan relief until January 31, 2022. That means there will be no payments of federal student loan required, 0% interest on federal student loans, and no collection of delinquent student loans. It’s a big win for progressives like Senator Elizabeth Warren (D-MA) and Senator Chuck Schumer (D-NY), who have advocated for months for the president to extend student loan relief to millions. student borrowers. They had hoped for an even longer extension of student loan relief – at least until March 31, 2022 at the earliest – but it looks like they will agree to an extension until early next year. So, this begs the question: Does student loan cancellation happen next?


Student loan relief: what it means for student loans

Student loans: the good news

There is good news and bad news for student loan borrowers when it comes to student loan relief. The good news is that they will still have four months of financial relief. This is particularly useful for all student loan borrowers who are experiencing financial difficulties as a result of the Covid-19 pandemic. This additional period will also help more than 10 million student loan borrowers who will lose their federal student loan officers by December 31 to be assigned a new one. Two leading student loan managers, FedLoan Servicing and Granite State Management & Resources, announced last month that they will end their federal student loan management contracts with the U.S. Department of Education by the end of the year. ‘year. As a result, the US Department of Education will now have more time to ensure a smooth transition for affected student loan borrowers.

Student loans: the bad news

The bad news for student loan borrowers is that this is the final extension. The Biden administration has explicitly announced that there will no longer be an extension of student loan relief. Therefore, student loan borrowers should be prepared to start repaying their student loans again on February 1, 2022. At that point, the interest rate on your student loan will return to its normal pre-loan interest rate. pandemic. If you have any student loan debt that is past due at that time, it could be subject to student loan debt collection, including possible wage garnishment.


Student loan cancellation: two ways to view student loan relief

There are two main ways to view student loan relief and cancellation. First, Warren and Schumer view the extension of student loan relief as a major victory and the first step in two. From their perspective, student loan relief was the first step, and student loan cancellation the second. With this first victory, progressives will see Biden’s extension of student loan relief as a direct result of their lobbying efforts. Progressives will now work to put more pressure on Biden to write off up to $ 50,000 in student loans. They may even view student loan cancellation as a more tangible possibility now that student loan relief has been extended.

Second, it’s not clear whether Biden’s first choice was to expand student loan relief. Biden could have decided to extend student loan relief regardless of pressure from progressives. However, it is also possible that he extended the student loan relief as a “peace offer” with members of his own party. Biden didn’t extend student loan relief for as long as many progressives hoped, but he did extend student loan relief before the scheduled expiry next month. That said, Biden announced the extension on a summer Friday afternoon. Now is not the time for a big announcement, which may suggest that the administration did not want to promote the announcement beyond the scope of student loan borrowers. The federal government has been subsidizing student loan borrowers since March 2020, which may not be right for 80% of Americans who don’t have student loans or who haven’t gone to college. The Biden administration is clearly committed to helping student loan borrowers, including through student loan cancellation and student loan cancellation and student loan repayment reform. Biden canceled $ 3 billion in student loans and twice extended student loan relief. However, from another angle, this extension of student loan relief could also be completely independent of the large-scale cancellation of student loans. Student loan cancellation can help student loan borrowers, but that doesn’t mean Biden will cancel everyone’s student loans. Student loan relief may be another tool in a larger toolbox that the Biden administration uses to help student loan borrowers. By January, the Education Department could announce proposals to help improve student loan repayments and student loan cancellation, which could be seen as alternatives to large-scale student loan cancellation.


Student loan cancellation: what happens next

There is no direct relationship between student loan cancellation and student loan relief. Yes, these are two forms of financial relief for student loan borrowers, but they are separate policy decisions. For example, it’s possible that Biden extended the student loan relief, but he won’t enact the student loan cancellation. Warren and Schumer have a totally different point of view. They want the two issues – student loan cancellation and student loan relief – to be linked. Supporters of student loan cancellation say Biden can use the executive power he used to extend student loan relief to enact student loan cancellation. Biden has repeatedly stated that he does not believe he has the legal authority to cancel a student loan without further express authorization from Congress. Warren and Schumer argue that Biden has such authority which was granted by the Higher Education Act of 1965. The next step is for the US Department of Education to issue its legal recommendations on the cancellation of student loans to Biden, which , based on this recommendation, will make the final decision on its authority to cancel student loans. Biden has backed $ 10,000 in student loan cancellation for student loan borrowers, but wants Congress to enact student loan cancellation through legislation. Biden’s position was bolstered last week by House Speaker Nancy Pelosi (D-CA), who said only Congress, not the president, had the power and legal authority to overturn the student debt.

If you have student loans, be aware that large-scale student loan cancellation is not guaranteed. Student loan relief ends in January, so be sure to plan for your financial future now. Don’t wait until February. You can save money with these options for your student loans:


Student loans: more reading

Biden extends student loan relief until January 31, 2022

Student loan cancellation focused today on Capitol Hill

Student loan cancellation may help more borrowers, but that doesn’t mean Biden will cancel everyone’s student loans

Canceling student loans won’t boost economy, new study finds

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