Joe Biden to suspend student loan payments for eight months…
Here’s what you need to know – and what this can mean for your student loans and the chances of canceling student loans.
Biden, who now becomes the 46th president, will suspend payments on the federal student loan today by his order. While many expected a three-month hiatus, Biden will extend the hiatus in student loan payments. for eight months until September 30, 2021 This is one of many changes in your student loans in 2021, and means that:
- No federal student loan payments due
- No new interest will be charged on your federal student loans.
- Student loans will not be charged in the event of default.
Congress created this student loan exemption under the Care Act ($ 2.2 trillion stimulus package) in March. President Donald Trump has renewed his student loan exemption twice. First, Trump extended the student loan exemption from September 30, 2020 to December 31, 2021 (three-month extension). Second, Trump extended the student loan exemption until January 1, 2021 (one month extension). Instead of extending the loan for three months, Biden decided on the first day of his presidency to extend the student loan exemption by eight months in advance. September 30, 2021 is the same date that House Democrats originally asked for an extension of the student loan exemption in their incentive package, the Heroes Act.
It is important to note that a temporary suspension of your student loan is not required. If you are looking for a deferral of federal student loans, then this student loan exemption will help you through most of 2021. However, if you want to pay off student loans as usual or make one-off payments, you can still pay off your student loans to reduce your principal balance and save money on interest.
What does it mean for student loan cancellation
Will your student loans be canceled? Senator Elizabeth Warren (Massachusetts) and Senator Chuck Schumer (New York) supported Biden cancel student loans by decree on the first day of his presidency. It won’t happen. First, the Department of Education issued a non-binding memorandum warning that the president cannot unilaterally cancel student loans for each student loan borrower in accordance with the ordinance. Biden wants to cancel student loans immediately… However, he wants Congress to propose legislation – either as a stand-alone law or as part of a new stimulus package. Congress Removes Student Loans From Latest Incentive Packageand Biden did not include the cancellation of the student loan in his proposed $ 1.9 trillion stimulus package. Here are some possible ways to interpret today’s announcement of student loan benefits and what that might mean for student loan cancellation:
1. Cancellation of student loan will not happen now
It is possible that today’s announcement of an eight-month deferral of student loan payments signals that Congress or Biden will not cancel student loans in the near future. Congress and Biden now have an eight-month period to consider a student loan forgiveness. Congress may focus first on the new stimulus package and other policy priorities. Then, later this year, Congress may consider abolishing the student loan. Meanwhile, Biden has provided student loan exemptions to millions of borrowers. While this is not the same as canceling a student loan, the longer window gives the Biden administration time to distribute more Covid-19 vaccines and boost the economy. After that eight-month period, the economy may recover and Congress may decide that student loan cancellation is not urgently needed, especially if the Covid-19 pandemic is shrinking. Alternatively, after eight months, the economy may not recover, Biden may again renew the student loan exemption, and then Congress may decide to cancel the student loan.
2. Cancellation of a student loan is not related to the suspension of payment of the student loan.
It is also possible that today’s student loan exemption is completely unrelated to the suspension of student loan payments. In this scenario, think about the suspension of student loans and the cancellation of student loans in two parallel tracks. Biden, as president, is suspending student loans by his order. Biden chose eight months because he believes there is plenty of time for borrowers to get a deferral of student loans while America recovers from the Covid-19 pandemic. At the same time, Congress is considering abolishing the student loan. Memory, Biden wants to cancel student loans in three ways… Schumer pointed out that student loans are a priority for the first 100 days after the Biden administration. Hence, it is entirely possible that Congress could cancel student loans even if payments are suspended. Or Congress ultimately decides not to cancel student loans. The essence of this scenario is that the suspension of payments and the cancellation of the student loan are completely unrelated.
3. Congress will revoke student loans by law.
A third possibility is that the suspension of student loan payments is one part of Biden’s student loan strategy, and canceling the student loan is another. In this scenario, you might consider suspending payments as the first step and canceling a student loan as the second step. In this hypothetical version, one of the options is that Congress May Cancel Student Loans In New Incentive Package… While Biden did not include student loan forgiveness in his proposed stimulus package, Congress had the final say. Thus, Congress may decide to include student loan abolition along with incentive checks and unemployment insurance. Or Congress could decide to abolish student loans in new legislation. It’s unsettled anyway who is eligible for student loan cancellation and what is the amount of the student loan forgiveness there will be. There have been several proposals to cancel student loans (for example, canceling a $ 10,000 student loan versus $ 50,000 for a student loan). It is also unclear if income restrictions, unemployment, financial hardship, or other requirements would make it likely that fewer student loan borrowers will eventually be eligible for student loan cancellations.
How to pay off student loans faster
What is the best way to pay off student loans? Today’s suspension of student loan payments is positive news for tens of millions of student loan borrowers. Many borrowers are simply delaying paying off student loans in the wake of the Covid-19 pandemic. Others with more financial resources will see this suspension of payments as an opportunity to pay off student loans faster. Since no new interest is charged, borrowers can pay off student loans faster by reducing their principal student loan balance. This is why it is important to understand your student loan repayment options now, especially if no student loan cancellation occurs. Get started with these three options, all of which are free: