President Joe Biden canceled over $ 40 billion in student loans…
Here’s what you need to know.
In the ongoing debate over student loan abolition, here’s a fact that may come as a surprise: Biden has now canceled over $ 40 billion in student loans since becoming president in January. Here’s a breakdown:
Biden Cancels $ 3 Billion Student Loans
Biden Cancels Nearly $ 3 Billion Student Loans by direct cancellation of the student loan.
To date, it has been a targeted student loan cancellation that has forced specific student loan borrowers to correct a specific error in accordance with applicable laws or regulations. However, this is in contrast to the large-scale student loan abolition that Senator Elizabeth Warren (Massachusetts) and Senate Majority Leader Chuck Schumer (New York State) are pushing Biden to go into effect by presidential decree. They want Biden to cancel student loans up to $ 50,000 per borrower on a large scale (if you make less than $ 125,000 and only on federal student loans). Nonetheless, Biden has decided to cancel at least a few large-scale student loans, worth more than $ 40 billion. Here’s how:
How Biden Canceled $ 40 Billion Student Loans
In March 2020, Congress passed the Cares Act, a $ 2.2 trillion stimulus package that provides student loan exemptions, among other things. This student loan exemption has provided federal student loan borrowers through September 30, 2021:
- no federal student loan payments;
- 0% interest on federal student loans; as well as
- no collection of outstanding student loan debt.
If you are a federal student loan borrower, this is all too familiar. Until September, student loan borrowers will receive an 18-month break in their mandatory payments on the student loan. In the absence of an extension, federal student loan payments will resume on October 1. Perhaps Biden will extend the student loan exemption even if unemployment payments and a moratorium on evictions end. However, there is another major dilemma if Biden grants student loan exemptions.
Regardless of whether Biden will extend this student loan exemption, Biden, by his order, extended this student loan exemption from January 31, 2021 to September 30, 2021. That decision alone canceled a $ 40 billion student loan debt for student loam borrowers. The suspension of the student loan has saved student loan borrowers $ 5 billion a month, according to the US Department of Education. By not paying off federal student loans and having no new interest charges on their balance sheets, student loan borrowers actually received $ 5 billion a month in student loan cancellations. President Donald Trump also extended the student loan exemption from October 1, 2020 to January 31, 2021, which also canceled approximately $ 20 billion. If you add the period from March 2020 to September 2020, the total student loan cancellation amount is over $ 90 billion.
Is this really a student loan cancellation?
Some may argue that this is not actually a student loan cancellation. Canceling the student loan, they say, is akin to canceling the $ 3 billion student loan that the Biden administration canceled outright. They may say that saving money on interest payments is not the same thing because they do not feel that there has been any tangible contraction in their student loan balance. However, there are two ways to think about canceling a student loan. The first is canceling the main student loan balance, which is how much money you currently owe. This is a cancellation of a student loan of $ 10,000 or $ 50,000. The second is the cancellation of future interest on this balance. The Warren-Schumer Plan calls for the cancellation of existing student loan debt, which for any student loan borrowers with a remaining student loan balance will actually also nullify some future student loan interest as interest will accrue on the smaller student loan balance. Biden’s decision to extend the student loan suspension, which resulted in $ 5 billion in monthly savings, is yet another form of student loan cancellation. Why? The student loan borrowers have saved this money directly and will not have to repay the savings. It is important to note that canceling this student loan does not preclude future cancellation, whether large-scale or targeted. Biden or Congress can still cancel student loans up to $ 10,000 or $ 50,000 or another amount. However, it’s important to note that Biden has written off more than $ 40 billion in student loan debt since becoming president, and student loan borrowers will receive a $ 90 billion student loan cancellation by September 30, 2021. Whether it’s too much, too little, or just enough. Ultimately, student loan forgiveness is up to the President and Congress.
It is unclear if there will be another student loan cancellation and when it will happen. This is why it is so important to keep track of your student loans. Consider all student loan repayment options based on your unique circumstances. Here are some smart options: