Beware of these 5 myths about student loan cancellation.
Here’s what you need to know.
There is a lot of misinformation about student loan cancellation – who gets it, how much it will be, and when it will happen. Make sure you know how to separate fact from fiction. Don’t Believe These 5 Student Loan Cancellation Myths:
1. Everyone gets a student loan forgiveness.
Myth: “Cancel student loans»Means that all student loans have been canceled or that everyone is forgiven for student loans.
- Senator Bernie Sanders (I-VT) offered to cancel all student loansincluding all $ 1.7 trillion in private and federal student loans.
- However, this proposal does not enjoy broad support from either President Joe Biden or members of Congress.
- It is unlikely that everyone will receive forgiveness on a student loan… Expect restrictions on income requirements, for example.
- Senate Majority Chuck Schumer (New York State) and Senator Elizabeth Warren (Massachusetts) have proposed canceling student loans for student loan borrowers from annual income up to USD 125,000… If you earn more than this amount, you will not receive a student loan forgiveness from their plan.
2. Your private student loans will be canceled.
Myth: Biden or Congress will cancel your private student loan duty.
- Biden has proposed canceling student loans for borrowers in the amount of $ 10,000. Biden’s plan can only be applied to federal student loans and not to private student loans.
- Likewise, the Sumer and Warren plan only covers federal student loans.
- While it is possible that private student loans could be canceled, it is currently believed that only federal student loan debt will be canceled if a large-scale student loan cancellation occurs.
- Specifically, the student loan cancellation will apply to federal student loans owned by the US Department of Education. Consequently, this may exclude certain FFELP and Perkins loans held by financial institutions or private investors.
3. Biden can cancel student loans by his own order.
Myth: Biden may unilaterally decide to cancel the student loan by his own order.
- Biden wants to cancel student loans in three ways…
- Despite the rhetoric of some members of Congress, it is not easy to say that Biden can decide to cancel a student loan “with a flick of the pen.”
- Biden has some power to forgive student loans through executive measures. For example, after becoming president in January, Biden hasprovided over $ 2.3 billion in student loans for student loan borrowers.
- The US Constitution grants Congress, not the President, “purse power” to control federal spending. The most widely accepted interpretation is that the president does not have unilateral authority to revoke student loans without further congressional approval.
- If the president cancels student loans, this decision is likely to be appealed in court. This can delay the forgiveness of the borrowers of any student loan.
- Biden asked the U.S. Department of Education to conduct due diligence on his authority to cancel a large-scale student loan through the order of the executive branch.
4. Congress will cancel student loans.
Myth: Congress broadly supports the abolition of the student loan.
5. Canceling a student loan is the only way to get student loan forgiveness.
Myth: Unless Biden cancels my student loans, I will never get my student loans forgiven.
- There are several ways to get a student loan forgiveness.
- While they may not happen right away, these existing programs can help you save money.
- Income based repayment plans such as Income Based Repayment (IBR), Pay as You Earn (PAYE), Revised Pay As You Earn (REPAYE), and Conditional Income Return (ICR) can help you obtain student loan forgiveness for your federal student loans. after 20 years (student loans) or 25 years (graduate loans).
- Income-focused payment plans are especially helpful if you struggle to pay off student loans or lose your job.
- Until December 31, 2025, any student loan forgiveness you receive through an income-driven repayment plan is tax-free. Congress may extend this provisional provision beyond that date.
- The Public Service Loan Forgiveness Program helps student loan borrowers obtain federal student loan forgiveness if they work full time for a qualified government or nonprofit employer and, among other things, make at least 120 monthly payments on their student loans.
- There is even a proposal to cancel student loans for all government employees after 10 years of service. even if they do not qualify for student loan forgiveness…
- Biden supports the government service loan forgiveness program and has offered to offer a student loan forgiveness of up to $ 50,000 in five years.
Student Loan Cancellation: Next Steps
There are many moving parts when it comes to canceling a student loan. Biden will read the U.S. Department of Education’s legal memo that may help guide him on the next steps to cancel a student loan. Biden will weigh both legal and political considerations, although he can opt for a different recommendation, which is recommended by Education Minister Miguel Cardona. If Biden cancels student loans by his order, cancellation of a student loan might look like this… If Biden has no legal authority to revoke student loans by presidential decree, then Congress will have to proceed as follows. Biden indicated that he will sign any student loan forgiveness law that Congress passes. However, to pass the law, Congress will need to amend its current $ 50,000 student loan forgiveness proposal to find a solution that attracts more support.
Regardless of whether Biden or Congress decides to cancel student loans, don’t expect all of your student loans to be canceled. That’s why it’s important to consider other potential options to save money: