This was President Joe Biden’s approach to student loan cancellation.
Here’s what you need to know – and what does it mean for your student loans…
Becoming president in January Biden Cancels $ 3 Billion Student Loans… Biden has focused on targeted student loan cancellation, which means that Biden has canceled the student loan for certain groups that have a specific and indefinable reason for canceling the student loan. In some cases, these student loan borrowers received a full cancellation of the student loan and in other cases, a partial cancellation of the student loan. For example:
- Biden canceled $ 500 million student loan debt for 18,000 student loan borrowers under the protection of the borrower in accordance with the student loan repayment rule.
- Biden canceled $ 1 billion student loans for 72,000 student loan borrowers.
- Biden canceled another $ 1.3 billion in student loans for 41,000 borrowers with full and permanent disabilities.
- Biden granted student loan exemptions to 1.1 million student loan borrowers who defaulted on their FFELP loan.
Here are 3 reasons why Biden has focused on targeted student loan cancellation:
1. Purposeful cancellation of a student loan is specific and measurable.
Purposeful student loan cancellation is specific and measurable. Unlike large-scale student loan cancellation, which cancels student loans for a large number of student loan borrowers depending on the type of loan or income, targeted student loan cancellation is associated with a specific economic or legal error or is aimed at solving another specific problem of social error. When Biden canceled his first $ 3 billion in student loans, he can clearly explain why student loans were canceled on a case-by-case basis. This is not to say that large-scale student loan cancellations cannot match an “economic downturn,” but it is more difficult to sell compared to targeted student loan cancellations.
2. Purposeful student loan cancellation is based on the law.
Targeted student loan cancellation is based on clear, effective and unambiguous legislation. There is no doubt that canceling student loans on the basis of total or permanent disability or protection of the borrower from a repayment rule are clearly defined rules available to the Biden administration for canceling student loan debt. In comparison, the legal basis for large-scale student loan cancellations is arguably ambiguous. For example, Senate Majority Leader Chuck Schumer (New York State) and Senator Elizabeth Warren (Massachusetts) argued that the Higher Education Act of 1965 grants Biden unilateral powers to revoke student loans by executive order. They cite section 432A of the Higher Education Act 1965 as evidence that the US Department of Education can revoke student loans because higher education grants the Department of Education the authority to “alter, compromise, waive or waive any rights, titles, claims, liens … , or demand, regardless of whether it was acquired, including any capital or any right to repurchase. ” However, the law does not explicitly state that the President or the US Department of Education can unilaterally cancel the student loans of each student loan borrower without further permission from Congress. Even if Biden cancels hundreds of billions of student loans, legal problems are likely. Moreover, the courts are unlikely to allow one branch of government to act unilaterally on the basis of an allegedly ambiguous text.
3. Targeted cancellation of student loans is cheaper for taxpayers.
Canceling a student loan is not cheap. Depending on the amount of large-scale student loan cancellations, estimates were pegged from $ 400 billion to $ 1 trillion. Of course, the student loan cancellation amount depends on several factors, including the amount of student loan outstanding, the number of student loan borrowers, and other limiting factors such as income and type of loan. By using targeted student loan cancellation, Biden saved taxpayer money. Opponents of targeted student loan cancellation say it’s not enough: not enough student loan borrowers and not enough student loan debt have been canceled. Opponents also say that canceling the student loan will boost the economy because student loan borrowers who have been forgiven for a student loan will spend their money in other sectors of the economy. Amid student loan cancellation, Biden is managing the economic recovery after the Covid-19 pandemic. There are several moving parts, from incentive checks to infrastructure spending. The question is how does student loan cancellation fit into this big conundrum, and if so, how much money to spend on student loan cancellation as Biden is helping America’s economic recovery.
Student Loan Cancellation: Next Steps
Will your student loan be canceled? Yes it is possible. Biden finished with student loan cancellation? Most probably not. The question is what the student loan cancellation will look like in the future. Will there be a large-scale student loan cancellation, targeted student loan cancellation, or both? At a minimum, there will likely be more targeted student loan cancellations. To date, there has been no large-scale student loan cancellation. Although the Department of Education is investigating legal options for canceling a student loan, it has been nearly four months since the process began. It is unclear when the non-binding legal opinion on widespread student loan abolition will be issued, whether the president can legally decide to abolish the student loan on a large scale, or if Congress will need to act. In addition, the Department of Education is holding hearings on student loan cancellation and student loan forgiveness, including ways to improve these programs to help more student loan borrowers qualify for student loan exemption. The Biden administration also places great emphasis on ensuring that existing student loan forgiveness programs work effectively and help achieve student loan cancellation for eligible borrowers.
What does this mean for your student loans? There are no guarantees for large-scale student loan cancellations. Targeted student loan cancellation is possible if you qualify, but most people will not qualify. So make sure you have a student loan game plan for your unique financial situation. Here are some smart options to consider for a student loan: