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The forgiveness of a significant chunk of the nation’s student loan debt has seemingly been just around the corner since Joe Biden’s election victory in November.
Four months into his term, the pressure remains on Biden to follow through on a campaign promise to forgive $10,000 in federal student loans for every borrower.
Meanwhile, an answer to a bigger question could come as early as next week: whether the president has the power to wipe out five times as much student debt. That would give millions of Americans a much smaller overall debt load.
But, in a new interview, Biden is sounding more skeptical about canceling $50,000 in student loan debt per person, which is the goal of several Democrats in Congress. And a report about the upcoming White House budget suggests $10,000 may be off the table for now, too.
More than 1M plead for student loan relief
More than 100 online petitions related to federal student loan forgiveness are now attracting scads of signatures. The biggest, on Change.org, has been signed by more than 1 million people and asks Biden to cancel all federal student loans.
While that's definitely a swing for the fences, it reflects the financial struggles familiar to many of the nation’s 43 million-plus student loan borrowers, who are carrying an average balance of $38,792, according to data from the credit bureau Experian.
Before the pandemic, 80% of Americans holding federal student loans "were either unable to pay, or were paying but their balances were going up," writes Alan Collinge, who launched the petition and founded a group called Student Loan Justice in 2005.
A recent study by prominent think tank the Brookings Institution studied the financial impact of various levels of student debt cancellation. With more forgiveness comes the potential for more financial stability, the research found.
"Setting a student debt forgiveness amount at a point where the average debt holder would have more than a quarter of their debt forgiven may yield large changes in savings behaviors, human capital investments (e.g., returning to school), and business starts, without leading to large changes in labor supply," the study's authors say.
Answer is due on the $50K question
Society and the economy would benefit if Biden were to cancel up to $50,000 in student loan debt for every borrower, say Senate Majority Leader Chuck Schumer and other Democrats in Congress who are pushing the president to take that step.
"Canceling student debt is the one thing we can do right now that will jump start our economic recovery, help build long-term economic opportunity and close the racial wealth gap," Schumer says in a recent fundraising pitch, according to The Hill.
The White House said at the beginning of April that the president asked his education secretary, Miguel Cardona, to investigate whether Biden has the authority to forgive up to $50,000 in student loans. Given that it's been more than seven weeks, it's reasonable to think the verdict will come soon, maybe even within days.
But borrowers may not want to get their hopes too high. In a new interview, the president makes clear that he doesn't want to be overly generous with student debt relief.
“The idea that you go to Penn (the University of Pennsylvania) and you’re paying a total of 70,000 bucks a year and the public should pay for that? I don’t agree," Biden says, in the interview with David Brooks of The New York Times.
Meanwhile, The Washington Post reports that a White House budget plan being prepared for release in the coming week leaves out even $10,000 in debt cancellation per borrower, which is what Biden proposed during his campaign.
What if student debt relief never comes? DIY it
While it seems Biden still wants to cancel at least some federal student loans, who can say when that might happen or how far he'll go? In the meantime, you have plenty of ways to improve your financial situation if you're drowning in student loan debt.
If you haven’t looked into it yet, see about refinancing your student loans. Interest rates on refinance loans from private lenders are at all-time lows, says the loans marketplace Credible.
A refinance could shrink your monthly payment substantially.
But remember that refinancing a federal student loan into a private one would make you ineligible if federal loan forgiveness ever becomes reality.
If you’re a homeowner burdened with student debt, consider refinancing your mortgage to lighten your financial load. Now that mortgage rates have dropped again, mortgage technology and data provider Black Knight says 13 million homeowners are in a position to save an average $283 a month by refinancing.
After you've slashed your debt costs, you might generate more income by doing a little investing in the stock market — and it won’t even cost you that much. One popular app helps you build a diversified portfolio using little more than your "spare change" from everyday purchases.