President Biden is expected to soon make consequential decisions pertaining to student loans, and borrowers are awaiting the news with bated breath. Here's everything you need to know:
Biden previously said he would decide whether to extend the current student loan repayment pause before it expires on Aug. 31 — but the exact timing of the announcement is otherwise unclear. He has previously extended the repayment moratorium, which began under former President Donald Trump, a total of four times.
There is also speculation Biden might issue the kind of widespread loan forgiveness favored by progressive lawmakers, who are asking the president to cancel $50,000 or more in loan debt per borrower. But Biden has been dodgy on the matter — and seemingly more comfortable with a $10,000 amount "limited to borrowers earning $125,000 per year or less," Forbes writes. A decision on that front is expected soon, as well.
Are there any indications as to which way Biden might be leaning?
Yes. As for another extension of the repayment moratorium, "most debt forgiveness advocates, policy experts, and loan servicers don't expect Biden to restart federal loan payments so close to the midterm elections," writes NBC News. There is also the issue of inflation, which administration officials have said would inform their loan forgiveness decision-making process, Forbes adds; in other words, the overall economic picture serves as yet another indication a fifth extension is on its way.
One might also argue Biden currently has the "political momentum" to make such a sweeping, consequential decision, especially now that the Democrats' major spending package has cleared the Senate. And perhaps anticipating movement on Biden's end, Republicans in Congress recently introduced the Responsible Education Assistance Through Loan (REAL) Reforms Act, which would end the loan moratorium as well as "expressly ban President Biden from canceling student loan debt on a mass scale," Forbes writes. The legislation will almost certainly fail in either chamber of Congress, but its mere existence suggests Republicans are preparing for a borrower-favorable decision from their commander-in-chief. If the president does extend the moratorium, it's possible he keeps payments on ice until next summer, NBC News reports, per a person familiar with White House discussions.
As for a broader forgiveness program, there are indications that it might be coming down the pipeline, as well. According to documents reviewed by Politico, the Education Department has developed a plan to implement widespread student loan forgiveness if and when Biden gives the go-ahead. The paperwork details "how the agency expects to manage and operate a possible mass debt cancellation program on a scale that would be unprecedented in the history of the federal student loan program," says Politico. Still, some advocates worry that current levels of inflation might actually deter Biden from making such a decision, NBC News adds.
How might a $10,000 cancellation help?
Forgiving $10,000 per borrower "would forgive a total of $321 billion of federal student loans and eliminate the entire balance for about 11.8 million borrowers," CNBC reports, per the Federal Reserve. The average borrower "would receive $8,478 in student loan forgiveness." Over 40 million Americans have student loan debt, and approximately 25 percent of them are in delinquency or default, per CNBC.
What can borrowers do in the meantime?
While awaiting news from the White House, borrowers should first figure out if they'd be included in any possible debt relief, CNBC reports, considering forgiveness might exclude those who make over a certain amount annually. As for type of loan included, the Education Department documents obtained by Politico indicate that "graduate school student loans; student loans for parents, known as Parent PLUS loans; and Federal Family Education Loans (FFEL), which are federal loans held by private entities, in addition to the main Direct Loan federal student loans" could qualify, though the administration will ultimately have the final say, CNBC writes.
Borrowers should also be wary of counting their chickens before they hatch, warned higher education expert Mark Kantrowitz: "[U]ntil legislation is signed into law, you can't count on anything, he told CNBC. "Borrowers should not take any precipitous action in anticipation of loan forgiveness."
What are some of the arguments for and against canceling student debt?
It's a hotly contested issue! Those in favor of widespread loan forgiveness claim that student debt delays and prevents borrowers from starting their lives — whether that means buying a house or having children — and also weighs more heavily on Black and Hispanic families, NerdWallet reports. There's also that claim that "not all borrowers have degrees that boost earnings."
As for arguments against student debt cancellation, the opposition often claims that forgiveness is unfair to those who have already paid off their loans or didn't go to college; tends to disproportionately benefit wealthy borrowers (those with the most debt often have a graduate degree or higher, leading to higher earnings); and fails to solve the underlying student debt crisis, per NerdWallet.
Has the administration done anything else in the way of student debt relief?
Yes. In addition to the freeze on loan payments, the administration has taken more of a "targeted approach to debt relief," CNBC explains, "focusing on a backlog of cases from defrauded borrowers." For example, the Education Department in June announced it would cancel $6 billion in loans from about 200,000 borrowers who claimed they were misled and defrauded by their college.