Expect This For Your Student Loans Tomorrow

Updated January 19, 2021

Here’s what you should expect — and not expect — for your student loans tomorrow.

Here’s what you need to know.

Student Loans

When Joe Biden is inaugurated as the 46th president Wednesday, there are multiple executive orders that he is expected to sign. There may be many changes for your student loans in 2021, and this is what you should expect (and not expect) on the first day of the Biden presidency:

Student Loans: what to expect

Student loan relief

On the first day of his presidency, January 20, 2021, Biden is expected to sign an executive order to grant student loan relief. Currently, there is a temporary moratorium on federal student loan payments through January 31, 2021. Biden is expected to extend the following student loan relief:

  • Pause federal student loan payments
  • Stop accrual of new interest on federal student loans
  • Halt collection of student loans in default

There are two questions about this extension of student loan relief. The first question is “How long can I get student loan relief?” The Cares Act — the $2.2 trillion stimulus package — included this student loan relief through September 30, 2020. President Donald Trump then extended this student loan relief twice: first, through December 31, 2020 and then second, through January 31, 2021. Biden may extend student loan relief for three months, for example, through April 30, 2021, which is the same three-month extension that Trump instituted last year. A more aggressive approach would be to extend student loan relief until June 30, but Biden may choose shorter increments and extend as needed (or possibly end the temporary forbearance based on progress with the Covid-19 pandemic and an economic rebound).

The second question is “Do other student loans qualify for relief?” The Cares Act granted student loan relief to federal student loans, but not FFELP Loans or Perkins Loans. Currently, if you have either of these student loans, you have to make student loan payments in the normal course. There has been a bipartisan effort to include these student loans in future student loan relief, but there’s no guarantee that Biden will include them in his executive order.


Student Loans: what not to expect

Student loan cancellation

Biden is not expected to cancel student loans on the first day of his presidency. This doesn’t mean there hasn’t been calls for student loan cancellation. These civil rights and community organizations have urged Biden to cancel student loans through executive order. Sen. Elizabeth Warren (D-MA) and Senate Minority Leader Chuck Schumer (D-NY) proposed that Biden should cancel up to $50,000 of student loans through executive order for borrowers who earn less than $125,000 per year. Warren, Schumer and others have argued that the Higher Education Act of 1965 empowers the U.S. Secretary of Education to cancel student loans, and no further congressional authority is needed to cancel student loans debt.

Biden supports student loan cancellation, and Biden wants Congress to cancel student loans immediately. (And Biden is proposing three ways to cancel student loans). The operative word is “Congress,” which echoes Biden’s sentiment that he is unlikely to cancel student loans through an executive order. A former U.S. senator, Biden likely believes that Congress, not the executive branch, is the appropriate branch of government to cancel student loan debt. The U.S. Department of Education also issued a non-binding memorandum last week that says it’s illegal for the president (through the Education Secretary) to cancel student loans for all student loan borrowers. If Congress passes legislation either in a stimulus package or as standalone legislation, Biden could sign the legislation into law. Before that happens, however, Congress will need to determine “how much student loans cancellation” and ultimately “who qualifies for student loan cancellation.” So far, there are some broad principles, but Congress has not reached definitive consensus on these two questions regarding student loan cancellation. Until then, absent any surprises, there won’t be student loan cancellation until Congress passes legislation.

How to pay off student loans faster

What’s the best way to pay off student loans? While Biden is unlikely to cancel student loans through an executive order, Congress may include student loan cancellation in the new stimulus package. To date, however, while some members of Congress have proposed student loan cancellation, student loans were dropped from the stimulus package. That’s why it’s important to understand your options for student loan repayment now, if student loan cancellation doesn’t happen. Start with these three options, all of which have no fees:

Related Reading

5 student loan changes for 2021

Congress may cancel student loans in new stimulus package

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