Here’s why wide-scale student loan forgiveness is even less likely now.
Here’s what you need to know.
President Joe Biden and the U.S. Department of Education announced a game-changer in student loan forgiveness this week. This new student loan forgiveness will change the future of public service loan forgiveness. (Do you qualify for $4.5 billion of student loan forgiveness?) While at least 550,000 student loan borrowers will get student loan forgiveness sooner, what does this mean for wide-scale student loan forgiveness? The answer: wide-scale student loan forgiveness is even less likely. That may sound surprising, but here’s why you shouldn’t expect wide-scale student loan cancellation:
1. The latest student loan cancellation is another example of targeted student loan cancellation
The major changes to public service loan forgiveness will cancel at least $4.5 billion of student loans. The latest student loan cancellation is another example of targeted student loan cancellation (in this case for public servants). Since becoming president, Biden has focused exclusively on targeted student loan cancellation (which benefits a particular group of student loan borrowers) over wide-scale student loan cancellation (which benefits most or all student loan borrowers). There’s a consistent pattern in Biden’s approach to student loan forgiveness, and none of the student loan cancellation to date has resembled anything close to wide-scale student loan forgiveness for all student loan borrowers.
2. Biden wants to fix student loans, but not enact wide-scale student loan cancellation
Biden wants to fix student loans, but not necessarily enact wide-scale student loan cancellation. Biden supports up to $10,000 of wide-scale student loan forgiveness, but Biden says Congress must cancel student loans and the president signs the bill. (Biden is ready to sign student loan forgiveness, but Congress hasn’t passed any legislation). Since Biden doesn’t believe that he has the legal authority to enact wide-scale student loan cancellation for every student loan borrower, Biden has opted for fixing student loan forgiveness over simply cancelling all student loan debt. Importantly, “student loan cancellation” and “fixing student loans” are not necessarily compatible. You can think of it this way: The good news is that Biden wants to fix your student loans and student loan forgiveness. However, the bad news is that Biden wants to fix your student loans and student loan forgiveness. Why? “Fixing student loans” suggests improving existing programs for student loan cancellation so they can function properly. The major changes with public service loan forgiveness announced this week represent this approach. That’s far different than wide-scale student loan cancellation, which doesn’t fix the underlying problem (the high cost of college), but simply seeks to provide limited and temporary student loan relief. So, Biden may continue to focus on optimizing the existing, sub-optimal student loan forgiveness programs. (Even if there is wide-scale student loan forgiveness, these student loan borrowers would be excluded).
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3. Biden reinforced that he doesn’t have legal authority to cancel student loans
When deciding to cancel more student loan debt, Biden didn’t use the so-called legal authority that Sen. Elizabeth Warren (D-MA) and Senate Majority Leader Chuck Schumer (D-NY) say that Biden can use to cancel everyone’s student loans with “the flick of a pen.” On the contrary, by actively choosing targeted student loan forgiveness with the Public Service Loan Forgiveness program, Biden reinforced that he doesn’t have the legal authority to cancel student loans on a wide scale basis. If Biden had the legal authority to cancel everyone’s student loans, Biden could have cancelled every public servant’s federal student loan debt. However, that’s not what happened. (If Biden doesn’t cancel your student loans, do these 3 things). Instead, Biden relaxed the requirements of the existing program so that more student loan borrowers could get automatic student loan forgiveness. However, this wasn’t wide-scale student loan cancellation. Rather, this student loan forgiveness was requirement-based. Each student loan borrower still made 120 monthly student loan payments, among meeting other requirements. While some requirements to qualify for student loan relief were “relaxed,” student loan borrowers still had to meet a litmus test to get student loan relief.
4. Student loan cancellation has been based on a “reason,” not simply because student loans are too expensive
Biden has cancelled more than $11.5 billion of student loans. (Here’s how to get approved for student loan forgiveness). Importantly, in each specific case, the reason for this student loan cancellation was not the reason that many supporters of student loan cancellation want their student loan debt discharged: the high cost of a college education. For example:
Borrower defense to repayment: student loan borrowers were misled by their college or university. ($1.5 billion of student loan cancellation)
Total and permanent disability: student loan borrowers have a total and permanent disability that prevents them from paying off their student loans. ($5.8 billion of student loan cancellation)
Public service loan forgiveness: make 120 monthly payments and commit to 10 years of employment for a qualified public service or non-profit employer. ($1.7 billion automatic student loan cancellation, with at least $2.8 billion of additional student loan cancellation)
In contrast, there hasn’t been wide-scale student loan cancellation solely based on financial burden, disparities, economic stimulus, becoming debt-tree or retirement savings. Again, the Biden administration has focused on optimizing existing student loan programs to benefit more student loan borrowers rather than simply cancelling student loans more broadly.
As student loan relief from Covid-19 pandemic ends, you will need a game plan for student loan repayment. Make sure you understand all your options. Here are popular ways to save money with your student loans: