Student loan forgiveness will not be included in President Biden’s annual White House budget, further diminishing hopes that there will be a blanket cancellation of $10,000 in loans, let alone $50,000. While options remain—Congress, executive action—it seems more likely that loan forgiveness will only be expanded through reforms to existing loan relief programs. Here’s what you need to know.
What’s going on with student loan forgiveness?
Biden has said he supports cancelling $10,000 in federally-backed student loan debt, but that it should be passed through Congress, stating in a February town hall that “I don’t think I have the authority.” Nevertheless, a few weeks ago he directed the U.S. Department of Education to review his legal authority to forgive student loan debt through executive order.
But as higher education expert Mark Kantrowitz put it to CNBC, this might be a way for Biden to pass the buck over to Congress, his preferred option all along:
“Only after he receives that report, which I expect will find that he does not have the legal authority, will the ball be in Congress’ court.”
The only problem with going through Congress is that there’s no indication that student forgiveness legislation has enough support to pass, as there’s no consensus on how much should be forgiven, even amongst Democrats. With the senate deadlocked between Republicans and Democrats, Congress is looking like a path that Democrats are avoiding, at least for now.
So what are President Biden’s plans for student loan forgiveness?
On Monday, the Education Department announced a regulatory rewrite process, which could change the regulations for existing federal student loan programs, including:
- Borrower Defense to Repayment
- Total and Permanent Disability Discharges
- Income-based repayment plans
- Public Service Loan Forgiveness (PSLF)
Following President Biden’s recent executive actions that led to easier qualifications for disability discharges, along with $1 billion in debt relief under the Borrower Defense to Repayment program, it seems likely that the reforms will bring more of the same, making it easier for existing borrowers to either pay off debt (through lowered payment requirements, which Biden supports) or discharge loans. While these types of regulatory reforms don’t need Congress’ approval, the process will take a long time, perhaps up to a year (the first hearing starts in June).
So is blanket student loan forgiveness dead?
Not quite. If you’ve been holding off on student loan payments because you’re waiting for forgiveness, you might want to hold on just a bit longer, at least until the student loan payment moratorium expires (we’ve discussed your options before in this Lifehacker post).
Education Secretary Miguel Cardona recently suggested that the student loan payment pause wouldn’t be extended beyond September 2021, but he also didn’t rule it out, either. Of course, you can keep paying off your student debt, too, but as long as you’re not paying interest it can’t hurt to take a wait-and-see approach until October.