Here’s who could qualify under President Joe Biden’s potential plan to write off student loans on a massive scale.
Here’s what you need to know — and what it means for your student loans.
President Joe Biden has not announced a plan to enact large-scale student loan forgiveness, but there is already speculation about who might qualify if Biden proceeds with the student loan forgiveness. For example, Biden could write off $10,000 for student borrowers if he does a massive student loan write off. Here are some student borrowers who could benefit:
1. Student Loan Borrowers with Federal Student Loans
First, Biden will likely limit student loan forgiveness to federal student loans. For example, this could include direct loans and other federal student loans held by the federal government. Sen. Bernie Sanders (I-VT) has called for full student loan forgiveness of $1.7 trillion in student debt, including private and federal student loans. However, Biden is unlikely to cancel private student loans. Why? The federal government does not hold private loans, which are based on private contracts and are generally owned by financial institutions, businesses and investors. As a result, the federal government could face an uphill battle to cancel these student loans, which could be more administratively cumbersome. (Biden will not cancel all student loan debt).
2. Student loan borrowers with student loans
Second, when it comes to student loan forgiveness, Biden can tell the difference between student loans and graduate student loans. Politicians and the media often refer to “student loan forgiveness” generally as a catch-all provision. However, Biden could limit student loan forgiveness to student loans only. Why? Higher education, especially for professional degrees such as law or medical degrees, is associated with higher income. Graduate student loans make up about half of all student loan debt. By limiting student loan forgiveness to just student loans, Biden could play down criticism that large-scale student loan forgiveness disproportionately benefits high-income earners. (Here are 5 takeaways from Biden’s latest announcement on student loan forgiveness).
3. Student borrowers who earn some income
Third, if Biden cancels student loans, Biden will likely limit student loan cancellation by imposing an income threshold. (Cancelling a student loan might be different from what you expected). For example, Sen. Elizabeth Warren (D-MA) and Senate Majority Leader Chuck Schumer (D-NY) have proposed limiting large-scale student loan forgiveness to student borrowers who earn up to $125,000. $ per year. That said, the Biden administration is reportedly considering an annual income cap of $125,000 to $150,000 for individuals and $250,000 to $300,000 for co-filers. That said, stimulus checks in response to the Covid-19 pandemic included an income cap for individuals of $75,000. It may be difficult for the Biden administration to justify a higher income threshold for student borrowers specifically (student loan cancellation) compared to the general population (stimulus checks).
Student loans: next steps
Biden canceled $17 billion in student loans. In a few weeks, Biden expects to make a major decision on large-scale student loan cancellation. If he continues, Biden could face potential legal challenges over his power as president to cancel student loans without further authorization from Congress. This could delay any implementation of student loan forgiveness, even for student borrowers who qualify. With temporary student loan relief set to end on August 31, 2022, now is a critical time to plan for student loan repayment. There is no guarantee that Biden will cancel your student loans or that all of your student loans will be forgiven. Understand all of your options, including these popular strategies: