Joe Biden’s election has thrilled student loan borrowers. However, it is important to separate fact and fiction.
Here’s What You Should Know.
When Biden becomes president on January 20, 2021, there is much anticipation about his student loan plans, including student loan repayment and student loan forgiveness. However, there is some confusion as to what will happen in the short term regarding student loan forgiveness.
Here are 4 myths about your student loans so you are fully aware of what to expect:
1. Biden will forgive all student loans
Myth: Some borrowers mistakenly believe that Biden’s election means ‘cancel student loans’ (especially all student loans).
- This is a false equivalence. Sen. Bernie Sanders (I-VT) has proposed canceling all student loans, including federal student loans and private student loans.
- However, Biden, who is more politically moderate than Sanders, has not suggested canceling all student loans.
- There is no general support in Congress to cancel all student loans.
- Biden has proposed a plan to provide tuition for two-year and four-year public colleges for students whose families earn $ 125,000 or less.
- That said, it doesn’t mean that all student loans will be forgiven and existing student loans will not apply.
2. Biden will cancel student loans
Myth: Biden, as president, will do that cancel student loans
- During his presidential campaign, Biden proposed cancel up to $ 10,000 in student loans
- However, Biden’s plan isn’t for every student loan borrower or every type of student loan.
- For example, Biden’s plan to cancel student loans would apply to borrowers affected by the Coronavirus.
- While this definition may be vague, it can apply to borrowers who are unemployed or otherwise struggling economically as a result of the Covid-19 pandemic.
- Therefore, not every borrower may be eligible. Furthermore, Biden’s plan can only apply to federal student loans, not private student loans.
3. Biden may cancel student loans by executive order
Myth: Biden can take executive action to cancel student loan debt
- The composition of the United States Senate will have significant implications for Biden’s policy plans for the next four years.
- If Republicans retain control of the United States Senate, there is less chance of legislation canceling student loans.
- If Democrats control the US Senate, student loan forgiveness becomes a stronger possibility. However, it is unclear whether Congress will pass legislation in line with Biden’s plan for student loans. Congress could adopt a different student loan forgiveness plan.
- If Congress doesn’t pass legislation on student loan forgiveness, some have argued Biden can cancel student loans via executive order.
- The US Constitution empowers Congress, not the President, with “purse power” (federal spending). If the president were to take executive action to cancel student loans, that decision would likely be challenged in court. This could inevitably delay the forgiveness of student loans to borrowers.
- Importantly, Biden did not say whether he would consider an executive order to cancel student loans.
4. Biden is the only hope of getting student loan forgiveness
Myth: With Biden as president, this is the only chance to cancel student loans.
- Any possible discussion of student loan cancellation implies widespread, outright forgiveness of student loans.
- It’s important to remember that there are other existing student loan forgiveness programs.
- For example, the Public Service Loan Forgiveness program helps student loan borrowers receive federal student loan forgiveness if they work for a qualified public service or nonprofit employer and make at least 120 monthly payments on their student loans (plus other requirements).
- Biden supports the Public Service Loan Forgiveness program and has proposed offering up to $ 50,000 in student loan forgiveness after five years.
- If you don’t work in the public service, but you have trouble paying off student loans, you can also get student loan forgiveness through an income-driven repayment plan.
- While the student loan forgiveness is not immediate, you can be forgiven after 20 years (undergraduate student loan) or 25 years (graduate student loan).
Many borrowers are hoping for at least some student loan forgiveness. There are many proposals in Congress to cancel student loans. However, it is important to understand the facts so that you can make an informed decision about your student loans. The bottom line: Student loan forgiveness can happen, but don’t expect it to be a done deal. There are many moving parts in Congress, and any student loan forgiveness plan may end up looking different from what was proposed during a presidential campaign.
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