President Joe Biden could deliver both student loan cancellation and an extension of the student loan payment break this year.
Here’s what you need to know — and what it means for your student loans.
Student borrowers could get a double-win surprise this year: student loan forgiveness and a sixth extension of the student loan payment break. If implemented, student borrowers could get the biggest student loan relief in US history. Here’s how it could happen and what it means for you:
Biden could extend student loan relief beyond May
Biden may extend the student loan payment break, his fourth time since becoming president. Currently, the payment pause will end on May 1, 2022. In March 2020, Congress passed historic student loan relief in the Cares Act, which was the $2.2 trillion stimulus package in response to the pandemic. of Covid-19. President Donald Trump has also extended the student loan payment twice. With the extension of student loan relief, student borrowers did not have to make federal student loan repayments during Biden’s entire presidency. (6 major changes to student loan relief). Also, interest rates on federal student loans have been set at 0%, so there is no new accrued interest. By May 1, 2022, when the student loan payment pause is set to end, student borrowers will have collectively saved over $120 billion in student loan interest. For every month Biden extends the student loan payment pause, student borrowers will save an additional $5 billion. For example, a three-month extension would save borrowers an additional $15 billion on their student loans.
This huge change indicates why Biden could extend student loan relief
Sen. Elizabeth Warren (D-MA) and congressional progressives have warned Biden that student borrowers are not financially or psychologically ready to restart student loan repayments. The impact of the Covid-19 pandemic is still present, these lawmakers say, and student borrowers need more time until student loan repayments resume. A huge change at the US Department of Education is the latest evidence that Biden is planning to extend the student loan payment break. The Department for Education has asked student loan servicers – the companies that collect and manage your student loan repayments – to stop notifying student loan borrowers about the restart of student loan repayments. That suggests the Biden administration may be considering pushing back student loan repayments, which would be an unexpected development. Earlier, the Department for Education reached out to borrowers about restarting student loan repayments in May.
Student loan cancellation could come before student loan payments restart
Will your student loans be forgiven? That’s what student loan forgiveness advocates hope will happen this year. According to White House Chief of Staff Ron Klain, the White House could decide this year whether Biden will act on large-scale student loan forgiveness. “The president is going to look at what we should do on student debt before the break expires, or he’ll extend the break,” Klain said on the podcast. Pod Save America. That suggests Biden could announce student loan forgiveness before May 1. Alternatively, Biden could extend the student loan payment pause and then process the student loan cancellation before the student loan payment pause expires. There is no guarantee that Biden will cancel student loans through an executive order. Previously, Biden has said he does not have the unilateral authority to enact large-scale student loan forgiveness for all student borrowers. Instead, Biden called on Congress to cancel up to $10,000 in student loans for borrowers. Politics can also come into play. Progressives are warning that Democrats could lose the midterm congressional elections in November if Biden does not extend student loan relief and cancel student debt. However, some argue that extending student loan relief and large-scale student loan forgiveness will alienate moderates and independents, whom Democrats need to hold their majorities in Congress.
There is no guarantee that Biden will extend the student loan payment pause or enact large-scale student loan forgiveness. So your best bet is to prepare for the restart of student loan repayments and assume there will be no more student loan relief. That said, if there’s a back and forth announcement about student loan repayments, it could be coming soon.
Here are some popular ways to save money on your student loans: