President Joe Biden has now canceled more than $17 billion of student loans.
Here’s what you need to know — and what it means for your student loans.
Biden has now canceled more student loans than any other president. Here’s a breakdown of the historic student loan relief:
- $6.8 billion for 113,000 borrowers through public service loan forgiveness;
- $7.8 billion for more than 400,000 student loan borrowers who have a total and permanent disability;
- $2 billion for 105,000 student loan borrowers who were misled by their college or university through borrower defense to student loan repayment; and
- $1.2 billion for student loan borrowers who attended ITT Technical Institutes.
(Student loan forgiveness: 5 key takeaways from major announcement)
Student loan forgiveness: $200 billion of student loan relief for borrowers
Student loan borrowers have received approximately $200 billion of student loan relief over the past two years due to the Covid-19 pandemic. In March 2020, Congress passed the Cares Act, a $2 trillion stimulus package that included historic student loan relief. Among other benefits, student loan borrowers were no longer required to make federal student loan payments. Student loan interest rates were temporarily set to 0% with no new interest accrual. President Donald Trump extended this student loan relief twice, and then Biden approved four more extensions. In aggregate, 37 million student loan borrowers haven’t been required to make a federal student loan payment since March 2020. This includes the entire duration of Biden’s presidency. In addition to no required federal student loan payments, student loan borrowers can count any non-payments toward the requirements to get student loan forgiveness. For example, this includes student loan forgiveness through income-driven repayment and public service loan forgiveness. This student loan relief expires on August 31, 2022. For a borrower who is pursuing public service loan forgiveness — which requires 120 monthly student loan payments — that borrower will have received nearly 30 months, or 25%, credit toward the requirements to get student loan forgiveness.
Student loan relief hasn’t made everyone happy
When it comes to student loan relief, not everyone is happy. For some supporters of student loan forgiveness, Biden’s actions show a strong commitment to reform a broken higher education system. For other supporters, however, there hasn’t been enough student loan cancellation. (If Biden cancels more student loan debt, it could happen before this date). For example, there are 45 million student loan borrowers who collectively owe $1.7 trillion. While $17 billion is a substantial amount of student loan cancellation, some supporters argue that it only amounts to approximately 1% of outstanding student loan debt. Progressive Democrats in Congress are campaigning for up to $50,000 of student loan forgiveness, while others are calling for total student loan cancellation. Republicans are equally unhappy with Biden’s student loan forgiveness, although for different reasons. While Biden has focused on targeted student loan cancellation, Republicans in Congress oppose wide-scale student loan cancellation. They argue that any attempt to enact wide-scale student loan cancellation without additional congressional approval would overstep the president’s legal authority. Republicans also believe that mass student loan cancellation equates to wealth redistribution that hurts Americans who don’t have student loans or never went to college.
Student loan payments are scheduled to restart beginning September 1, 2022. While the president could extend student loan relief for the fifth time, borrowers should prepare as if that won’t happen. You should evaluate all your options now and choose the best strategy for student loan repayment. Here are some popular options to pay off student loans:
- Student loan refinancing (lower interest rate + lower payment)
- Income-driven repayment (lower payment)
- Student loan forgiveness (federal student loans)