Make no mistake about it. The student loan debt crisis has been out of control for a long time. So, if you are one of the 42 million Americans who have student loan debt, you’re understandably watching what President Biden is doing to address this issue.
During his first day in office, President Joe Biden signed an executive order to extend the pause on federal student loan payments to September 30, 2021 (Update: the pause on payments is now extended through August 2022). But you probably also remember that, during the campaign trail, the idea of canceling or forgiving student loan debt came up once or twice (read: a whole lot).
So, where do those plans for student loan debt relief stand now that Biden is in office and the pause on payments has been extended again? Should you keep making payments on your student loans?
Well, there are no definitive answers just yet. But, in this post, we’re going to look at everything you need to know right now.
Specifically, we’ll answer the questions:
- What is President Joe Biden doing to address the student loan debt crisis?Advertisement
- Will the pause on student loans be extended again after August 2022?
- Is Joe Biden forgiving or canceling student loan debt?
- Does Joe Biden support Elizabeth Warren’s or Bernie Sanders’s student loan debt plan?
- Should you keep making payments on your student loans or wait?
What is President Joe Biden doing to address the student loan debt crisis?
Administrative forbearance are the words to know. And they have been since March 2020 when former President Trump signed into law the CARES Act, which included several measures to help American citizens facing financial difficulties due to the ongoing Covid-19 pandemic.
At the time, the pause on student loan payments was only set to last until September 2020. But in August it was extended through December. Then, in December, it got extended again through January 2021. Then Biden extended it again through September 2021 and then again through January 2022.
So, we’re sure you by now you have at least some idea of what administrative forbearance means. But, since Biden’s executive order just extended forbearance again through August 2022,
With all federal student loans in administrative forbearance, that means:
- You don’t need to make any payments on your federal student loans owned by the Department of Education
- Your balance won’t go up because, for the time being, there’s a 0% interest rate on your federal student loans
- None of this applies to private student loans
Now, having your student loans in administrative forbearance is great for taking those monthly payments off your list of things to worry about. The only problem: it’s a temporary solution.
Is it likely that the pause on student loans will be extended again?
Honestly, no one knows. At least not right now.
Recently, Jen Psaki, the White House press secretary, responded to a Fox News reporter’s question about whether borrowers should expect to have to make payments anytime soon.
Her answer: maybe. At least, that’s the gist of her answer. You can watch what Psaki really says in this clip.
FOX NEWS: Do you think that if you hold student loan debt that you will ever have to make a payment during the Biden administration?
JEN PSAKI: I suspect at some time you will pic.twitter.com/z7SgVtq3iU
— Aaron Rupar (@atrupar) April 10, 2022
You see why we said no one knows if the pause on student loans will be extended again? In that clip Psaki says:
“We are going to continue to assess every month, every few months, on where things stand, both looking at COVID but also economic data and where we need to continue to help give the American people some breathing room.”
Is this good news? Sure, if you’re one of the people that wants “breathing room” so you can prepare to start making payments again once the pause on student loan payments ends.
But you might be getting a little frustrated that it appears the Biden administration has no intention of canceling all student loan debt.
Still, we have to acknowledge that some people have seen some or all of their student loan debt canceled. And there is still some hope that you’ll have some of yours canceled too…
Potential plans to forgive or cancel some student loan debt
Nationally, Americans owe $1.68 trillion in student loans
But there is hope for some student loan debt relief. According to the official Biden Plan for Education Beyond High School, the president does support:
- Forgiving $10,000 of federal student loans per borrower, regardless of income
- Revising the federal student loan income-based repayment plans so that: 1) borrowers making over $25,000 per year only have to make monthly payments that are 5% of their discretionary income 2) borrowers making $25,000 or less per year don’t have to make any payments on their undergraduate federal student loans and also won’t accrue any interest on those loans
- Canceling federal student loans that are tuition-related for people who graduated from public colleges, historically black colleges and universities, or minority-serving institutions, and who earn less than $125,000 per year
- Creating a new program that offers $10,000 of undergraduate or graduate student debt relief for every year of national or community service, up to five yearsAdvertisement
- Forgiving the debt held by individuals who were deceived by the worst for-profit college or career profiteers
To date, Biden has acted on some of those initiatives. Since taking office, he has directly canceled more than $17 billion of student loan debt for more than 700,000 borrowers.
You just might not be one of those people. Why? Because, so far, Biden has only canceled debt for people who fit certain conditions. For example, Biden has canceled:
- $1.5 billion for borrowers who were taken advantage of by their academic institutions
- $7 billion for 400,000+ borrowers who are permanently disabled
- $1.26 billion for 100,000+ borrowers who attended ITT Technical Institute
Last year, the administration also restructured and expanded the criteria for the Public Service Loan Forgiveness program. The update to this student loan forgiveness program could soon lead to an additional cancellation of $6.2 billion in student loans for around 100,000 borrowers.
So, is it still possible that Biden will follow through on a former campaign promise to at least forgive $10,000 of student loan debt for all people with federal student loan debt? Maybe. But nothing is for sure right now.
What is sure, though, is that some politicians don’t think Biden’s plans go far enough to help borrowers struggling with debts. Can you guess which politicians?
What other politicians think about Biden’s plans to address the student loan debt crisis
When you hear the words “cancel student loans”, who comes to mind? For many, it’s the Democratic politicians who have helped popularize this idea. You know, people like Senator Elizabeth Warren, Senator Bernie Sanders, and Congresswoman Alexandria Ocasio-Cortez.
So, what are some of their thoughts about Biden’s potential plans to address the student loan debt crisis?
Democratic Senators Elizabeth Warren and Chuck Schumer have started putting pressure on Biden to forgive more than just $10,000 per borrower. These senators want Biden to use his executive powers to forgive $50,000 in federal student loan debt per borrower.
It’s simple: When people have more money to spend, our whole economy is better off. The Biden-Harris administration can put more money in people’s pockets by using their existing legal authority to cancel student loan debt for millions of Americans.
— Elizabeth Warren (@ewarren) January 20, 2021
But, for better or worse, Biden’s already made it clear that he opposes this plan. Recently, Speaker of the House Nancy Pelosi has said Biden doesn’t have the power to use executive action to cancel student loan debt even if he wanted to. And without executive action, it’s pretty unlikely to happen.
Still, there is hope for the $10,000 forgiveness plan. And if that’s close to the amount you currently owe, the question “should I continue paying my student loans?” becomes all the more important.
Should you pay off your student loans or wait for forgiveness?
With all this talk about student loan forgiveness, it’s understandable that you might be thinking about waiting to see what happens before you make another payment. But should you? Well, it depends…
If you owe over $10,000, now is a good time to make sure you’re enrolled in the right student loan repayment plan for your financial circumstances and plan to continue paying off student loans. As we mentioned already, it’s highly unlikely that the Biden administration will cancel all of your student loan debt.
And, if you can, it’s a good idea to take advantage of the 0% interest rate during this ongoing forbearance period. Doing so will help you pay off your student loans even faster since you’d get to make payments directly toward your principal balance.
If, however, your student loan balance is below $10,000, then that’s a decision only you can make. You could wait and see what happens. If you do wait, just make sure you’re prepared to potentially start making payments again once the current forbearance period ends after August 2022.
With Biden in office, the student loan debt crisis is finally being addressed on the national level. But that doesn’t mean you should expect all of your student loan debt to go away.
For now, it looks like there’s still a chance $10,000 of student loan forgiveness per borrower could happen. And things like a restructuring of income-driven repayment plans and debt relief programs for particular groups could follow.
In the meantime, you’ll need to decide if making student loan payments during this national forbearance period makes sense for you. And if you need some extra help, be sure to check out Scholly’s 2021 Covid-19 Relief Fund.