President Joe Biden (Photo by Oliver Contreras-Pool/Getty Images)
Here are 4 things to expect if President Joe Biden enacts student loan forgiveness.
Here’s what you need to know and what it means for your student loans.
President Biden is just weeks away from making one of the biggest announcements of his presidency. In August, Biden will decide whether to enact large-scale student loan forgiveness for millions of student loan borrowers. The White House has denied that Biden has decided to cancel student loans. However, leaked documents from the US Department of Education show a detailed plan to enact sweeping student loan cancellation. If Biden cancels your student loans, here are 4 things to look forward to.
1. You could get $10,000 in student loan forgiveness
If there is extensive student loan relief, expect $10,000 in student loan forgiveness. Biden campaigned on this amount of student loan forgiveness and sent a message of $10,000 in student loan forgiveness throughout his presidency. After Congress failed to pass the legislation, Biden could act through executive action or rulemaking at the US Department of Education. Some progressive lawmakers in Congress want Biden to write off $50,000 in student loans. However, Biden has given no indication that he would support $50,000 in student loan cancellation.
2. Student loan forgiveness could be automatic
With three important student loan deadlines looming, Biden could decide to make student loan forgiveness automatic. Under a proposed plan from the U.S. Department of Education, you could get broad student loan forgiveness automatically if the Department of Education has your income information. In this case, expect the cancellation of the student loan within 45 days. If the Department of Education does not have your income information, one proposal is to allow you to apply online and self-declare your income. In any case, the Department of Education says it is ready to implement broad student loan relief for millions of student loan borrowers.
3. You may not be eligible for student loan discharge
While virtually everyone qualifies for a federal student loan, that doesn’t mean they’ll automatically qualify for Biden student loan forgiveness. Based on leaked documents from the US Department of Education, the good news is that the requirements to qualify are more generous for student loan borrowers. For example, the leaked plan shows that all federal student loans, including FFELP loans, Perkins loans, Parent PLUS loans and Grad PLUS loans, could be eligible for student loan forgiveness. That said, private loans will not be eligible for student loan relief. The Department of Education is also considering an income threshold of $150,000 per individual and $250,000 per family for student loan forgiveness. This threshold could limit how many student loan borrowers ultimately pay off their student loans.
4. Not all of your student loans can be discharged
It’s important to note that broad student loan forgiveness can only pay off some of your student loans. Most student loan borrowers will still have significant student loan debt after any large-scale student loan relief. So, unless you have less than $10,000 in student loans, consider large-scale student loan relief as partial student loan forgiveness. This means you need a game plan for paying off your student loans beyond student loan payoff. For example, student loan refinancing, income-based repayment, or student loan forgiveness are all viable options. Here’s how to pay off student loans and save money: