Biden Drops Student Loan Cancellation From Budget
President Joe Biden dropped student loan cancellation from his annual presidential budget.
Heres’s what you need to know — and what it means for your student loans.
The president has spoken. If you’re expecting wide-scale student loan cancellation, you won’t find any in the president’s proposed annual budget to Congress. For student loan borrowers who are wondering whether the president will enact wide-scale student loan forgiveness, the answer appears to be no. If the president’s $5.8 trillion proposed budget is any indication, student loan borrowers shouldn’t expect any wide-scale student loan relief this year.
While only Congress approves the federal budget, the president can propose a budget for Congress to consider. Consistent with previous years, Biden didn’t include student loan cancellation as an economic priority. For progressive Democrats in Congress, the exclusion of student loan forgiveness may come as a disappointment.
(Biden could extend the student loan payment pause forever)
Bad news for supporters of student loan cancellation
Democrats have been lobbying the president to cancel up to $50,000 of student loans for borrowers. The exclusion of student loan cancellation may not be surprising, however. Why? Biden consistently has said he supports up to $10,000 of student loan cancellation for student loan borrowers. However, Biden has doubted his legal ability to cancel student loans for all student loans borrowers. Biden has called on Congress to cancel student loan debt, although he didn’t include that either in his budget. Biden has never supported up to $50,000 of student loan cancellation.
Biden still committed to student loan forgiveness
What does this mean for your student loans?
Student loan cancellation
First, Biden is still committed to student loan forgiveness. Since becoming president, Biden has cancelled $17 billion of student loans. Expect more student loan forgiveness in the months and years to come. However, this will be targeted student loan cancellation for specific groups of student loan borrowers, rather than for all federal student loan borrowers.
(Student loan cancellation and the student loan payment pause are confusing. Here’s what to know).
Student loan relief
Second, Biden included in his budget some student loan relief. Specifically, Biden wants to work with Congress to improve income-driven repayment. Income-driven repayment plans base your monthly federal student loan payment on your discretionary income and family size, which can save you money compared to the Standard Repayment Plan. Income-driven repayment reform was a centerpiece of Biden’s presidential campaign, although Congress has yet to act. As a presidential candidate, Biden proposed that student loan borrowers pay only 5% of discretionary income for federal student loan payments compared to 10-20% under current income-driven repayment plans.
(A new proposal would extend student loan payment pause and cancel student loans).
Student loan forgiveness
Third, Biden wants to improve and expand student loan forgiveness for public servants. Last week, Biden said he would cancel $6.2 billion of student loans. In October, Biden announced major changes to student loan relief, which will result in more student loan borrowers being approved for student loan forgiveness. For example, student loan borrowers who are pursuing student loan forgiveness can submit a limited waiver until October 31, 2022. This limited waiver helps borrowers to ‘count’ any previous student loan payments that were previously excluded toward the required 120 monthly student loan payments. As a result, more borrowers will qualify for total federal student loan cancellation. By revamping the Public Service Loan Forgiveness program, Biden can help public servants ranging from teachers to police officers get essential student loan forgiveness.
(Here’s who won’t qualify for $6.2 billion of student loan cancellation)
Student loans: next steps
Importantly, while the president’s budget represents his legislative and policy priorities, it’s still possible Biden could enact wide-scale student loan cancellation through executive action. There’s no guarantee, however, and this announcement makes it less likely that there will be wide-scale student loan cancellation for student loan borrowers. Biden also hasn’t commented on any possible extension of the student loan payment pause beyond May 1, 2022 not is it included in his annual budget. Therefore, student loan borrowers should expect student loan payments to restart soon.
Here are some of the best ways to prepare for student loan repayment:
Student Loans: Related Reading
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