Here are 4 things to expect if President Joe Biden enacts student loan relief.
Here’s what you need to know and what it means for your student loans.
President Biden is only weeks to make one of the biggest announcements of his presidency. By August, Biden will decide whether to pass large-scale student loan forgiveness for millions of student borrowers. The White House has denied that Biden decided to cancel student loans. However, leaked documents of the United States Department of Education show a detailed plan to enact a broad cancellation of student loans. If Biden cancels your student loans, here are 4 things to expect.
1. You could get $10,000 student loan forgiveness
If there is broad student loan relief, expect $10,000 in student loan forgiveness. Throughout his presidency, Biden campaigned on this student loan forgiveness amount and sent a message of $10,000 in student loan forgiveness. After Congress failed to pass legislation, Biden could act through executive action or rulemaking at the US Department of Education. Some progressive lawmakers in Congress want Biden to forgive $50,000 in student loans. However, Biden has given no indication that he supports $50,000 in student loan forgiveness.
2. Student loan forgiveness could be automatic
As three important student loan deadlines approach, Biden could decide to make student loan forgiveness automatic. Based on a plan offered by the US Department of Education, you could automatically get a large student loan forgiveness if the Department of Education has your income information. In this case, expect cancellation of the student loan within 45 days. If the Department of Education does not have information about your income, one proposal is to allow you to apply online and report your income yourself. Either way, the Department of Education says it is ready to implement broad student loan relief for millions of student borrowers.
3. You may not qualify for student loan forgiveness
While virtually everyone qualifies for a federal student loan, that doesn’t mean you’ll automatically qualify for Biden’s student loan forgiveness. Based on documents leaked by the US Department of Education, the good news is that the qualification requirements are more generous for student 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 qualify 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 the number of student borrowers who ultimately get their student loans forgiven.
4. Not all of your student loans can be canceled
It is important to note that the general student loan forgiveness can only cancel some of your student loans. Most student borrowers will still have significant student loan debt after any large-scale student loan relief. Therefore, 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 student loans beyond student loan forgiveness. For example, student loan refinancing, income-contingent repayment, or other student loan forgiveness are all viable options. Here’s how to pay off student loans and save money: