Student Loan Forgiveness: Who Could Qualify Under Biden’s Plan

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Here’s who could qualify under President Joe Biden’s potential plan to enact wide-scale student loan cancellation.

Here’s what you need to know — and what it means for your student loans,

Student Loans

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President Joe Biden hasn’t announced a plan to enact wide-scale student loan cancellation, but there’s already speculation about who could qualify if Biden proceeds to cancel student loans. For example, Biden could cancel $10,000 for student loan borrowers if he proceeds with mass student loan forgiveness. Here are some student loan borrowers who could benefit:

1. Student loan borrowers with federal student loans

First, Biden likely will limit student loan forgiveness to federal student loans. For example, this could include Direct Loans and other federal student loans that the federal government owns. Sen. Bernie Sanders (I-VT) has called for total student loan cancellation of all $1.7 trillion of student loan debt, including both private and federal student loans. However, Biden is unlikely to cancel private student loans. Why? The federal government doesn’t own private loans, which are based on private contracts and typically are owned by financial institutions, companies and investors. Therefore, the federal government could face an uphill battle to cancel these student loans, which could be more administratively burdensome. (Biden won’t cancel all student loan debt).

2. Student loan borrowers with college student loans

Second, when it comes to student loan forgiveness, Biden may differentiate between college student loans and graduate school student loans. Politicians and the media often refer to “student loan forgiveness” generally as one, catch-all provision. However, Biden could limit student loan cancellation to college student loans only. Why? Graduate school, particularly for a professional degrees such as law or medical degrees, is associated with higher income. Graduate school student loans comprise approximately half of all student loan debt. By limiting student loan cancellation only to college student loans, then Biden could minimize criticism that wide-scale student loan cancellation is disproportionately benefiting higher income earners. (Here are 5 takeaways from Biden’s last announcement on student loan forgiveness).

3. Student loan borrowers who earn a certain income

Third, if Biden cancels student loans, Biden will likely limit student loan cancellation by imposing an income threshold. (Student loan cancellation could look different than you expect). For example, Sen. Elizabeth Warren (D-MA) and Senate Majority Leader Chuck Schumer (D-NY) have proposed limiting wide-scale student loan forgiveness to student loan borrowers who earn up to $125,000 annually. That said, the Biden administration reportedly is considering an annual income cap of $125,000 to $150,000 for individuals and $250,000 to $300,000 for joint filers. That said, stimulus checks in response to the Covid-19 pandemic included an income cap for individuals of $75,000. It may be challenging for the Biden administration to justify a higher income threshold for student loan borrowers specifically (student loan cancellation) compared to the broader population generally (stimulus checks).

Student loans: next steps

Biden has canceled $17 billion of student loans. Within weeks, Biden expects to make a major decision whether to enact wide-scale student loan cancellation. If he proceeds, Biden could face potential legal challenges regarding his authority as president to cancel student loans without further congressional authorization. This could delay any implementation of student loan forgiveness, even for student loan borrowers who qualify. With temporary student loan relief scheduled to end on August 31, 2022, now is a critical time to plan for student loan repayment. There’s no guarantee that Biden will cancel your student loans or that all your student loans will be canceled. Understand all your options, including these popular strategies:

Student Loans: Related Reading

No, Biden is not canceling most student loan debt

Biden confirms he won’t cancel $50,000 of student loans—5 key takeaways

Student loan forgiveness: 5 key takeaways from major announcement

Biden will cancel student loans or extend student loan pause before August 31


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