Personal Finance

What If Biden Doesn’t Cancel Student Loans?

What if President Joe Biden doesn’t cancel student loans?

Here’s what you need to know.

Student Loans

It’s possible that Biden won’t cancel your student loans. Despite the lobbying from progressives and the pressure to enact up to $50,000 of student loan forgiveness, Biden, ultimately, may decline not to cancel student loan debt. For example, Biden didn’t include student loan cancellation in the latest stimulus package. This doesn’t mean he doesn’t want your student loans cancelled. Biden supports of $10,000 of student loan forgiveness, and since becoming president, he has cancelled $2.3 billion of student loans. However, he may not be able to enact student loan cancellation by executive order unilaterally without further congressional authorization. The answer to that question, or at least a legal opinion, will be at the center of a memorandum that U.S. Secretary of Education Miguel Cardona will deliver to the president in the coming weeks. The Education Department, under President Donald Trump, wrote in a legal memo that the president doesn’t have existing unilateral authority to cancel student loans. Biden’s Education Department may reach the same or a different conclusion. However, the Education Department can only recommend; Biden will be the final decisionmaker.

If Biden doesn’t enact student loan cancellation, what could happen next? Here are three scenarios:

Option 1: Congress cancels student loans

Remember: there are two main paths to student loan cancellation. If the president cannot cancel student loans, Congress would be the appropriate federal branch of government that could cancel student loan debt. Currently, progressive Democrats in Congress have rallied around a proposal from Senate Majority Leader Chuck Schumer (D-NY) and Sen. Elizabeth Warren (D-MA) to cancel up to $50,000 of student loans. The U.S. Department of Education says that up to $50,000 of student loan cancellation would fully cancel student loans for 36 million student loan borrowers. Importantly, this proposal is only for federal student loans and for student loan borrowers who earn up to $125,000 a year. The reality, however, is this student loan proposal won’t become law. Congress won’t pass any legislation that cancels up to $50,000 of student loan debt per borrower. Why? There aren’t enough votes in Congress. It’s also unlikely there are enough votes in Congress to cancel student loan debt of any amount. That may come as a surprise. It doesn’t mean there isn’t support to reform higher education or help borrowers manage student loan debt. Rather, it means, if put to a floor vote, Democrats likely wouldn’t be able to secure enough votes to pass any legislation for wide-scale student loan cancellation. So, what happens next? Congress could draft legislation that moderate Democrats and perhaps some Republicans could support. That could be a tall order, but finding more common ground on student loans will be the best bet to get student loan forgiveness.


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