What if President Joe Biden does not to cancel student loans?
Here’s what you need to know.
Biden may not cancel your student loans. Despite lobbying from progressives and pressure to impose up to $ 50,000 in student loan forgiveness, Biden, in the end, could decide not to cancel student loan debt. Most recently, Biden did not include the student loan cancellation in the latest stimulus package. That doesn’t mean he doesn’t want your student loans canceled. Biden supports the forgiveness of $ 10,000 in student loans, and since becoming president he has canceled $ 2.3 billion in student loans. However, he may not be able to unilaterally decree the cancellation of the student loan by decree without further authorization from Congress. The answer to that question, or at least a legal opinion, will be at the center of a memorandum that US Secretary of Education Miguel Cardona will deliver to the president in the coming weeks. The Education Department, headed by President Donald Trump, wrote in a legal note that the president does not have the existing unilateral power to cancel student loans. Biden’s education department may come to the same conclusion or a different conclusion. However, the education department can only recommend; Biden will be the final decision maker.
If Biden doesn’t cancel the student loan, what could happen next? Here are three scenarios:
Option 1: Congress cancels student loans
Remember: there are two main ways to cancel a student loan. If the president cannot write off student loans, Congress would be the appropriate federal branch of government that could write off student loan debt. Currently, Progressive Democrats in Congress have rallied around a proposal from Senate Majority Leader Chuck Schumer (D-NY) and Senator Elizabeth Warren (D-MA) to set aside up to $ 50,000 in student loans. According to the US Department of Education, up to $ 50,000 of student loan cancellation would completely write off student loans for 36 million student borrowers. Above all, this proposal is only for federal student loans and for student loan borrowers who earn up to $ 125,000 per year. The reality, however, is this student loan proposal will not become law. Congress will not pass any law to write off up to $ 50,000 in student loan debt per borrower. Why? There are not enough votes in Congress. There are also unlikely to be enough votes in Congress to write off student loan debt of any amount.. This may come as a surprise. This is not to say that there is no support to reform higher education or to help borrowers manage their student debt. On the contrary, it means that if they were put to a floor vote, Democrats would likely not be able to get enough votes to pass legislation to cancel student loans on a large scale. So what happens next? Congress could draft a bill that moderate Democrats and perhaps some Republicans could support. It could be a tall order, but finding more common ground on student loans will be the best bet in getting student loans canceled.
Option 2: change the bankruptcy laws on student loans
If the President or Congress does not cancel student loans, there are still other options to help student borrowers. For example, Congress could amend the United States Bankruptcy Code to make student loan cancellation in bankruptcy more accessible for borrowers. As a US senator, Biden opposed the cancellation of student loans in bankruptcy. However, as president and presidential candidate, Biden now says student loan borrowers should be able to terminate student loans in bankruptcy. Warren, a former Harvard bankruptcy law professor, has been a leading advocate for student loan reform, particularly on this issue. Perhaps this is an issue Democrats and Republicans could find common ground on.
Option 3: Simplify Student Loan Repayment Plans
Another option is that Congress could simplify student loan repayment. It is an area conducive to bipartisanship. Currently, there are four income-based reimbursement plans: Income Based Reimbursement (IBR), Pay As You Earn (PAYE), Revised Salary As You Earn (REFUND), and Pay As You Earn (REFUND). income (ICR). These income-based repayment plans base your monthly payment on your discretionary income, typically 10-20%, and allow you to get a federal student loan discount on your remaining balance after 20 years (undergraduate student loans) or 25 years (graduate student loans). . They are especially useful for student loan borrowers who are struggling to repay their student loans or who are unemployed. There are a number of ways that Congress could simplify the repayment of student loans. For example, Congress could make enrollment automatic (with the option to opt out) so that student loan borrowers do not have to proactively enroll. Second, Congress could simplify the number of student loan repayment plans to minimize confusion. Third, Congress could consider canceling student loans before 20 years or 25 years. For example, Trump proposed canceling student loans for undergraduate student loans after 15 years.
Student loan cancellation: next steps
Biden could still order the cancellation of the student loan, if the Education Department says he has legal authority. This legal note and this student loan review could be delivered to the president in a matter of weeks. Above all, any recommendation from the education department is merely an opinion and not legally binding. Therefore, it is possible that any unilateral action by the executive on the cancellation of student loan could be challenged in court. As he stated, Biden wants student loans canceled in three ways. Besides the large-scale cancellation of student loans, Biden also wants to reform higher education. However, there is no guarantee that Congress will act on any of its agendas. While these three options aren’t the only potential next steps, they represent three potential avenues Congress could take if Biden doesn’t cancel student loans. Either way, make sure you have a student loan game plan. Here are some useful options to consider:
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