Here is the latest news on student loan forgiveness
President Joe Biden (Photo by Drew Angerer / Getty Images)
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What is the latest news on student loan cancellation?
Here’s what you need to know.
Student loans
Will your student loans be canceled? This is the question for student borrowers and taxpayers alike. Given the propositions, headlines and assumptions, let’s clear things up. Here is the last one:
1. We may soon have an answer on student loan cancellation
President Joe Biden wants student loans canceled in three ways. On a positive note, Biden asked the US Department of Education to provide a recommendation on whether he was legally allowed to unilaterally enact student loan cancellation by decree. Previously, Biden has said he doesn’t believe he has the power to enact a full-scale student loan cancellation. Therefore, Biden wants Congress to immediately write off $ 10,000 in student loans. The contents of the Department of Education’s student loan legal note may determine whether Biden can proceed with student loan cancellation or if he does not have the legal authority and, therefore, Congress should pass. legislation to write off student loan debt. The Trump administration once wrote a legal note that a president can not unilaterally enact the cancellation of the student loan without further authorization from Congress.
2. However, don’t expect a student loan cancellation tomorrow.
Don’t expect a student loan cancellation tomorrow. The road to full-scale student loan cancellation, if at all, could be a long one. Once Biden’s education department issues its opinion, you may get a student loan cancellation, but there’s one major problem: the legal opinion is not only non-binding, but it is simply a legal opinion. To have a binding decision, a court would have to make a decision on student loan cancellation. If Biden proceeds with the cancellation of student loans, it could be challenged in court, which could delay implementation by several months or more.
3. Not everyone will get their student loan canceled
Above all, despite the headlines you may have read, you are very unlikely to get $ 50,000 student loan cancellation. Biden has never supported the cancellation of $ 50,000 in student loans and has repeatedly said that it would be unlikely to cancel up to $ 50,000 in student loans. The figure of $ 50,000, which is often repeated, comes from a proposal to Congress from Senate Majority Leader Chuck Schumer (D-NY) and Senator Elizabeth Warren (D-MA), both of whom are major advocates of large-scale student loan cancellation. . Importantly, even their proposal wouldn’t forgive everyone for student loans. There are several limitations in their proposal, which is why it is important to read the fine print. First, their proposal only applies to federal student loans. Second, their proposal only applies to student loan borrowers with a income up to $ 125,000. If Biden cancels student loans, he could enforce those same limitations, or even make them more stringent. Therefore, not everyone should expect a student loan forgiveness.
4. Biden cancels $ 2.3 billion in student loans
There is a lot of talk about how Biden will not cancel student loans. However, since becoming president, Biden has already canceled at least $ 2.3 billion in student loans. (You can find out if you qualify for the $ 2.3 billion student loan forgiveness here). First, Biden canceled $ 1 billion in student loans for 72,000 student borrowers, and second, he canceled an additional $ 1.3 billion in student loans for 41,000 totally and permanently disabled borrowers. America reacted in different ways to the cancellation of Biden’s student loan. Some have argued that this amount of student debt is not enough. For example, $ 2.3 billion is only 0.1% of the $ 1.7 trillion in outstanding student loans. Likewise, 110,000 student borrowers represent only about 0.2% of the 45 million student borrowers. However, Biden pursued a targeted approach to canceling student loans. He has helped specific constituencies piecemeal, and will likely continue to do so in partnership with US Secretary of Education Miguel Cardona.
5. Student loan forgiveness is now tax free
The latest stimulus package included a big win for student loan borrowers. All student loan cancellations are now tax-free until December 31, 2025. Thus, if you get the student loan cancellation from Congress or the President, you would not be liable for tax on the amount of the loan forgiveness. student loan you receive. In contrast, before Warren and Sen. Bob Menendez (D-NJ) proposed this provision, student loan borrowers may have owed tax on their student loan balances that were canceled. This tax-free provision also applies to student loan cancellation through income-based repayment plans such as IBR, PAYE, REFUND and ICR. The forgiveness of student loans through the civil service loan forgiveness program is already tax-exempt.
6. Congress lacks the votes to pass the cancellation of student loans
It may come as a surprise to many, but Congress lacks votes to pass student loan cancellation. There have always been two main routes to canceling student loans. The first route is through congressional legislation. The second route, although more unlikely given the constitutional limits, is through a decree from the president. If Biden does not have the legal authority to cancel student loans, then Congress would be the remaining avenue to cancel student loans. The problem is, despite the rhetoric and headlines, Congress doesn’t have the votes to pass the landmark student loan cancellation legislation, which is Schumer and Warren’s plan to write off up to $ 50,000. student loans. Beyond a group of progressive senators, the entire Democratic caucus does not support the cancellation of $ 50,000 in student loans and no Republican supports it either. Likewise, Congress probably wouldn’t support the outright cancellation of a $ 10,000 student loan, either. Therefore, in order to secure a student loan cancellation, it will be up to Congress to draft compromise legislation on student loan forgiveness and higher education reform that is potentially acceptable to members of both sides.
7. Student loan repayments will likely resume on October 1
It is not guaranteed, but it is highly likely that your student loan payments will resume as of October 1, 2021. Currently, federal student loan payments and accrued interest are temporarily suspended until September 30, 2021. When he was asked this week whether federal student loan payments will restart on October 1, 2021 or be suspended beyond that date, Cardona replied: “We are looking at it. Obviously, we’re going to be inspired by what the data tells us and where we are as a country in terms of the resumption of the pandemic. It’s not out of the question, but at this point it’s September 30th. “ If the payment break is not extended, there will be correspondence from the US Department of Education regarding next steps to restart stuednt loan payments. By September 30, student loan borrowers will have received more than $ 90 billion in student loan cancellations since the start of the Covid-19 pandemic.
Will your student loans be canceled?
Will your student loans be canceled? The response is not necessarily binary and it may take longer than expected to get a response. The education department is expected to provide its recommendations to the president within a few weeks. However, Biden may not cancel student loans. Ultimately, according to White House Chief of Staff Ron Klain, Biden will make the final decision on canceling student loans based on law and policy. Congress now has the power to legislate cancellation of student loans, but has instead placed its hopes on a presidential proclamation. However, there is no guarantee that there will be a student loan cancellation now or in the future. While there is large-scale student loan cancellation, it may also not apply to all types of student loans or be available to everyone.
Make sure you understand all of your student loan options. Here are some potential options to consider:
