Why You Shouldn’t Count on Student Loan Forgiveness

Upon assuming office, President-elect Joe Biden is expected to ask Congress to immediately cancel the $ 10,000 student debt for all federal loan borrowers and extend the federal-backed student loan moratorium that expires this month. But will the Senate’s debt forgiveness pass? It is possible, but there is no guarantee that it will happen.

President-elect Biden’s plan

“On the first day, the president-elect will direct the Department of Education to extend the existing pause in the payment of student loans and interest for millions of Americans with federal student loans,” David Kamin, Biden’s transition adviser, told the press in a recent press . conference . The term for the suspension of student loan payments has not yet been specified. (Unfortunately, there seems to be no announced plans to forgive private student loans. However, according to Nerdwallet , Biden supports making it easier for borrowers to pay off debt through bankruptcy.)

Details are scant, but President-elect Biden also wants to expand income-based repayment plans and reform the debt relief program for borrowers in the public service.

Currently, 45 million student loan borrowers have total outstanding debt of $ 1.7 trillion. Canceling $ 10,000 in outstanding student loans will annul outstanding student loans for more than 16 million people – about a third of all current borrowers, according to Forbes .

What happened to the $ 50,000 debt relief plan?

Democratic Senate leaders such as Chuck Schumer and Elizabeth Warren have demanded $ 50,000 in debt repaid and called on President-elect Joe Biden to use the decree to make it happen.

However, the legality of the use of executive power is ambiguous , and such action is likely to cause legal problems in the Supreme Court. If the decree were found unconstitutional, the government would have an administrative confusion, especially if it had to recover a debt that had already been paid.

Biden’s preferred path is through Congress, but Democrats have a narrow majority in the Senate (50-50, with Vice President-elect Kamala Harris casting the vote). And to avoid obstruction, which could jeopardize the passage of the student debt cancellation bill, the Senate would need 60 votes. This means that nine Republican senators will have to support a large-scale debt cancellation.

Another option is a legislative procedure known as budget reconciliation , which can pass legislation to write off student debt with a simple majority in the Senate, but it also has limitations. As Ryan D. Dorfler, a law professor at the University of Chicago recently told CNBC , “Democrats can only use reconciliation procedures three times over the next two years.” Republican senators may also try to block the cancellation of student debt on the grounds that it is not related to the budgetary changes required to pass conciliation legislation. Whether the Democrats will follow this option remains to be seen.

Considering these legislative options, one might reasonably argue that a $ 10,000 debt forgiveness would have a better chance of getting through with at least some bipartisan support than $ 50,000.

So what does this mean for my student loans?

As a precautionary measure, let’s say that you will make payments on your student loan in February (even if an extended moratorium on payments is much more likely than a debt write-off). However, Valerie Curtin, executive director of Compliance and Financial Assistance at Helena College, recommends refraining from making additional loan payments over the next few weeks. This makes sense – especially if your student debt is $ 10,000 or less, you’ll want to see if that amount gets canceled before you pay it out of your pocket.

“I think cash is very important right now, so the more money you can keep in your pocket, the better, as long as you make payments and make payments on time, it’s okay if you use a lower payment rate. said Curtin.

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