The White House is still considering the details of an announcement on student loan forgiveness — and it’s unclear how far President Joe Biden can go on canceling student loans.
Here’s what you need to know — and what it means for your student loans.
According to the Washington Post, the White House has not finalized details on comprehensive student loan forgiveness. (Other reporting notes student loan forgiveness could come as early as tomorrow). With only a few days until the end of the student loan payment pause, Biden’s announcement on the potential for wide-scale student loan relief may come just before student loan borrowers are expected to resume federal student loan payments on September 1, 2022. Is. Biden is considering whether to enact broad-scale student loan forgiveness for more than 40 million student loan borrowers. So, what is the hold-up?
As the Washington Post notes, there are a number of reasons why the Biden administration is carefully weighing the decision to cancel comprehensive student loans.
1. Student Loan Forgiveness Could Drive Up Inflation
Inflation hit a 40-year high, and the last thing the Biden administration wants is the assumption that comprehensive student loan forgiveness will increase inflation. However, former US Treasury Secretary Larry Summers, a Democrat, has argued that wide-scale student loan forgiveness could fuel inflation. If student loan borrowers have more disposable income, they can spend that money in the economy, which can increase demand and potentially drive up prices. Republicans in Congress also say that canceling student loans on a wider scale will lead to monster inflation. The White House disagrees, saying that any broad-scale student loan relief would have minimal, if any, impact on inflation.
2. Student Loan Cancellation Can Be Treated as Money Redistribution
The Biden administration is weighing the notion that massive student loan forgiveness leads to a redistribution of wealth. While other policies create wealth redistribution, the logic here is a little different. As with comprehensive student loan forgiveness, Republicans and other critics of comprehensive student loan cancellation worry that widespread student loan forgiveness redistributes income to higher-income earners. How is this possible? On average, college-educated student loan borrowers — even if they face high student loan payments and an uncertain economy — earn more income than other Americans who didn’t attend college or couldn’t afford it.
3. Americans Without Student Loans Wouldn’t Want to Pay for Other People’s Student Loans
According to the latest student loan debt statistics, there are 45 million borrowers who collectively pay off $1.7 trillion in student loans. There are approximately 250 million adult Americans, which means that student loan borrowers represent about 20% of the adult American population. This means that about 80% of Americans do not have student loans: they have either never taken out student loans or have already paid off their student loans. With comprehensive student loan cancellations, these Americans would effectively be asked to pay for the college education of other Americans.
Student Loan Forgiveness: Political Implications
Biden will also weigh the political impact of massive student loan cancellations. The midterm election is on November 8, and Democrats could lose control of Congress. Supporters of massive student loan cancellations want a financial lifeline in the wake of the Covid-19 pandemic and an uncertain economy. They also want Biden to fix a broken student loan system that has created inequalities. Biden must also weigh feedback from some moderates, independents and Republicans, who say canceling student loans would fuel inflation, cost $400 billion and hurt working Americans who didn’t go to college or who have There is no student loan. Republicans announced a major, new plan on student loan forgiveness that would prevent the president from implementing broad-scale student loan relief and immediately restart student loan payments, among other proposals.
Student Loans: Next Steps
Biden has said he will decide on a broad-scale student loan waiver before August 31, 2022. With only a few days left, Biden on student loan forgiveness is expected to announce a halt to student loan payments any day. Regardless of the president’s decisions, remember that you should learn all of your options for student loan repayment. Student loan forgiveness may help some student loan borrowers, but most likely, it will not eliminate all of your student loans. Here are some popular ways to save money and pay off student loans faster:
- Student loan refinancing (lower interest rate + lower payments)
- income-driven repayment (less payment)
- Student Loan Forgiveness (Federal Student Loans)