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Biden Excludes Student Loan Cancellation From Annual Budget
Updated On March 30, 2022
Editorial Note: This content is based solely on the author's opinions and is not provided, approved, endorsed or reviewed by any financial institution or partner.
President Joe Biden excluded student loan cancellation from his annual budget. Here’s what it means for your student loans.
Biden dropped student loan forgiveness
You won’t find any student loan forgiveness included in Biden’s new $5.8 trillion annual budget. Biden submitted his annual budget to Congress this week. While many hoped for a detailed plan on wide-scale student loan cancellation, Biden opted not to include this student loan relief for borrowers.
While only Congress approves the federal budget, the president can submit a proposed budget that reflect his policy priorities and legislative agenda. Biden’s decision may come as a major disappointment for Democrats in Congress and student loan borrowers alike.
Several Democrats in Congress have been lobbying the president to cancel up to $50,000 of student loans for borrowers. However, as Biden has done in previous years, he decided not to include any wide-scale student loan cancellation in his budget.
(Learn more: How To Pay Off $70,000 of Student Loans)
Democrats want $50,000 of student loan cancellation
Some Democrats in Congress, including Senate Majority Leader Chuck Schumer (D-NY) and Sen. Elizabeth Warren (D-MA), want the president to act now to cancel student loans. They’re calling on the president to cancel up to $50,000 of student loans through an executive order.
However, Biden has said he doesn’t have legal authority to cancel student loans for every borrower. Therefore, Biden has asked Congress to pass legislation to enact wide-scale student loan forgiveness.
That said, Biden didn’t include $10,000 of student loan forgiveness in his budget either. Importantly, Congress isn’t required to accept the president’s proposed budget. Congress can amend the budget accordingly, which means that Congress could vote to include wide-scale student loan forgiveness.
Democrats in Congress also want Biden to extend the student loan payment pause for a fourth time. However, Biden did not include any federal spending on the student loan payment pause in his budget. (Here are 3 reasons why Biden could extend the student loan payment pause).
(Read: The Ultimate Guide To Student Loan Forgiveness)
Student loan cancellation is still possible
Since becoming president, Biden has cancelled $17 billion of student loans. Last week, for example, Biden announced plans to cancel $6.2 billion of student loans. Therefore, student loan borrowers shouldn’t think that there won’t be any student loan cancellation. It’s expected that Biden will continue to cancel student loans for specific student loan borrowers, rather than for every student loan borrower.
There is good news for student loan borrowers inside Biden’s proposed budget.
- First, Biden proposed that income-driven repayment plans be simplified. Income-driven repayment plans such as IBR, PAYE, REPAYE and ICR set a monthly student loan payment based on a borrower’s discretionary income and family size.
- Second, Biden said he wants to double the amount of Pell Grants to make college more affordable. Increased Pell Grants would help student loan borrowers get grants that don’t have to be repaid.
- Third, Biden called for more investment into Historically Black Colleges and Universities (HBCUs).
- Fourth, Biden wants to improve the Public Service Loan Forgiveness program, which helps public servants get total federal student loan forgiveness after meeting certain requirements. (How to get student loan forgiveness for teachers). This program, which Congress passed in 2007, has at times rejected up to 99% of applicants. In October, Biden made major changes to student loan forgiveness, which should help more student loan borrowers get access to student loan cancellation. For example, student loan borrowers can complete a limited waiver for student loan forgiveness to count previously ineligible student loan payments toward the required 120 monthly student loan payments.
(Learn more: The Ultimate Guide To Lower Student Loan Payments)
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