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Biden May Cancel $10,000 of Student Loans for these Borrowers Only
Updated On March 26, 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 may cancel $10,000 of student loans. However, student loan cancellation may not be available for everyone. Here’s what you should know about this new proposal.
Biden could cancel $10,000 of student loans
Since becoming a presidential candidate, Biden has supported $10,000 of student loan cancellation for borrowers. Now, a new plan could help Biden achieve his campaign goal. Several private student loan companies have pushed a new proposal that would cancel student loans for certain student loan borrowers.
According to the plan, Biden should cancel student loans for student loan borrowers who meet the following:
- Low income
- Struggling financially
- Student loan default
- Student loan delinquency
Rather than provide wide-scale student loan cancellation, this new plan would target student loan forgiveness only for borrowers who need financial relief the most. The plan doesn’t specify what “low income” or “struggling financially” means.
That said, student loan default means a student loan borrower hasn’t paid a student loan in at least 270 days. Student loan delinquency means a borrowers hasn’t paid a student loan in at least 90 days.
(Learn more: How to pay off student loans)
Democrats call for $50,000 of student loan cancellation
While progressive Democrats in Congress support wide-scale student loan cancellation, they want to maximize student loan forgiveness for most or all borrowers. For example, Senate Majority Leader Chuck Schumer (D-NY) and Sen. Elizabeth Warren (D-MA) want Biden to cancel $50,000 of student loans.
Based on their plan, student loan cancellation only would be available to federal student loan borrowers who earn up to $125,000 annually. Biden has opposed $50,000 of student loan forgiveness and has said that Congress, not the president, should cancel student loans. Biden believes he doesn’t have legal authority to enact wide-scale student loan cancellation.
Last week, Biden announced plans to cancel $6.2 billion of student loans. Previously, Biden cancelled $15 billion of student loans since becoming president.
(Read: The Ultimate Guide To Student Loan Forgiveness)
Why private student loan companies want to target student loan cancellation
While many student loan borrowers want total student loan cancellation, not everyone agrees. For example, some private student loan companies argue that wide-scale student loan cancellation would provide student loan forgiveness to too many borrowers.
Instead, they believe targeted student loan cancellation would help provide student loan relief to the most financially vulnerable borrowers. This way, higher income earners such as doctors, lawyers and dentists who can afford student loan payments wouldn’t need student loan forgiveness. This helps the federal government save money, which could be used to help pass Biden’s legislative agenda.
(Learn more: How to pay off $100,000 of student loans)
Will Biden cancel student loans?
Biden hasn’t decided on whether he will issue an executive order to enact wide-scale student loan cancellation. Some members of Congress are urging the president to cancel student loans to cancel student loans during the Covid-19 pandemic. However, Biden has focused on targeted student loan cancellation rather than wide-scale student loan forgiveness. Expect more student loan forgiveness for certain borrower groups, including public servants, borrowers with a permanent disability, and borrowers who qualify for student loan forgiveness through borrower defense to repayment. That said, it’s less likely that Biden will enact wide-scale student loan cancellation for all student loan borrowers.
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