This was President Joe Biden's approach to student loan cancellation.
Here's what you need to know – and what it means for your student loans.
Student loans
Since taking office in January, Biden has canceled $3 billion in student loans. Biden has focused on targeted student loan cancellation, which means Biden has cancelled student loans for specific groups that have a specific and identifiable reason for student loan cancellation. In some cases, these student loan borrowers received full student loan cancellation and in other cases, they received partial student loan cancellation. For example:
- Biden forgave $500 million in student loan debt for 18.000 student loan borrowers under the borrower defense rule for student loan repayment.
- Biden canceled $1 billion in student loans for 72.000 borrowers.
- Biden canceled another $1.3 billion in student loans for 41.000 Borrower with a total and permanent disability.
- Biden granted student loan relief to 1.1 million student loan borrowers who defaulted on their FFELP loans.
Here are 3 reasons why Biden has focused on targeted student loan cancellation:
1. The targeted termination of student loans is specific and measurable
Targeted student loan cancellation is specific and measurable. Unlike broad-based student loan cancellation-which, for example, cancels student loans for a large cross-section of student loan borrowers based on loan type or income-targeted student loan cancellation is tied to or targeted at a specific economic or legal wrong that further specific, societal wrongs. When Biden cancelled his first $3 billion in student loans, he can clearly explain why the student loans were cancelled in each case. This is not to say that broad-based student loan cancellation cannot fit an "economic injustice" or "societal injustice," but it is a harder sell from a public policy perspective compared to targeted student loan cancellation. This may be one reason Congress has not passed a law to cancel student loans on a large scale.
2. Targeted student loan cancellation is governed by law
Targeted student loan cancellation is based on clear, existing and unambiguous law. There is no question that student loan cancellation due to total and permanent disability or the borrower's defense to repayment rule are clearly defined rules available to the Biden administration to cancel student loan debt. By comparison, the legal basis for broadly terminating student loans is arguably ambiguous. For example, Senate Majority Leader Chuck Schumer (D-NY) and Senator Elizabeth Warren (D-MA) have argued that the Higher of Education Act of 1965 grants Biden unilateral authority to cancel student loans through an executive order. They cite Section 432A of the Higher Education Act of 1965 as evidence that the U.S. Department of Education can cancel student loans because Higher Education grants the Department of Education the authority to "modify, compromise, surrender, or release any right, title, claim, lien". , Or claim, however acquired, including any participation or redemption rights."However, the law does not explicitly state that the President or the U.S. Department of Education can unilaterally cancel any borrower's student loans without further congressional authorization. Even if Biden canceled hundreds of billions of dollars in student loans, legal challenges are likely. Moreover, courts are unlikely to allow a branch of government to act unilaterally based on arguably ambiguous text.
3. Targeted student loan cancellation is less costly to taxpayers
Student loan cancellation is not cheap. Depending on the size of the large-scale student loan cancellation, estimates have ranged from $400 billion to $1 trillion. There have also been concerns about who benefits from student loan cancellation. New research shows that canceling student loans could benefit the wealthy more than low-income borrowers. Of course, the amount of student loan cancellation will depend on several factors, including the amount of student loan debt, the number of borrowers, and other limiting factors such as income and loan type. By targeting student loan termination, Biden has saved taxpayers money. Opponents of targeted student loan cancellation say it doesn't go far enough: not enough student loan borrowers and not enough student loan debt have been forgiven. Opponents also say student loan cancellation will boost the economy because student loan borrowers who receive student loan forgiveness will spend their money elsewhere in the economy. However, against the backdrop of the student loan termination, Biden is creating an economic recovery from the Covid 19 pandemic. There are several moving parts, from stimulus checks to infrastructure spending. The question is how student loan cancellation fits into this larger puzzle, and if so, how much money should be allocated to student loan cancellation as Biden helps Americans recover economically.
Student loan cancellation: next steps
Is your student loan being cancelled? Yes it is possible. Is Biden done with student loan cancellation? Probably no. The question is, what will student loan cancellation look like in the future?. Will there be a comprehensive student loan cancellation, a targeted student loan cancellation, or both? At the very least, there will likely be more targeted student loan termination. To date, there has been no widespread termination of student loans by Congress or the President. While the Ministry of Education is considering legal options for student loan cancellation, almost four months have passed since this process began. It is unclear when the Department of Education will provide the President with a non-binding legal opinion on large-scale student loan termination, whether the President can legally issue a large-scale student loan termination, or whether Congress must act. Last month, the Department of Education held hearings on student loan cancellation and student loan forgiveness, including ways to improve these programs to help more student loan borrowers get student loan relief. Within the Biden administration, there is also a major focus on ensuring that existing student loan forgiveness programs are operating efficiently and that student loan cancellation is possible for qualifying student loan borrowers.
What this means for your student loans? There are no guarantees that student loan cancellation will be comprehensive. Targeted student loan cancellation is possible if you qualify, but most people don't qualify. Therefore, make sure you have a student loan game plan for your unique financial situation. Here are some smart options to consider for your student loans: