Will Biden Forgive Student Loans? Student Loan Forgiveness in 2021
On Friday, August 6th, 2021, the Biden Administration announced that they would direct the US Department of Education to extend the current freeze on federal student loan payments for yet another six months. This means that, if you have federal student loans, you’re not liable to make payments on them until January 31st, 2022.
That’s great news for people struggling to make ends meet during the pandemic, but what about his promise to cancel student loans? Senators and members of Congress have called on Biden to cancel up to $50,000 in student loans per borrower. However, is that a realistic thing to look forward to? Let’s dive into student loan forgiveness in 2021 and what it could mean for you.
What to Know About the Repayment Freeze Extension
During the beginning of the pandemic, the Trump Administration announced a freeze on all federal student loan repayments. This freeze was interest-free, meaning that you could skip all payments and still not accrue interest on your loans (woo!).
That freeze has since been extended, most recently this past week, in what seems like a neverending extension until the economy recovers. However, the US Department of Education assured borrowers (and lenders) that this most recent extension would be the last one.
Biden himself was quoted as saying that “This will give the Department of Education and borrowers more time and more certainty as they prepare to restart student loan payments. It will also ensure a smoother transition that minimizes loan defaults and delinquencies that hurt families and undermine our economic recovery.”
While this certainly helps those struggling economically at the moment, it’s not a long-term fix to the massive issue that is student loan debt. Currently, 1 in 4 Americans have student loan debt, with the average balance being just over $37,000. In total, Americans owe $1.53 trillion.
What does Biden have in mind when it comes to student loan forgiveness on a more long-term basis?
Biden’s Student Loan Relief Plan
There are a few components to Biden’s current relief plan regarding student loans. Here’s what to know and what to expect in the coming year or two.
Can Biden Cancel All Student Loans?
The answer to that isn’t so straightforward. There have been a few very vocal senators who seem to think so, namely Senator Elizabeth Warren and Senate Democratic Leader Chuck Schumer. They argue that Biden is able to use executive authority to sign a document that would forgive student loans for everybody, or at least up to a certain amount (the most common quoted number is $50,000).
Is it possible that Biden will forgive student loans to that extent, though? It’s unlikely. Biden himself has been quoted as saying that he doesn’t think he has the power to do such a thing. And, others have argued that he would need Congressional approval to pass that sort of initiative.
Will Biden Partially Forgive Student Loans?
Yes, that seems more likely. Currently, the Biden Administration supports canceling up to $10,000 in student loans per borrower. However, it seems like there are many caveats to that plan. For example, the support is currently for loan forgiveness for loans that are held only by the US Department of Education.
Instead of forgiving the loans outright, it seems that Biden is more focused on improving certain repayment strategies. For example, under his current plan, anybody making under $25,000 will not have to make payments on their undergraduate federal student loans. And, while they’re not making payments, no interest will accrue. That’s not so bad, at least not compared to income-driven repayment plans of the past.
Will Tuition-Free College Replace Student Loans?
Again, it appears that instead of canceling what students already owe, Biden seems to be focused on fixing the issue long-term, which means that he’s focused on providing tuition-free college so that the next generation of students won’t be burdened with such massive debt.
While at least 17 states currently offer tuition-free community college, this would apply nationally to both two-year public colleges and four-year public colleges such as UCLA, The University of Florida, and Purdue University. To qualify, the borrower’s family would have to earn below $125,000 annually.
Other Options for Loan Forgiveness
The President doesn’t have to forgive student loans for you to have them cancelled. There are independent companies working on helping you do this whether or not anything is signed into law.
Savi is a great example of such a company. They work to help borrowers like you easily lower their payments and find forgiveness. Most recently, Savi and the company’s co-founder Aaron Smith are working with FedLoan to help aid in the transition process as FedLoan recently announced that they will not renew their contract with the Department of Education after this year.
If you’re an individual borrower, you can sign up with Savi and they’ll automatically check for savings and automates enrollment in 150+ state & federal programs. Currently, they’ve been able to help student borrowers reduce payments by $156 on average. Programs like these can help you lower your monthly payments while everybody figures out what’s going on with total loan forgiveness. Click here to learn more about how to partner with Savi.
How to Save for Student Loan Repayment
Biden has been talking about forgiving student loans for a year now, and while he’s still only seven months into his first year in office, large-scale student loan forgiveness seems a bit unlikely at this point (or, at least, it seems quite far away still). And, while you can enjoy the student loan freeze for another six months, come January 2022, you will have to start making payments on your current loans.
In order to prepare for those payments, we suggest starting to save now, especially if you’re a student. How? Reduce your expenses, think about a side hustle, and open a bank account that helps you earn cashback rewards and savings. Yep, we’re talking about the Cheese Debit Card.
With the Cheese Debit Card, you get access to all of these perks:
❌ No Monthly Fee 🧀️ $5 cash bonus
❌ No ATM Fee 🧀️ Up to 10% cashback with every purchase/transaction
❌ No Overdraft Fee 🧀️ Potential Double Cheese Cashback
❌ No Insufficient Fund Fee 🧀️ Up to 3% Saving Bonus
❌ No Minimum Balance Requirement 🧀️ Early Paycheck
As an added bonus, the Cheese Debit Card is available to international students. To apply, you’re able to show just an established US address, passport, and valid visa.
Ready to get started? Download the Cheese Mobile Banking App for Android or iOS and create your account. It’s free and you’ll be able to access your digital debit card within minutes of approval.
