Biden’s framework could look like this

President Joe Biden’s framework for student loan forgiveness might look like this.

Here’s what you need to know — and what it means for your student loans.

Student loans

Biden is weeks away from announcing three major decisions on student loans and student loan forgiveness. The most important decision of the three – the large-scale cancellation of student loans – could impact millions of student borrowers. Will Biden Forgive $10,000 in Student Loans? Will Biden Forgive $50,000 in Student Loans? Will Biden forgo a large student loan forgiveness? Here’s a potential framework Biden could use to determine whether he’ll forgive student loans.


1. Whether to cancel student loans

First, Biden must decide whether or not to cancel student loans. It is not a foregone conclusion that Biden will embrace large-scale student loan forgiveness. Biden has forgiven more than $30 billion in student loans since becoming president. For example, Biden canceled $8.1 billion in student loans for public servants. He also agreed to forgive $6 billion in student loans for 200,000 student borrowers. Now he must weigh the pros and cons of broad student loan relief. Proponents say large-scale student loan forgiveness will boost the economy, reduce disparities and provide financial relief for borrowers to get married, start a family, buy a home, save for retirement or start a business. Opponents say Biden has already canceled $400 billion in student loans and his plan represents a redistribution of wealth that will hurt working Americans who didn’t go to college.


2. How much for student loan cancellation

Second, Biden needs to figure out how much student loan debt to write off. The most likely scenario is that Biden will forgive $10,000 in student loans for each eligible borrower. However, the White House has denied that Biden decided to forgive $10,000 in student loans. That said, Biden has referenced $10,000 in student loan forgiveness since running for president in 2020. Progressive Democrats in Congress are still pressing the president to write off $50,000 of student loans, and the president could decide to cancel any amount of student loans.


3. Who is eligible for student loan forgiveness

Third, Biden must decide who qualifies for student loan forgiveness. There are clear requirements for the cancellation of utility loans and the defense of the borrower against repayment, for example. However, there is no precedent for large-scale student loan forgiveness – even with these 5 huge changes to student loans. If Biden proceeds with a broad student loan forgiveness, he will need to determine the rules governing who qualifies. The Biden administration has set potential annual income caps of $125,000 or $150,000 for individuals, which would limit who is eligible for student loan forgiveness. Some proponents say there should be no income cap and all student borrowers should be eligible. Opponents have argued that if there are income caps, they should be targeted at low-income student borrowers.


4. Legal Authority for Student Loan Cancellation

Fourth, Biden must determine whether he has the legal authority to enact large-scale student loan forgiveness. Biden said he does not believe he has the existing legal authority to cancel student loans for most or all student borrowers. Rather, as House Speaker Nancy Pelosi said, only Congress can cancel student loan debt, unless Congress proactively grants the President additional executive power. Sen. Elizabeth Warren (D-MA) and Senate Majority Leader Chuck Schumer (D-NY) argue the president has existing power to cancel a large student loan granted by Congress in the Education Act higher of 1965. Biden could decide to cancel student loans. but could face lawsuits that could block any implementation of student loan relief. Ultimately, the United States Supreme Court could decide the parameters of the presidential power to cancel student loans.


5. Impact on the economy / inflation / equality and justice

Fifth, Biden is likely to conduct various impact analyzes before deciding to cancel a large-scale student loan. For example, will canceling student loans stimulate the economy? Will canceling student loans increase inflation? What does student loan forgiveness mean for equality and justice?


6. Policy Implications of Canceling Student Loans

Finally, Biden will assess the political implications of canceling student loans. The midterm election will take place on November 8, 2022, and more than 450 members of the House and Senate are eligible for re-election. Democrats could lose control of at least the U.S. House of Representatives, and a return to a divided government could further delay Biden’s legislative agenda. Therefore, Biden must determine the impact of any decision to cancel student loans on his party’s electoral prospects. Rep. Alexandria Ocasio-Cortez (D-NY) said Biden must write off student loan debt or he risked alienating a large constituency of non-voting Democrats. These voters say Biden promised student loan forgiveness and he needs to keep his promises. That said, Biden also doesn’t want to alienate moderates and independents who could help Democrats retain control of Congress. Moderate and independent voters may view the blanket student loan waiver as prohibitively expensive, poorly targeted, and likely to increase inflation during a recession.

Expect a decision on student loan cancellation within weeks. Regardless of Biden’s decision, the student loan payment pause ends August 31, 2022. This means federal student loan payments will resume beginning September 1, 2022. Now is the time to prepare for the return of repayment student loans. Know these great options to pay off student loans faster:


Student Loans: Related Reading

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