Biden could still cancel $50,000 of your student loan debt — here’s why
The third stimulus checks are largely history, it's not clear if there will ever be a fourth, and President Joe Biden has turned his attention to spending money on roads, bridges and other infrastructure — and America's families.
But what about student loan forgiveness? It may not be getting as much attention as other issues in Washington, but it hasn't gone away. So if you're swamped with college debt, there's still reason to hope for major relief.
Biden has stated publicly that he's willing to cancel $10,000 in federal student loan debt per borrower, but several developments could pave the way for the president to forgive up to five times as much.
1. Members of Congress keep pushing for $50K in forgivenessSherry V Smith / Shutterstock
Senate Majority Leader Chuck Schumer, Massachusetts Sen. Elizabeth Warren and other leading Democrats continue to nudge Biden to cancel as much as $50,000 in student loan debt for all borrowers.
"Student loan debt is weighing down millions of families," Schumer said in a statement. "We must do everything in our power to deliver real relief to the American people."
During a recent virtual event on student debt, the majority leader said he and Warren have warned the president they'll be relentless. “We said, 'We're going to keep at it until you do this,' and to his credit, he said, 'Go ahead,'" Schumer recounted.
2. Biden has people exploring the $50K question
The president has said he's not sure he has the authority on his own to dispose of $50,000 in student loan debt per borrower, so Sen. Schumer announced in March that the Justice Department had launched a legal study of the president’s ability to grant blanket student debt forgiveness.
The Senate's top Democrat has insisted Biden does indeed have the power to wipe out generous amounts of student debt, with just "the flick of a pen."
Meanwhile, the president has asked his education secretary to investigate the $50,000 question, too — and prepare a report.
When reports of this Education Department review first surfaced on April 1, White House chief of staff Ron Klain was quoted saying that the results were expected "in the next few weeks."
3. A new law makes forgiveness easier, tax-wiseKeith Bell / Shutterstock
The COVID-19 relief bill the Biden signed in March — the one with those third, $1,400 stimulus checks — also included a tax exemption on student loan forgiveness that could save borrowers big-time.
With a few exceptions, student loan debt canceled by the government has historically been considered taxable income. But a provision added to the stimulus bill by Sen. Warren and fellow Democratic Sen. Robert Menendez, of New Jersey, would exempt forgiven student debt from federal taxes through 2025.
Previously, Biden canceling $50,000 of your student loans in one shot would have left you on the hook for a large tax bill. Now that debt cancellation doesn’t threaten to carry a painful tax penalty, the president could move forward knowing that borrowers won’t be saddled with onerous taxes.
4. The president already has canceled some student debt
In the space of about 10 days during March, the Biden administration canceled about $2.3 billion in student loan debt: $1 billion held by borrowers who said they'd been ripped off by their schools, and another $1.3 billion owed by Americans described as totally and permanently disabled.
Last week, another $500 million got wiped away for former students defrauded by ITT Technical Institute, a chain of for-profit schools that went out of business in 2016.
Altogether, the moves have affected more than 318,000 borrowers — a tiny fraction of the roughly 43 million people who owe approximately $1.7 trillion on federal student loans.
Obviously, forgiving up to $50,000 in debt per person would be a massive step, costing the government about $1 trillion, according to multiple sources.
While you’re waiting for an answerfizkes / Shutterstock
If your student loan balance is wrecking your finances, try some steps to reduce your expenses while Congress, the president and members of his administration sort out the forgiveness issue.
First, explore refinancing your student loans. Interest rates on student loan refinances have hit record lows, so if you can replace your federal student debt with a new and cheaper loan from a private lender, you could slash your payments. Federal student loan forgiveness would not apply to private loan balances.
Look for savings elsewhere in your budget. Are you paying too much for car insurance? With many people now working from home and driving less, some car insurers have been giving price breaks. If yours won't cut you a deal, it's time to shop for new coverage that could save you hundreds of dollars a year.
Other small measures can add up to big savings. To save when you shop online, download a free browser add-on that will automatically search for better prices or coupons. And, a popular app helps you earn returns in the stock market merely by investing "spare change."
Taking charge of your finances where you can is almost always a safer bet than waiting for Washington to get its act together.