The US Department of Education has now confirmed that President Joe Biden will “soon” decide whether the student loan payment break will be extended.
Here’s what you need to know — and what it means for your student loans.
This is the critical time in America for student loans. Biden faces three deadlines that will impact the future of student loan repayment and student loan forgiveness. First, the student loan payment pause ends on August 31, 2022. Absent an unprecedented seventh student loan forbearance extension, federal student loan payments will resume on September 1. Second, in a few days, Biden could announce his decision on a large-scale student loan. forgiveness for over 40 million student borrowers.
Student loan payment break: announcement coming any day
Within days, Biden could announce an extension to the student loan payment pause, which means student borrowers would not be required to make mandatory federal student loan payments. Federal student loan repayments have been on hold since March 2020, when Congress passed historic student loan relief. Alternatively, Biden could allow the student loan payment pause to expire as scheduled, meaning student loan borrowers would begin student loan repayments again within weeks. If Biden extends student loan relief, you should expect these 5 things. However, the student loan payment break ends in less than 15 days and Biden has remained silent. For previous student loan forbearance extensions, student borrowers received longer notice. This could suggest that Biden does not plan to extend student loan relief. That said, the Department of Education recently asked student loan servicers to suspend sending student loan bills to borrowers. Here’s when the president extended every student loan payment break:
Position 1: On August 8, 2020, President Donald Trump extended the student loan payment break until December 31, 2020.
Position 2: On December 4, 2020, Trump extended the student loan payment break until January 31, 2021.
Expansion #3: On January 20, 2021, Biden’s first day as president, Biden extended the student loan payment break until September 30, 2021.
Expansion #4: On August 6, 2021, Biden extended the student loan payment break until January 31, 2022.
Position 5: On December 22, 2021, Biden extended the student loan payment break until May 1, 2022.
Position 6: On April 6, 2022, Biden extended the student loan payment break until August 31, 2022.
“Yes, [the student loan payment pause] should end at the end of this month,” U.S. Secretary of Education Miguel Cardona told CBS News. “Although I don’t have an announcement here today, I will let you know that we are having daily conversations with the White House, and borrowers will hear directly from us soon when a decision is made.”
Student Loan Forgiveness: Historic Student Loan Relief
Biden is also considering historic student loan relief through large-scale student loan forgiveness. Who Could Benefit From Student Loan Forgiveness? According to leaked internal Department of Education documents, the Biden administration is considering $10,000 in student loan forgiveness for all federal borrowers. Student loan forgiveness could include borrowers with Direct Loans, Parent PLUS Loans, Grad PLUS Loans, Perkins Loans, and FFELP Loans. Biden also assesses an income threshold of $150,000 for individuals or $250,000 for families. If the Department of Education has your income information, expect student loan forgiveness within 45 days. Alternatively, student borrowers could apply online and self-report their income, with student loan forgiveness possible in about 90 days. There is no guarantee that Biden will embrace broad student loan cancellation. However, since becoming president, Biden has canceled $32 billion in student loans through targeted student loan cancellation.
Student loans: next steps
Here’s what happens next if Biden cancels student loans or extends the student loan payment break. Biden could make a double announcement regarding the two policies before Aug. 31, which could give respite to borrowers worried about the ongoing Covid-19 pandemic and uncertain economic outlook. Biden is facing pressure from Republicans in Congress who have proposed a blockbuster new plan to cancel student loans. Republicans say Biden has canceled $400 billion in student loans — far too expensive for the federal government — and should end the student loan payment hiatus immediately. Despite all the uncertainty surrounding your student loans, your best strategy is to prepare a student loan repayment game plan. Neither student loan forgiveness nor student loan payment suspension is a long-term solution. Here are popular ways to pay off student loans and save money: