What Does Biden Have to Do to Cancel Student Loans?
Updated May 23, 2023 • 5 min read
There was hope that President Joe Biden's election would quickly lead to wide-scale student loan forgiveness, but the buzz is wearing off.
Little progress has been made in the past few months, leaving questions about what, if anything, will happen.
Student loan debt is a crisis in the United States. According to EducationData, about 43 million student borrowers owe an average of $39,351 each and will spend the next 20 years paying off their debt.
Student debt has far-reaching negative impacts, such as disproportionately impacting women and people of color and causing wealth gaps for millennials. Biden campaigned on canceling and reforming student debt, so expectations for wiping the slate clean are high.
While he is sticking by his promises to address the issue, it appears there isn't a quick fix for the student debt crisis. We looked into what's holding up the process and what to expect down the road.
What's the Latest?
The Biden administration is still working on broad student loan debt forgiveness, but the process is at a standstill.
President Biden wants Congress to draft a bill that would cancel up to $10,000 in federal debt per borrower. Instead, ranking members of Congress are pressuring Biden to use his executive authority to cancel student debt so that borrowers can avoid tax liability.
Biden is unsure he has that kind of presidential power, but has asked the Department of Education to look into the matter. In March, the White House announced a legal review that would determine the following:
- If the president has the authority to cancel student loans without congressional approval;
- Recommendations for student loan cancellation;
- Different ways to implement student loan relief to supplement student loan cancellation;
- The amount of student loan debt to cancel; and,
- Who is eligible for student loan cancellation.
The legal review was supposed to be finished within a few weeks. But it hasn't materialized, and the administration has made no announcements regarding broad student loan cancellation.
When Will Student Loans Be Forgiven?
It's unclear when — or even if — broad student debt cancellation will occur, but some signs indicate that it won't be anytime soon.
Biden didn't mention any plans to tackle student debt when he addressed Congress in April. The Biden administration also dropped student loan cancellation from the latest infrastructure package and the president's budget.
How Much Student Loan Debt Will Biden Cancel?
Biden is sticking with his proposal to cancel $10,000 for every borrower with federal student loan debt. He has so far rejected calls by some legislators to forgive as much as $50,000.
Biden explained his position in an interview with The New York Times, saying, "The idea that you go to Penn and you're paying a total of 70,000 bucks a year and the public should pay for that? I don't agree."
Though the amount of debt that will be canceled is still up for debate, both figures would make a considerable impact. New data from the Department of Education shows 15 million borrowers will be debt-free if $10,000 is forgiven, and 36.1 million will be debt-free if $50,000 is forgiven.
Biden also continues to support additional student loan forgiveness if borrowers meet the following criteria:
- If you attended a public college or university.
- If you attended a private, historically Black college or university or another minority-serving institution.
- If you took out loans for undergraduate tuition.
- If you earn less than $125,000.
Has Any Student Debt Been Forgiven?
Biden has canceled about $3 billion in student loan debt, though that's just a drop in the bucket compared to the outstanding debt of $1.56 trillion.
So far, the debt cancellation has been a targeted effort to help certain groups of people rather than wide-scale cancellation. A few examples of this include:
- $1 billion in canceled student debt for 72,000 student loan borrowers defrauded by schools engaging in misconduct or violating certain laws.
- $1.3 billion in canceled student debt for 41,000 borrowers with total and permanent disability.
- $500 million in canceled student debt for 18,000 borrowers under the borrower defense loan discharge rule.
When Will Loan Payments Resume?
Student loan borrowers can breathe a sigh of relief — for now. The pause on federal student loan payments has been extended until Jan. 31, 2022.
However, there's some bad news. The Education Department announced it will be the "final extension" of the student loan payment freeze. Once the freeze ends, loan payments, interest accrual, and collections on defaulted loans will resume as it did before the pandemic.
But several recent developments could indicate that millions of borrowers are not ready to resume payments.
FedLoan Servicing, a student loan provider, announced in June that it plans to suspend its federal student loan program. The decision will impact 8.5 million borrowers, whose accounts will need to be transferred to other student loan servicing companies.
A survey by Student Debt Crisis and Savi also found that 90% of student loan borrowers do not feel ready to start repaying their loans this fall.
At a public event in May, Secretary of Education Miguel Cardona said, "We're looking at it. Obviously, we're going to always take the lead from what the data is telling us and where we are as a country with regards to the recovery of the pandemic. [A further extension] is not out of the question."
Header Image Credit: Cindy Ord / Stringer | Getty Images
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