Democrats in Congress are demanding a timeline on student loan cancellation.
Here’s what you need to know — and what it means for your student loans.
Student Loans
In a letter to U.S. Secretary of Education Miguel Cardona, Rep. Ilhan Omar (D-MN) and 55 Democratic members of Congress want detailed answers on student loan cancellation, including:
- a comprehensive timeline on student loan cancellation;
- when student loans will be canceled; and
- confirmation that student loans will be canceled “no matter the effort or resources required.”
The members of Congress also reference “an expected executive order,” referring to President Joe Biden issuing an executive order to enact wide-scale student loan forgiveness. However, Biden has not indicated whether he will cancel student loans or if he would use an executive order to do so.
Student loan forgiveness: Biden said he plans to cancel student loans
The members of Congress also claim that Biden has “publicly stated that he plans to cancel student debt” and he has “reiterated that intention” in private meetings with members of the Congressional Progressive Caucus as well as the Congressional Hispanic Caucus. Despite these claims, the White House has denied that Biden has reached a final decision on whether to enact wide-scale student loan cancellation. Biden, who has canceled $25 billion of student loans, has supported $10,000 of student loan forgiveness. However, Biden has called on Congress to pass legislation to cancel student loan debt. In late April, Biden said he would decide within a few weeks, but that arbitrary deadline passed nearly a month ago. Omar and other progressive Democrats are leading a renewed push to encourage Biden to cancel $50,000 of student loans for borrowers.
Student loan cancellation: the details
The members of Congress make it clear that student loan cancellation isn’t as simple as canceling student loan debt. Rather, there are multiple, proactive measures that the Education Department must take in addition to student loan forgiveness. This includes, but isn’t limited to:
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- Student Loan Cancellation Details: Contact borrowers to explain the details of wide-scale student loan cancellation;
- Student Loan Servicers: Work with student loan borrowers and student loan servicers to ensure that all eligible borrowers have access to student loan forgiveness;
- Compensation: Modify the existing student loan servicer contracts to specify how student loan servicers will be compensated for student loan cancellation;
- Credit Reports: Work with credit reporting agencies to remove student loan debt information, including any information about student loan delinquencies or student loan default, from student loan borrower credit reports; and
- Income Cap: Explain how would an income cap on student loan forgiveness would work and whether borrowers have to submit proof of income; and
- Appeals Process: Allow student loan borrowers to appeal any determination that they are ineligible for student loan cancellation.
Student loans: next steps
The members of Congress raise claims that may differ with Biden’s public statements on student loan cancellation. That said, they raise important points on student loan forgiveness that the Biden administration will need to address if the presidents proceed with wide-scale student loan relief. Importantly, the members of Congress didn’t address the student loan payment pause, which ends on August 31, 2022. With student loan payments expected to restart soon, the letter didn’t include any questions about the Education Department’s preparedness to restart student loan payments. With inflation at a 40-year high, it’s unclear whether Biden will cancel student loans and risk increasing inflation, particularly before the midterm election on November 8. If you have student loans, your best next step is to evaluate all your options for student loan repayment based on your unique financial situation. Here are some smart ways to pay off student loans faster no matter what Biden decides:
- Student loan refinancing (lower interest rate + lower payment)
- Income-driven repayment (lower payment)
- Student loan forgiveness (federal student loans)
