Attempts to cancel student debt have been in motion for years. Throughout the 2020 election, President Biden campaigned on the promise of loan forgiveness. While declaring that his administration would forgive up to $10,000 in federal student loans, he also stated his intention to forgive all student loans for students earning less than $125,000 per year who graduated from public colleges, historically black colleges or universities (HBCUs), and minority-serving institutions (MSIs).
Expectations for loan forgiveness have been high, and they reached fever pitch in March, when President Biden unveiled his $1.8 trillion “American Families Plan.”
Given the enormous size of the bill, many Americans anticipated the inclusion of loan forgiveness. However, while the American Families Plan provided over $300 billion in support for higher education, none of the money will be directly applied to student loan forgiveness.
Today, over 43 million Americans remain saddled with $1.7 trillion in student debt. Though loan forgiveness remains part of the national conversation, most college graduates are nevertheless expecting to resume their monthly payments starting February 1, 2022.
The Current State of loan Forgiveness
Loan forgiveness remains a top priority for high-ranking Democrats across the country. As of late July, Senate Majority Leader Chuck Schumer amplified his party’s aims to provide up to $50,000 in loan forgiveness:
“With the stroke of a pen, [President Biden] can follow through on his promise and bring life-changing relief for tens of millions of Americans struggling with student loan debt.”
If only it were so simple.
According to House Speaker Nancy Pelosi, “People think that the President of the United States has the power for debt forgiveness,” she said. “He does not. He can postpone, he can delay, but he does not have that power.”
Instead, Pelosi emphasized that such action can only be enacted through Congress.
The President himself has questioned his executive authority to forgive student debt, and by his command, the U.S. Department of Education and Justice Department have been reviewing the legality of such an action.
If the Education and Justice departments determine the President does not have the authority to forgive student loans, the matter will then officially transfer to Congress.
Expect Senators Schumer and Warren to continue the call for loan forgiveness throughout the fall. Even if such legislation were agreed upon, however, the likelihood that all federal loans get canceled remains slim, and a number of eligibility requirements will likely be installed.
While it seems increasingly unlikely that President Biden will authorize a $50,000 forgiveness policy on his own, he recently extended the loan payment pause and interest waiver moratorium through January 31, 2022 (beyond its original expiration date this fall).
Fortunately, the American Families Plan legislation — if passed — will provide other essential forms of support to families in need.
What This Means For Borrowers
President Biden’s relief package could help reduce future student loan debt in two ways: first, by providing two years of tuition-free community college, “so that every student has the ability to obtain a degree or certificate.”
Secondly, it would increase the maximum Federal Pell Grant by $1,400 (thus increasing the average Federal Pell Grant by about $900). Such grants are especially influential in helping low and moderate-income students attend college and reduce the burden of debt.
Though these steps are undoubtedly positive, many college-bound families that don’t receive such benefits must continue to plan ahead. While it’s undoubtedly tempting to hold out for potential student loan forgiveness (and progressive policies that may make higher education considerably more affordable or even free), the current debt crisis remains a sobering call to action.
The numbers speak for themselves: while the average borrower holds a debt balance of $38,792 upon graduation, women (and particularly women of color) enter the workforce with even higher levels of debt.
The Power of Planning
While federal help may indeed be coming, such hopes must not distract Americans from shopping smarter for college at the outset. As the cost of education continues to rise, families deserve to understand exactly what they’re paying (and what they’re receiving in return). To that end, college-found families should know what their graduating son or daughter will earn on a one, five, and ten year basis.
At College Aid Pro™, our tools instantly deliver that information and allow families to compare institutions on a granular level. Our state-of-the-art software reveals dollar-specific numbers and breakdowns of every school on your client’s shortlist, so families can make truly informed college decisions, have confidence in their investment, and not be beholden to debt decades after graduation.
For years, such detailed planning required days and even weeks of research. With College Aid Pro™, you can get all the answers you need in a matter of minutes.
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