This has been President Joe Biden’s approach to student loan cancellation.
Here’s what you need to know — and what it means for your student loans.
Since becoming president in January, Biden has cancelled $3 billion in student loans. Biden has been focused on targeted student loan cancellation, which means that Biden has cancelled student loans for certain constituent groups that have a specific and indentifiable reason to get student loan cancellation. In some cases, these student loan borrowers got full student loan cancellation, and in other cases they got partial student loan cancellation. For example:
- Biden cancelled $500 million of student loan debt for 18,000 student loan borrowers under the borrower defense to student loan repayment rule.
- Biden cancelled $1 billion of student loans for 72,000 student loan borrowers.
- Biden cancelled another $1.3 billion of student loans for 41,000 borrowers with total and permanent disability.
- Biden granted student loan relief for 1.1 million student loan borrowers who defaulted on their FFELP Loans.
Here are 3 reasons why Biden has focused on targeted student loan cancellation:
1. Targeted student loan cancellation is specific and measureable
Targeted student loan cancellation is specific and measureable. Unlike wide-scale student loan cancellation — which cancels student loans for a large cross-section of student loan borrowers based on loan type or income, for example — targeted student loan cancellation is tied to a particular economic or legal wrong, or seeks to address another specific, societal wrong. When Biden cancelled his first $3 billion of student loans, he can clearly explain why student loans were cancelled in each specific case. This doesn’t mean wide-scale student loan cancellation couldn’t fit an “economic wrong” or “societal wrong,” but it’s a harder sell as a matter of public policy compared to targeted student loan cancellation. This may be one reason that Congress has not passed any legislation for wide-scale student loan cancellation.
2. Targeted student loan cancellation is based on the law
Targeted student loan cancellation is based on clear, existing and unambiguous law. There’s no question that cancelling student loans based on total and permanent disability or the borrower defense to repayment rule are clearly-defined rules available to the Biden administration to cancel student loans debt. In comparison, the legal basis for wide-scale student loan cancellation is arguably ambiguous. For example, Senate Majority Leader Chuck Schumer (D-NY) and Sen. Elizabeth Warren (D-MA) have argued that the Higher of Education Act of 1965 provides Biden with unilateral authority to cancel student loans through an executive order. They cite Section 432A in the Higher Education Act of 1965 as proof that the U.S. Department of Education can cancel student loans because the Higher Education grants the Education Department authority “to modify, compromise, waive, or release any right, title, claim, lien, or demand, however acquired, including any equity or any right of redemption.” However, the statute doesn’t explicitly state that the president or U.S. Department of Education can unilaterally cancel every student loan borrower’s student loans without further congressional authorization. Even if Biden proceeded to cancel hundreds of billions of dollars of student loans, legal challenges are likely. Further, courts are unlikely to allow one branch of government to act unilaterally based on an arguably ambiguous text.
3. Targeted student loan cancellation is less costly for taxpayers
Student loan cancellation doesn’t come cheap. Depending on the amount of wide-scale student loan cancellation, estimates have been pegged from $400 billion to $1 trillion. There also have been concerns about who benefits from student loan cancellation. New research says that student loan cancellation could benefit the wealthy more than low income student loan borrowers. Of course, the amount of student loan cancellation is dependent on several factors, including how much student loan debt, how many student loan borrowers, and other limiting factors like income and loan type, for example. By employing targeted student loan cancellation, Biden has saved taxpayers money. Opponents of targeted student loan cancellation say it doesn’t go far enough: not enough student loan borrowers and not enough student loan debt has been cancelled. Opponents also say that student loan cancellation will stimulate the economy because student loan borrowers who get student loan forgiveness will spend their money elsewhere in the economy. Against the backdrop of student loan cancellation, however, Biden is managing an economic recovery from the Covid-19 pandemic. There are multiple moving parts from stimulus checks to infrastructure spending. The question is how student loan cancellation fits in that larger puzzle, and if so, how much money to allot to student loan cancellation as Biden helps American recover economically.
Student loan cancellation: next steps
Will your student loan get cancelled? Yes, it’s possible. Is Biden finished with student loan cancellation? Likely no. The question is what student loan cancellation will look like in the future. Will there be wide-scale student loan cancellation, targeted student loan cancellation, or both? At a minimum, there will likely be more targeted student loan cancellation. To date, there has been no wide-scale student loan cancellation from Congress or the president. While the Education Department is reviewing legal options for student loan cancellation, it’s been nearly four months since that process started. It’s unclear when the Education Department will provide the president with a non-binding legal opinion on wide-scale student loan cancellation, whether the president can lawfully enact wide-scale student loan cancellation, or whether Congress will need to act. Last month, the Education Department held hearings on student loan cancellation and student loan forgiveness, including ways to improve these programs to help more student loan borrowers get student loan relief. There is also a major focus within the Biden administration to ensure that the existing student loan forgiveness programs work efficiently and help get student loan cancellation to the student loan borrowers who qualify.
What does this mean for your student loans? There are no guarantees for wide-scale student loan cancellation. Targeted student loan cancellation is possible if you qualify, but most people won’t qualify. Therefore, make sure you have a student loan game plan for your unique financial situation. Here are some smart options to consider for your student loans: