Will President Donald Trump cancel your student loans?
Here’s what you need to know—and what could happen next.
Sen. Elizabeth Warren (D-MA) and Senate Minority Leader Chuck Schumer (D-NY) have made an offer to Trump—right before the presidential election—that would empower him to cancel up to $50,000 of student loan debt for each borrower in the U.S. Warren and Schumer argue that student loan forgiveness would stimulate the economy, reduce inequality and lower income disparity. Warren has argued that a president—through the Secretary of Education—has the power to cancel student loan debt under the Higher Education Act. However, others argue that only Congress has the power to cancel student loans. According to the latest student loan debt statistics, there is approximately $1.6 trillion of outstanding student loan debt, more than 90% of which federal student loan debt. If Trump forgives student loan debt, it would be federal student loan debt that is owned by the federal government (rather than private student loan debt, which is owned by private lenders or investors, or other federal loans such as Perkins Loans and FFELP loans not owned by the federal government).
So, will Trump cancel student loan debt? Here is the likelihood of each option, contingent upon Congress passing the proposal.
1. Trump cancels student loan debt
One possibility is that Trump cancels student loan debt. This is a low probability option, since Trump and Secretary of Education Betsy DeVos have not supported widespread student loan forgiveness. That said, it’s an election year, and anything is possible.
2. Trump doesn’t cancel student loan debt
Another possibility is that Trump effectively ignores the resolution and doesn’t cancel student loan debt. This is the likely outcome. Why? Trump and DeVos have made it explicitly clear that widespread student loan forgiveness is not the focus. Similarly, Republicans in Congress also don’t support widespread student loan debt forgiveness for every student loan borrower. However, Trump supports student loan forgiveness through income-driven repayment plans. At this stage, Warren and Schumer have proposed legislation. However, Congress likely will not pass this legislation—especially before the election on November 3. There have been multiple proposals for student loan forgiveness during the Trump administration. However, Congress didn’t pass any legislation that would forgive student loans for every borrower, so the president could not sign any legislation. Plus, Congress is focused on finalizing a continuing resolution to fund the government after September 30. Most members of Congress also are expected to spend most of October campaigning for re-election. There is also the looming possibility that Congress passes a stimulus package before the election, although that’s looking increasingly unlikely. At this juncture, a continuing resolution and potential stimulus deal would take precedent over a student loan forgiveness resolution.
Trump: student loan relief
Even if Trump doesn’t cancel student loans, Trump has still enacted student loan relief. In the wake of the Covid-19 pandemic, Trump has helped millions of student loan borrowers defer student loan payments through December 31, 2020. This includes both student loan relief under the Cares Act (the $2.2 trillion stimulus package that Congress passed in March) and through executive action. Earlier this year, Trump paused federal student loan payments, stopped the accrual of student loan interest for federal student loans and halted the collection of federal student loans in default. Subsequently, Trump extended this student loan relief through December 31.
This student loan relief helped millions of borrowers manage their finances during a challenging health crisis and economy. That said, it’s important to understand that even with this student loan relief, your student loan balance will not disappear. Consider this student loan deferral, not student loan forgiveness. You will still owe the same student loan balance and your same interest rate effective January 1, 2021.
That’s why it’s important to get a student loan repayment plan to pay off student loans faster. You can also consider student loan refinancing, which can help get you a lower interest rate and save money. This student loan refinancing calculator shows you how money you can save when you refinance student loans.
Does Biden support student loan forgiveness?
Joe Biden supports student loan forgiveness, but doesn’t support cancelling $50,000 of student loan debt for every borrower. Biden has indicated his support to cancel up to $10,000 of federal student loan debt for borrowers as part of a Covid-19 plan. Biden also has proposed a student loan plan to make two- and four-year public colleges tuition-free for families who earn less than $125,000. Biden also supports cancelling student loan debt for undergraduate borrowers from public colleges and universities as well as from private Historically Black Colleges and Universities and Minority-Serving Institutions and earn less than $125,000 annually. Biden would simplify the Public Service Loan Forgiveness program, whereas Trump has proposed to eliminate public service loan forgiveness. Therefore, even if Congress passed this resolution (which is unlikely in this current Congress), there’s no guarantee that Biden, if elected president, would support cancelling up to $50,000 of student loan debt for every borrower.