Anxious Americans with student loans want answers from President Joe Biden.
For the last two and a half years, Biden has promised millions of Americans saddled with student loans that more help is coming. But he has yet to address his campaign promise to forgive $10,000 of student debt per borrower, or whether regular payments will restart at the end of August when the current pause is set to end.
Many have grown frustrated and anxious with the constant uncertainty surrounding student loan debt. The student loan payment pause has been extended six times, some of which were last-minute extensions.
“The student loan payment pause is not a solution to the larger issue that is facing student loan borrowers,” says Aoife Delargy Lowe, vice president of law school engagement and advocacy at Equal Justice Works. “If folks are thrown back into repayment on federal student loans, it could seriously threaten the financial stability of so many Americans with student debt.”
The good news is student loan borrowers will likely get some clarity in August. In the coming weeks, you can expect Biden to make three major decisions that will directly affect your student loans:
Decision 1: Pause student loan payments
Since March 2020, Americans with student debt have been able to take a break from making monthly payments and use the extra cash to save up, pay down high-interest debt, and chip away at private student loans.
The student loan payment pause ends Aug. 31, and President Biden will need to announce sometime before then if he plans to extend the student loan payment pause.
If the student loan payment pause ends next month as scheduled, then student loan payments will restart beginning on Sept. 1, though several signs indicate that it’ll likely get extended again. Experts point to the upcoming midterm elections, a possible looming recession, and the fact that borrowers have not received any information about the restart of repayment.
“The student loan moratorium will almost certainly be extended for a seventh time, even if President Biden announces some student loan forgiveness,” says higher education expert Mark Kantrowitz. “Restarting repayment two months before an election is political suicide.”
Robert Farrington, CEO of The College Investor, says borrowers will likely see an extension until Jan. 31, 2023, but “it’s uncertain” as to whether it will be the last one.
Decision 2: Wide-Scale Student Loan Forgiveness
President Biden is reportedly nearing a final decision on wide-scale student loan forgiveness, with multiple outlets reporting he could make an announcement by the end of August.
During the 2020 presidential campaign, Biden voiced support several times for canceling at least $10,000 of federal student loan debt per borrower. However, Democrats and Republicans are divided on whether student loans should be forgiven on a large scale.
Some have called on Biden to cancel upwards of $50,000 in student loans per borrower, whereas Republicans have shut down the idea of student loan forgiveness entirely. Republicans just introduced student loan legislation as an alternative to Biden’s student loan forgiveness, which proposes to end the student loan payment pause and eliminate public service loan forgiveness, among other initiatives.
It’s also still unclear whether the President has the legal authority to cancel student loan debt with executive action or if he would need approval from Congress. As of now, there is no legislative or executive plan to broadly forgive federal student loan debt but many expect Biden to address the topic in the coming weeks.
With inflation at an all-time high, forgiving student loans on a large scale has the potential to increase the buying power of a significant number of Americans at a time when policy makers are looking to tamp down consumer demand. check out the Recession Help Desk with our friends over at CNET for more money advice during these uncertain times (CNET like NextAdvisor is owned by Red Ventures).
Decision 3: Public Service Loan Forgiveness Waiver
President Biden will need to decide how to address the limited waiver for public service loan forgiveness (PSLF), which expires on Oct. 31. Almost a year ago, the Biden administration relaxed the rules for public service loan forgiveness, which was a “massive step in the right direction,” according to Lowe.
Public service loan forgiveness is known as a difficult program to qualify for, so the temporary waiver allows borrowers to qualify for it more easily. However, many are wondering if the deadline will be extended past Oct. 31. If Biden pushed the deadline back, more borrowers might be able to take advantage of the limited waiver.
What Biden’s 3 Decisions Mean for Student Loan Borrowers
These three major decisions are right around the corner and could have a substantial impact on student loan borrowers. While signs are pointing to another extension, it’s still unclear which policies, if any, Biden will implement.
“The president can continue to extend the pause as long as there is a state of emergency, so as long as that continues to be extended, so can the payment pause,” says Farrington.
In the meantime, experts say student loan borrowers should tread with caution and assume that payments resume at the end of August unless we hear otherwise. You can position yourself to be prepared for whatever the president decides by assessing your student loan debt, setting reminders for yourself, and finding what forgiveness programs you are eligible for.
If you aren’t eligible for forgiveness, you should identify the best and cheapest way to pay back your student loans and start making a budget. Also, consider signing up for autopay if you haven’t already as it makes it much less likely that you’ll be late with a payment. Most importantly, update your contact information with your loan servicer so you can stay up to date on the evolving student loan situation.
“Borrowers should use this time to identify the resources that set them up for success with a plan that makes them confident and comfortable with their finances,” says Tony Aguilar, founder and CEO of Chipper, a student loan repayment app, “so that they ‘re prepared no matter what happens.”