Joe Biden has approved a new stimulus package—without blanket forgiveness of student loans.
Here’s what you need to know and what it means for your student loans.
President-elect Joe Biden backs a new $ 908 billion bipartisan stimulus package that would provide, among other benefits, $ 300 a week in improved unemployment benefits, $ 160 billion in state and local aid, loans to small businesses businesses and additional funding for schools, health care, airlines and transit authorities. According to New York Times, Biden said the stimulus package “wouldn’t be the answer, but it would be an immediate help for a lot of things, quickly.” However, one thing is notoriously missing from the bipartisan bill: student loan forgiveness. While the stimulus package includes $ 4 billion for student loans, the proposal does not include a student loan cancellation plan.
Here’s what that could mean for student loan cancellation and any potential student loan cancellation plans:
1. There are 3 ways to cancel student loans
There are 3 possible ways to cancel student loans:
- Congress cancels student loans in stimulus package
- Congress cancels student loans through stand-alone legislation
- Biden cancels student loans by executive order
This current stimulus plan is only a proposal. Despite being backed by a group of senators and moderate representatives, Senate Majority Leader Mitch McConnell (R-KY) is unlikely to back this stimulus package. McConnell wants the Senate to pass a $ 500 billion stimulus bill, which also doesn’t include a plan to cancel student loans. The bottom line is that if there is a stimulus package before the end of the year, it won’t include any student loan forgiveness. This is not surprising because Senate Republicans will not support a plan to cancel student loans for all borrowers, and Senate Republicans control the Senate. Leading Democrats such as Senatorial Minority Leader Chuck Schumer (D-NY) and House Speaker Nancy Pelosi (D-CA), who also back the stimulus proposal, can hope this compromise stimulus package will be spearheading new stimulus talks between Democrats and Republicans ahead of the year. -to finish.
2. Why is Biden supporting a no forgiveness student loan stimulus?
Some may wonder why Biden is supporting a no-forgiveness student loan stimulus package. Biden called on Congress to immediately cancel student loans and supported a student loan forgiveness of $ 10,000 for every student loan borrower in the wake of the Covid-19 pandemic. Why support legislation that does not include a key policy objective? There could be several reasons. First, Biden can view this stimulus package as a “first step” – immediate and essential financial relief. With stimulus talks stalled for months, Biden may see a bipartisan compromise as the best way forward to deliver economic stimulus now. Second, Biden is likely planning a further stimulus in the spring of 2021. So this stimulus package could be seen as flawed bridging funding to a potentially larger stimulus package in the spring. Currently, Biden supports the Heroes Act, the $ 2 trillion stimulus package drafted by House Democrats. If the next Congress passes the Heroes Act, or a similar stimulus package, it could include up to $ 10,000 in student loan forgiveness. Notably, House Democrats passed the Heroes Act earlier this year, but it only included a $ 10,000 student loan waiver for private student loan borrowers only.
3. Congress could cancel student loans through stand-alone legislation
Biden’s support for this new stimulus package doesn’t stop Biden from backing future stand-alone legislation that could cancel student loans. Biden called on Congress to cancel student loans. Therefore, a stimulus package is not the only way to cancel student loans. It is clear that direct economic stimulation is the top priority of the Biden administration. Whether it’s second stimulus checks, unemployment benefits, or other economic relief, Biden seems to focus on direct financial relief first.
4. A student loan cancellation plan doesn’t seem to be the top priority
That said, a student loan cancellation plan can be important, but it doesn’t seem like the top priority. This does not mean that student loans will not be canceled in the first 100 days or the first year of a Biden presidency. There are many factors that can influence any student loan cancellation plan. First, the makeup of Congress will play a direct role in any potential student loan cancellations. The outcome of the two Senate races in Georgia will determine the balance of power in the US Senate. If Republicans retain control of the Senate, Congress is less likely to pass legislation to cancel student loans. If Democrats win both Senate seats, there might be a clearer path to canceling student loans. Whatever the outcome, among the many economic stimulus choices, it appears that several other economic priorities, such as unemployment benefits, state and local aid, and small business loans, could take priority over cancellation. student loans, regardless of which party controls Congress. Again, this does not mean that there will be no student loan forgiveness.
Second, the health of the economy next year could also affect Congress’ decision to cancel student loans. If there is an economic recovery, or signs of an economic recovery, Congress may be less willing to write off student loans, or at least less willing to write off a larger amount of student loans. For example, Senator Elizabeth Warren (D-MA) and Schumer want Biden to write off up to $ 50,000 in student loans. Considering the total cost to federal taxpayers, Congress or Biden might be less willing to write off student loans of up to $ 50,000 if the economy shows signs of life.
Pay off student loans
At the end of the line : Don’t expect a student loan forgiveness. That’s not to say it won’t happen, but it doesn’t seem like the top priority. If a widespread student loan forgiveness occurs, consider it a pleasant surprise. In the meantime, make sure you know your options for paying off student loans. Here are 3 ways to help pay off student loans, which are free of charge: