Cancel student loans? Now, it might depend on that one thing.
Here’s what you need to know.
There has been growing hope for the cancellation of the student loan during the new Biden administration. These calls, however, are not new. Over the past two years, there have been several calls to cancel student loans:
- Bernie Sanders: Cancel all student loans, including federal student loans and private student loans.
- House Democrats: Write off $ 30,000 in student loans.
- Senate Democrats: Write off $ 10,000 in student loans.
- Elizabeth Warren: Cancel billions in student loans
- Joe Biden: Cancel $ 10,000 in student loans (for borrowers affected by the coronavirus).
There were other proposals in Congress and during the election campaign as well. So what happens next? Will You Get A Student Loan Discount?
It really depends on one thing.
Student loan forgiveness
The cancellation of the student loan really depends on one thing: who controls the United States Senate. Why? Biden may have won the presidency. However, who wins the US Senate, in many ways, will have a significant influence on the direction of public policy over the next two years. Georgia’s run-off election will determine whether Democrats, led by Sen. Chuck Schumer (D-NY), will take control of the Senate, or whether Republicans, led by Sen. Mitch McConnell (R-KY), will retain control .
If Democrats win the US Senate
- If Democrats win, Schumer will push legislation to cancel student loans.
- It’s unclear which of these student loan proposals Schumer would ultimately approve.
- For example, Schumer could support student loan cancellation up to $ 10,000 for each borrower.
If Republicans win the US Senate
- If Republicans retain control of the Senate, canceling student loans is unlikely to become law.
- Senate Republicans have generally not supported plans to cancel student loans. McConnell, as Senate Majority Leader, can dictate which bills go to the Senate. Student loan cancellation likely won’t be one of them.
- Senate Republicans could still support other bipartisan student loan laws, but generally want to limit federal spending (and canceling student loans, in fact, is a form of federal spending).
Cancel student loans by decree?
If Republicans retain control of the US Senate, the next question is what other options, if any, do Democrats have for canceling student loans. The basic approach to canceling student loans is through congressional legislation. The US Constitution grants the legislature (Congress) the power to make laws, which includes federal spending. Without congressional approval, there is no clear path to canceling student loans. Some have argued that Congress is not the only branch of government that has the power to write off student loans. They think the president can use executive action to cancel student loans. Warren and others have defended this position, implying that Biden could cancel student loans without Congressional approval. However, this is not clear from a legal point of view.
Hypothetically, suppose Republicans control the Senate, Biden uses executive action to cancel student loans, and Biden does so despite Senate Republicans’ objection. The president has the power to issue decrees. The question, however, is whether a president has the power to cancel student loans through executive action. It is possible that this hypothetical scenario could lead to legal challenges, including a temporary injunction to suspend all student loan forgiveness.
Ultimately, if there is a student loan forgiveness, the federal government (taxpayers) foot the bill. While student loan borrowers would like Congress or Biden to forgive them for their student loans, not everyone (including many Republicans) supports this policy. If Democrats win the Senate, the path to at least one student loan forgiveness may become easier. However, if Republicans win, don’t expect a student loan forgiveness just because Biden is president. So Democrats in Congress could support the cancellation of student loans. Biden could support the cancellation of the student loan. However, the only thing that determines the outcome might be who becomes the next Senate Majority Leader.
Pay off student loans
Whether Congress or Biden act to cancel student loans, it’s unclear how and when that might take shape. In the meantime, get ready and come up with a student loan game plan. Here are some great places to start paying off student loans, all of which are zero-fee:
Student loans: reading
Elizabeth Warren to Joe Biden: Canceling Student Loans
Should You Refinance Student Loans Now?