Will The Biden Administration’s Loan Cancellation Plan Work This Time?
The President is taking another swing at his signature campaign promise by potentially canceling up to $20,000 in college loans for millions of Americans.
But will this attempt actually work? Or will it run into the same roadblocks and legal challenges as before?
Let’s review the latest student loan cancellation update and how it may affect you if it passes!
Biden’s New Plan: What’s Different This Time?
Like the initial plan struck down by the Supreme Court last year, the Biden administration still aims this plan at young voters critical to this November’s election.
But this time, the President’s new proposal made vital changes that may pass Congress without any issues. There will also be a standard 30-day window, through May 17th, for public feedback, which can help further fine-tune the proposal.
The new program would provide significant financial relief to over 25 million borrowers if it goes through.
Who Might Benefit From This Plan?
The main groups who can benefit from Preside Biden’s reforms include:
- Borrowers whose debt has increased way past their original balance and make $120,000 or less
- Graduate borrowers in repayment for 25 years or longer
- Those experiencing financial hardship
- Undergraduate borrowers who’ve been repaying their undergraduate loans for 20 years or more
For many students, loan balances could decrease or even get eliminated entirely. However, only time will tell if this reform will actually go through.
Who’s Opposed To The President’s Plan?
Many conservative-leaning officials view the proposal as blatantly unfair to those who paid their debt in full. They also believe it will leave taxpayers with the bill for reckless college student borrowing and raise the nation’s debt to a new all-time high.
In fact, Republican leaders openly threatened to wage legal war against the plan. Similar to the previous proposal, they will do whatever they can to block cancellation from happening.
That said, expect a massive in-fight among Congress and possibly another Supreme Court intervention to implement this law.
Will This Time Be Different?
A lot of uncertainty hangs over the President’s new scheme.
Past cancellation attempts have met fierce challenges, with courts stopping them in their tracks. With so much polarization around the issue, Biden’s team may well hit the same barriers as before.
The process could easily drag out for months with the public comment period and potential legal appeals. In short, while the scheme has a better shot of passing than previous attempts, don’t expect any of these reforms to come quickly.
What Borrowers Can Do While Awaiting Cancellation
Until the dust settles, student debtors float in limbo once again. It’s an all-too-familiar feeling by now.
But there are ways to help manage your monthly payments and student loan debt while you wait. Here are a few practical steps you can take:
- Enroll in auto-pay so you never miss a payment during the waiting period. Missed payments can be devastating to your credit score.
- Look into the Education Department’s other plans starting in July, such as the Income-Driven Repayment or SAVE plans.
- Building up your emergency fund gives you a much-needed financial cushion. It helps you stay caught up on your payments if something comes up.
- From deferment to loan forgiveness programs, there are many ways to reduce or cancel your debt if you’re having trouble. Talk to your servicer about alternatives to avoid going into delinquency.
Good news might soon be around the corner when you least know it. But until then, be patient and find alternatives to make your payments as manageable as possible.
The Bottom Line
Many Americans are still dreaming of being free from crushing student debt. And while it’s good to be optimistic about the President’s new plan, don’t expect anything until we see the final results.
If all goes well, millions of borrowers will never have to worry about another student loan payment in their lifetimes.
We’ll continue to update you as everything progresses, so keep an eye out for any important updates!
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