Don’t expect your student loan forgiveness next year either.
President Biden made a ton of campaign pledges to get elected, and some of them meant everything to aspiring students struggling to afford their college education. Among those promises, plans to double the maximum value of Pell Grants were outlined, along with a global reimagining of income-based repayment plans to reduce monthly payments. In the meantime, discussions were underway about canceling student loans, and Biden suggested waiving $ 10,000 in student loan debt per borrower at some point (if Congress sent him a bill).
It’s also worth noting that other Democrats, including Senators Elizabeth Warren and Chuck Schumer, have formally called on President Biden to cancel up to $ 50,000 in student loans per eligible borrower nationwide.
In the passionate announcement at the start of this year, Senator Warren said that by canceling up to $ 50,000 in federal student loan debt for borrowers through executive action, “President Biden can take the most effective executive action available to massively stimulate our economy, help narrow the racial wealth gap and remove that impossible burden on tens of millions of families. ”
Unsurprisingly, we are now months away from progress on this front. While this is certainly a bummer for people hoping for some or all of their student loan debt to be canceled, experts say you shouldn’t have high hopes for next year, either. We asked why, and here is what they said.
Student loan forgiveness is expensive
Mark Kantrowitz, student loan expert, author of How to Appeal for More College Financial Aid, says one of the biggest issues with canceling student loans is the price tag. In fact, he says some Democrats are reluctant to support a broad pardon program because of that factor alone.
“Forgiving $ 50,000 per borrower will cost over $ 1,000 billion. Even forgiving $ 10,000 per borrower will cost $ 377 billion,” Kantrowitz said.
Plus, just forgiving student loans from borrowers who owe $ 10,000 or less will cost $ 75 billion.
Unfortunately, adopting any student loan cancellation plan is a big deal when even a few Democrats can’t back it. Kantrowitz says this is because in the Senate pardon would require a budget reconciliation bill, as it is unlikely to garner the 60-vote super-majority required to invoke closure, thus avoiding the systematic obstruction.
“Since Democrats hold the Senate with the smallest of margins, every vote counts,” he said. “Every Democrat has a veto.”
Free community college failed
Remember how President Biden proposed Rebuild better did the legislation once have a free community college built into the package? This part of the bill was dropped earlier this year, mainly because there was not enough money or support for this kind of proposal.
According to independent academic consultant Thomas O’Hare of Go to college, there are too many compromises to be made to maintain the federal budget while funding other social programs.
The fact that the Biden administration had to drop its free community college proposal shows a real lack of support in this area.
There is no “real” plan for loan cancellation
Finally, remember that canceling student loans is just a concept right now, says Tiffany Welka, Financial Advisor and Certified Wealth Management Advisor at VFG Associates in Livonia, Michigan. In fact, lawmakers have yet to put pen to paper to come up with a legislative plan to make it happen.
Without a bill to write off student loans, this is as likely to happen as free trips to the moon. Sure, Senators Elizabeth Warren and Chuck Schumer appear to believe President Biden can write off $ 50,000 in student loan debt per borrower through executive action, but it remains to be seen if that’s the case – or even if President Biden would consider doing such a thing.
So what’s the next step?
Borrowers should accept that the student loan cancellation will not materialize in 2022, and maybe never. But, what should they push towards instead?
Dan Rosensweig, President and CEO of Chegg
, says he thinks private industry should do a better job of stepping in and helping ease this crushing debt burden.
“Businesses are one of the biggest beneficiaries of our education system and they should be part of the solution to realign the system,” he says. “We need an updated agenda for the global economy and companies must do more to influence, support and subsidize the training of their employees.”
Rosensweig says these efforts should not neither be taxed as a benefit. Instead, they should be given an incentive as they will ultimately benefit the economy.
“We believe that young Americans and their families deserve the opportunity to move forward,” he said.
While we all wait for private companies to help us ease the burden of student debt, there are other steps individuals can take as well.
For example, O’Hare says there are many payment relief options available, including income-based repayment options available to borrowers on federal student loans. These programs are perfect for those on low incomes and retirees living on a fixed income, he says.
In the meantime, those with private student loans may consider refinancing for a lower monthly payment, a lower interest rate, or both.
As we emerge from the federal loan freeze, O’Hare says he anticipates a brief and competitive rate surge as the limited number of lenders try to attract new borrowers to build their loan portfolios.
This could be a “potential big win for debt-ridden borrowers with strong credit or the availability of a creditworthy co-signer,” he says.
Another option is to see if your employer already offers forgiveness options, or even find a new employer that offers student loan debt repayments as a job benefit. Believe it or not, there are all kinds of companies out there that will pay off your student loans in exchange for your work.
Whatever you do, don’t wait for the government, business, or anyone else to write off your student debt. History has shown a lot of talk on the subject but not a lot of action. If you keep waiting for someone else to save the day, you could end up paying off your student loans longer than you need to.