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If President Joe Biden doesn’t enact wide-scale student loan cancellation, here are 5 reasons why.

Here’s what you need to know — and what it means for your student loans.

Student Loans

Biden is actively considering whether to cancel student loans for millions of student loan borrowers. If Biden forgives student loans, supporters say it’s the most impactful act that Biden can do as president. Student loan cancellation, according to supporters, will stimulate the economy, reduce disparities, and help student loan borrowers afford to get married, buy a home, save for retirement and start a business. For student loan borrowers looking for a fresh start, it’s essential student loan relief. While Biden has cancelled $17 billion of student loans, he has remained skeptical about broad student loan forgiveness. Here are 5 reasons that Biden could decide not to enact wide-scale student loan cancellation.

1. Most people don’t have student loans

Most people don’t have student loans. There are 45 million student loan borrowers and approximately 250 million adult Americans. This means approximately 20% of adult Americans have a student loan, while the remaining 80% either no longer have student loans or never went to college. Since the vast majority of Americans don’t have student loans, the Biden administration could choose to focus on policy priorities that impact a larger amount of the population. Supporters of student loan cancellation argue that numbers alone shouldn’t dictate the effectiveness of student loan relief. (No, Biden is not canceling most student loan debt).

2. Student loan forgiveness is wealth redistribution

Opponents of wide-scale student loan forgiveness say it’s classic wealth distribution. If Biden forgives student loans for most or all student loan borrowers, critics say that college-educated Americans will receive financial relief at the expense of those who didn’t attend college. On average, college graduates can earn $1 million more over their lifetime compared to others who don’t hold a college degree. Yes, some college graduates may be struggling financially. However, critics say it’s unfair to make someone who didn’t go to college or who couldn’t afford to go to college subsidize someone, who on average, can generate more income as a result of a college degree. Plus, approximately half of the $1.7 trillion of outstanding student loan debt is held by borrowers with graduate school student loans. On average, these borrowers earn higher income than college graduates without a graduate degree. If all student loan borrowers get student loan relief, it’s possible that wealthier student loan borrowers such as doctors and lawyers could benefit disproportionately.

3. Student loan forgiveness is expensive

Student loan forgiveness is expensive. The cost of student loan cancellation is dependent upon two primary factors: how much student loan is forgiven per borrower and how many student loan borrowers qualify. For example, Sen. Elizabeth Warren (D-MA) and Senate Majority Leader Chuck Schumer (D-NY) have proposed $50,000 of student loan cancellation for borrowers. If implemented, their plan could cost approximately $1 trillion. (Biden confirms he won’t cancel $50,000 of student loans—5 key takeaways). Biden’s plan to cancel up to $10,000 of student loan borrowers could cost $350-$400 billion. Are there ways to lower these amounts? Yes. (Student loan forgiveness: who could qualify under Biden’s plan). For example, Biden could limit student loan forgiveness to federal student loans only or college student loans only. Biden also could impose an income threshold. The lower the income threshold, the lower the overall cost of student loan forgiveness. The downside of imposing limitations is that fewer student loan borrowers get student loan relief. (3 ways Biden could cancel student loans).

4. Republicans may block student loan cancellation

Republicans may block student loan cancellation. While Republicans don’t control Congress, Republicans could stand in the way of broad student loan forgiveness. For example, five Republican U.S. senators this week introduced The Stop Reckless Student Loan Actions Act in Congress. The proposed legislation would, among other things, end the current student loan payment pause and prohibit the president from canceling student loans due to a national emergency. If the president proceeds to cancel student loans, the proposal would grant Congress the legal authority to disapprove of the president’s action. Republicans and other critics of widescale student loan forgiveness also could seek a legal injunction, which could prevent the implementation of student loan cancellation.

5. Biden doesn’t have the legal authority for student loan cancellation

Biden could decide that he doesn’t have the legal authority for student loan cancellation. (That said, attorneys general say Biden has authority to cancel student loans for all federal borrowers). The president has doubted that he has the requisite executive power to enact wide-scale student loan cancellation without further congressional authorization. Speaker of the House Nancy Pelosi (D-CA) agrees, and has said that only Congress has the power of broad student loan forgiveness. Warren and Schumer disagree, and they have argued that the president has existing authority in the Higher Education Act of 1964. That said, Biden may decide that canceling student loans broadly through an executive order may not be permissible. Alternatively, Biden could seek to implement student loan cancellation through the regulatory process. However, even if Biden proceeds to cancel student loans, it’s expected that opponents could file lawsuits, which could leave borrowers in student loan limbo.

Student loans: next steps

Biden potentially could cancel student loans for millions of student loan borrowers. That said, there are no guarantees that Biden will proceed with wide-scale student loan forgiveness. It’s also unclear how much student loan debt Biden would cancel and how many student loan borrowers could qualify. Temporary student loan relief is scheduled to end on August 31, 2022. That’s why it’s essential to implement a game plan for student loan repayment based on your financial circumstances. Here are several ways that student loan borrowers are paying off student loans to save money:

Student Loans: Related Reading

Biden confirms he won’t cancel $50,000 of student loans—5 key takeaways

3 ways Biden could cancel student loans

Student loan forgiveness: who could qualify under Biden’s plan

Student loan forgiveness: 5 key takeaways from major announcement

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