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Student loan cancellation sends these three messages.
Here’s what you need to know.
Now that student loan relief has been extended until January 31, 2022, attention now turns to whether student loans will be cancelled. Sen Elizabeth Warren (D-MA) and Senate Majority Leader Chuck Schumer (D-NY) say student loan relief is necessary to help millions of student loan borrowers avoid student loan default. Simply put, Warren said student loan borrowers need more time to prepare for student loan repayment. They say student loan cancellation is the next logical step. Opponents of wide-scale student loan cancellation say that nearly two years of no federal student loan payments, combined with more than $110 billion of student loan cancellation, is enough student loan forgiveness. They argue that after the expiration of student loan relief, there isn’t a need to cancel more student loan debt. Student loan cancellation (and the lack thereof) sends a distinct message to student loan borrowers, advocates, other stakeholders and the general public. Student loan relief without wide-scale student loan forgiveness also has a separate meaning. Here are 3 messages that student loan cancellation would send (and 3 messages if wide-scale student loan forgiveness doesn’t happen):
1. Student loan cancellation means you can unlock the shackles of student loan debt
Student loan cancellation means that millions of student loan borrowers can get a fresh financial start. With less or no student loan debt, student loan borrowers of all ages can have additional money to invest in their future or in their local communities. From stimulating the economy and starting a family to buying a home and investing in retirement, student loan cancellation could be a financial game changer for millions of people.
2. Student loan cancellation means that student loan borrowers who are struggling have a voice
Student loan cancellation sends a message to student loan borrowers who are struggling that they have a voice. If you’re struggling with student loan debt, it’s common to feel marginalized. You can feel trapped and unsure where to turn for financial help. Student loan forgiveness tells these student loan borrowers that their representatives are listening to their concerns and are actively addressing the problem.
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3. Student loan cancellation helps to address inequality
Student loan cancellation also sends a message that inequality in higher education, including student loan borrowing and access to higher education, among other concerns, should be addressed immediately. Warren and Schumer have highlighted these issues, including economic, racial and gender inequality, and wide-scale student loan forgiveness could be a first step.
No student loan cancellation also sends 3 messages
There is no guarantee that there will be wide-scale student loan cancellation. President Joe Biden may not have legal authority to enact wide-scale student loan cancellation. Congress doesn’t want to pass wide-scale student loan forgiveness. Where does that leave student loan borrowers who are hoping for student loan forgiveness? While student loan forgiveness may not happen, Biden has moved aggressively to provide student loan relief for millions of student loan borrowers. As president, Biden has cancelled $3 billion of student loans. He has extended student loan relief twice. Among other accomplishments, Biden has committed to reform the Public Service Loan Forgiveness program, make income-driven repayment plans simpler, and hold student loan servicers accountable so that student loan borrowers get a fair shake. If there is no student loan cancellation, it also can send these 3 messages:
No student loan cancellation means student loan borrowers have other options to get student loan forgiveness
No student loan cancellation doesn’t mean student loan borrowers can’t get any student loan forgiveness. Rather, no student loan cancellation means there won’t be a one-time event that cancels some or all student loans for a large group of student loan borrowers at once. There are multiple programs available to help student loan borrowers get full federal student loan forgiveness after meeting certain requirements. Student loan borrowers can get student loan forgiveness through an income-driven repayment program such as IBR, PAYE, REPAYE and ICR after 20 or 25 years of student loan repayment. There is also student loan forgiveness available through the Public Service Loan Forgiveness program for student loan borrowers who work for a qualified public service or non-profit employer, make 120 qualifying student loan payments and meet other requirements.
No student loan cancellation means that student loan borrowers got sufficient significant student loan relief
No student loan cancellation also can mean that student loan borrowers have received significant student loan relief. For example, through January 31, 2022, student loan borrowers have received nearly two years of federal student loan payments, 0% interest on federal student loans, and no collection on student loans in default. Student loan borrowers also had their non-payments count as payments for purposes of income-driven repayment plans and public service loan forgiveness. In aggregate, student loan borrowers will have received more than $110 billion of student loan cancellation as as result of the student loan relief that Congress created under the Cares Act, including multiple extensions under both Biden and President Donald Trump. Therefore, if there is no further wide-scale student loan forgiveness, the message could be that student loan borrowers have received significant student loan relief. It doesn’t mean that student loan borrowers still aren’t struggling, but the message from elected representatives to student loan borrowers is that federal subsidies from taxpayers may no longer be possible.
No student loan cancellation may not be the best strategy to help student loan borrowers
No student loan cancellation may send the message that wide-scale student loan forgiveness may not be the best strategy to address the problems with higher education. The main issue with higher education is the exponential growth of tuition. Some argue that one-time student loan cancellation will help current student loan borrowers, but does nothing to address the underlying problem. Critics also say that one-time student loan cancellation won’t help future student loan borrowers, reduce tuition or reduce the amount of student loan borrowing. Others say that student loan cancellation doesn’t hold colleges and universities accountable if their students default on their student loans or carry high debt-to-income ratios. This is true, even if several colleges and universities have cancelled student loan debt. No student loan cancellation could signal that Congress needs to develop a more comprehensive plan to address student loan debt.
Biden wants to cancel $10,000 of student loans, but if he doesn’t have the legal authority, then Congress will need to act. Without broad support in Congress, student loan cancellation is deadlocked. Make sure you understand all your options for student loan repayment. Here are some popular options for student loans to save money:
Student Loans: Related Reading
Student loan cancellation may help more borrowers, but that doesn’t mean Biden will cancel everyone’s student loans