How To Plan Around Biden’s Loan Cancellation
Are you counting on Biden’s loan cancellation in 2023? I wouldn’t. Here’s where 2023’s Supreme Court case stands, and what to focus on instead.
Even though most Americans support Biden’s loan cancellation program, most experts aren’t optimistic.
Since this is a popular topic right now (and there’s a bunch of legal jargon to sort through), I wrote this article to walk you through the essential details:
“Key Takeaway: Don’t count on this program passing. Instead, explore other relief options and prioritize putting together a repayment plan before payments start later this summer.”
What is Biden’s loan cancellation program?
You’ve probably seen the headlines for this. Currently, this program is in limbo while its legality is debated by the Supreme Court.
Last Fall, Biden announced a loan cancellation program that was supposed to wipe away $10,000 from your student loan balance, or $20,000 if you received a Pell grant.
Loan cancellation was only one of several updates to Biden’s Student Loan policy package, including another extension to the interest and loan repayment pause.
“ASIDE: You may see this cancellation program referred to as “Biden’s loan forgiveness,” which isn’t accurate. Technically, it’s a loan cancellation program, which is how I’ll refer to it.
This is an important distinction, since 1) forgiveness programs operate differently, and 2) existing loan forgiveness programs are not up for legal debate.”
How Biden’s loan cancellation got stuck.
Before this program could be implemented, representatives from Missouri, Arkansas, Iowa, Kansas, Nebraska, and South Carolina sued, and the courts hit the brakes.
Essentially, the argument is that the Department of Education overreached its authority by canceling loan debt in this way.
Experts predict the Supreme Court will reach a final decision by late June. Personally, I expect them to strike down this program.
So, I wouldn’t count on getting $10-20K waived from your loan balance.
Plus, if your loan balance is over $100,000, this cancellation wouldn’t make a very big impact.
Your best bet is to explore other forgiveness and repayment options, which I list below.
If I’m right, you’ll be glad to have a plan laid out (and likely paying less) before payments restart.
If I’m wrong, consider it a bonus!
Currently, the Supreme Court is debating the legality of Biden’s loan cancellation program. Experts predict the Supreme Court will reach a final decision by late June.
Where are things at right now?
The media’s been reporting their speculations. Here are the important points to take away:
Biden isn’t feeling confident. President Biden is doubtful the Supreme Court will uphold his student loan cancellation program. Many justices were skeptical, but, if a majority of the court concludes that the lawsuit lacks standing, they may still uphold the program.
There’s no backup plan. The Biden administration has no backup plan if the Supreme Court strikes down this program. Borrower advocates suggest that the administration could reissue the program differently under the Higher Education Act. Still, the process could be difficult and lengthy, potentially delaying cancellation by one or two years.
Despite the outcome, payments will be restarting soon. Though the Education Department continues to fight for this program, they issued a reminder that payments will be reactivated 60 days after the Supreme Court's decision, or 60 days after June 30 if a decision wasn’t made by then.
There’s a lot of uncertainty surrounding the fallout of this final decision. Will Biden try to extend the pause yet again? Will he end up exploring a backup? Will conservatives go after other parts of Biden’s student loan measures, like the IDR waiver?
Frankly, we just don’t know yet.
At this point, only one thing is certain: student loan payments and interest will start again, at the latest, on August 30, 2023.
Student loans and interest will be starting again this summer. Experts aren’t optimistic about Biden’s loan cancellation case (and there’s currently no backup). The best thing you can do is put together a repayment plan that explores other ways to save.
What should you focus on?
Put together a repayment plan before payments start up this summer. If you want to explore forgiveness, I wouldn’t wait much longer.
Be sure to explore every viable student loan relief option, including forgiveness. That way, if loan cancellation does pass, it will be a welcome bonus!
Don’t let fear or uncertainty discourage you from seeking alternatives. There are lots of programs still available that aren’t up for debate:
Standard Forgiveness
Public Service Loan Forgiveness (PSLF)
Employer-Sponsored Repayment Assistance Programs
Government or Non-Profit-Sponsored Loan Repayment Assistance Programs (LRAPs)
If you have a large student loan balance, you can likely save more than $10-20K using one or more of these student loan relief programs.
When payments start, you’ll be ready and paying less.
Leveraging student loan relief options can help you take care of other things, like
Saving for retirement
Creating a healthy work/life balance
Getting a promotion or finding a new job
Taking care of your health or the health of a loved one
Spending more time with family
Paying off a mortgage and/or credit cards
Don’t let fear or uncertainty discourage you from seeking alternatives like forgiveness, repayment assistance programs, or refinancing. If you need help putting together a repayment plan this summer, I can help.
Key Takeaways
Don’t count on this program passing. Instead, treat it like a possible bonus. Here are the main takeaways:
Supreme Court Justices are skeptical of Biden’s loan cancellation program, and experts aren’t optimistic about its fate.
Don’t be afraid to explore other solutions that could save you more than 10-20K.
Put together a repayment plan this summer to pass as little as possible when payments start back up.
If you have general questions about student loan forgiveness and other relief options, I answer the top FAQs I receive in this article.
Many times, a solution is simple enough to handle without extra help. But, if you’re feeling unsure, we can walk through your options together.
Here’s how you can reach me:
Email me or call me at (262) 260-9002.
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At your service,
Erik Kroll