If President Joe Biden cancels student loans, that will happen next.
Here’s what you need to know.
Make no mistake: If progressives are pressuring Biden to enact large-scale student loan forgiveness, this will send shockwaves throughout the land. There’s no guarantee that will happen, even though this survey indicates that borrowers believe their student loans will be completely forgiven before student loan relief expires. Senate Majority Leader Chuck Schumer (D-NY) and Sen. Elizabeth Warren (D-MA) led the charge from Capitol Hill to sway Biden. While they hope for up to $50,000 in student loan forgiveness for borrowers, Biden has only committed to $10,000 in student loan forgiveness as long as Congress passes legislation. Here’s what happens next if Biden decides to cancel student loans without Congress.
1. The cancellation of student loans will cause a major reaction among Americans
If Biden enacts large-scale student loan forgiveness, it will provoke a major backlash among Americans. Supporters will rejoice that Biden gave student loan forgiveness. (How Federal Student Loans Will Change This Year). They will have more money available to get married, start a family, buy a house, save for retirement or start a business. Student borrowers may also witness a reduction in disparities and inequalities due to student debt. If Biden were to enact $50,000 in student loan forgiveness (which is highly unlikely), 36 million student borrowers would get full student loan forgiveness at a cost of $1 trillion. If Biden were to enact a large-scale student loan forgiveness, the cost would be around $400 million. (Here’s Who Won’t Get Student Loan Forgiveness).
2. Student Loan Forgiveness Could Be Why Democrats Lose Midterm Election
Not everyone will be excited about the large-scale cancellation of student loans. Remember that 45 million borrowers have student loans. However, 80% of the adult population, or an additional 200 million Americans, do not have student loans or have never had student loans. Any student loan cancellation could have a significant impact on the midterm elections in November. Democrats have claimed that if Biden doesn’t cancel student loans soon, student borrowers could ditch Democrats on Election Day. If Biden enacts large-scale student loan cancellation, he could alienate moderate and independent voters who view student loan cancellation as wealth redistribution and poorly targeted public policy. So, student loan forgiveness could be the reason the Democrats lose the midterm election. If there is no student loan forgiveness, at least some student borrowers could threaten not to vote for Democrats. If the student loan is cancelled, moderate and independent voters could vote Republican, which could cause the Democrats to lose the midterm elections.
(Biden canceled $15 billion in student loans)
3. Expect student loan forgiveness to be challenged in court
If Biden enacts large-scale student loan forgiveness, that doesn’t mean your student loans will be forgiven. (Most borrowers will not get student loan forgiveness). It is likely that any attempt to write off everyone’s debt will be met with multiple legal challenges. Why would anyone want to dispute a student loan forgiveness? There may be several political reasons, but others may oppose a unilateral attempt by a president to spend federal dollars without explicit prior authorization from Congress. There are legal arguments from proponents and opponents of mass student loan forgiveness. However, a lawsuit could result in an injunction that could, at least temporarily, delay any potential cancellation of your student loans. So, you may have to wait even longer to get this potential student loan relief. It is also possible that a court may decide that a president cannot unilaterally write off an unlimited amount of student loan debt for an unlimited number of student borrowers. (5 ways to get student loan forgiveness).
Student loans: next steps
One thing is certain (at least for now): student loan relief is coming to an end. The Biden administration has repeatedly said that student loan borrowers should prepare for the restart of federal student loan payments on May 1. This means you need to start creating your student loan repayment game plan now. Here are some popular ways to pay off student loans and save money: