Student loan forgiveness may expire soon, But student loan borrowers now want to cancel the student loan.
Here’s what you need to know.
With student loan forgiveness scheduled to expire on May 1, 2022, the next question is: Is student debt forgiveness next? Some see student loan forgiveness as effective student loan cancellation for 40 million student loan borrowers. Others say it was only a temporary aid that didn’t really cancel student debt. Who is right? Let’s analyze the pros and cons of student loan cancellation broadly and what each side really wants.
Student loan cancellation means more student loan forgiveness
When student loan forgiveness ends on May 1, student loan borrowers are hoping for at least one of two things: extended student loan forgiveness and student loan cancellation broadly. (Student loan borrowers will get $15 billion from student loan cancellation.) Since March 2020, federal student loan borrowers have had a temporary student loan tolerance, which included no mandatory federal student loan payments, 0% interest rates, and no student loan collection in default. Now, student loan borrowers, advocates, and activists want student loan borrowers to get student loan forgiveness on a large scale. They argue, among other things, that:
- Student loan forgiveness will stimulate the economy;
- Student loan forgiveness will help borrowers free themselves from mounting debts;
- Student loan forgiveness will help borrowers with the expenses of getting married and starting a family;
- Student loan forgiveness will help borrowers to buy a home, save for retirement, and start a business;
- Student loan forgiveness will help reduce disparities.
(Those who will not receive student loan forgiveness)
Why canceling a student loan is a bad policy
When student loan forgiveness ends on May 1, opponents of student loan forgiveness say temporary student loan tolerance should end and there should be no widespread student loan cancellation. Opponents argue, among other things, that:
- Student loan forgiveness must expire two years after taking on a major student loan.
- Student loan forgiveness is very expensive, with a potential cost of up to $1 trillion if up to $50,000 of student loans are forgiven for borrowers.
- Student loan forgiveness is not necessary because the economy has recovered and the Covid-19 pandemic is different than it was in March 2020.
- Student loan forgiveness will provide approximately $120 billion in student loan interest for student borrowers.
- Student loan forgiveness isn’t fair to the 80% of American adults who don’t have student loans or who haven’t attended college.
- Student loan forgiveness is a one time forgiveness only so it does not solve the fundamental problem of high tuition fees or help any student loan borrower in the future.
- Student loan forgiveness targets one segment of the population, but ignores other borrowers who struggle financially such as those with mortgage or credit card debt. (Amount of $2000 per month for stimulus request verification up to 3 million)
Student loan cancellation: Congress and Biden will need to work together
If there is any widespread student loan cancellation, there needs to be consensus. Currently, progressive members of Congress are pressing the president, a fellow Democrat, to cancel student loans on a large scale, and they have resorted to an intra-party battle. (Student loan forgiveness may be the reason Democrats lost the midterm elections.) The president called on Congress to cancel up to $10,000 in student loans. Still, the Progressives are focused on canceling up to $50,000 in student loans and haven’t held back — despite opposition to that plan in Congress and from the president. The result is stagnation. If there is no large-scale student loan cancellation, it is helpful to communicate this as soon as possible to student borrowers so that they do not hope for student loan forgiveness that will never come. (What Biden must believe in until his student loan is cancelled.) Instead, it would be more effective to help provide a clear path for student borrowers to return to their student loan payment on May 1st. Focus on helping student loan borrowers who are struggling financially, especially borrowers in the event of a student loan default or student loan delinquency. Help them rehabilitate and get back on track. Give borrowers a grace period to return to student loan payments. The more notice to borrowers, the better.
Finally, since there is no guarantee that any student loan will be cancelled, get educated on all the options available to you to pay off your student loan. Here are some popular strategies for paying off student loans faster:
Student loans: related reading
Those who will not get student loan forgiveness
Is canceling student debt next?
Student loan borrowers will get $15 billion from student loan cancellation
Biden Extended Student Loan Forgiveness, But Advocates Really Want Student Loan Canceled