In late August 2022, President Joe Biden announced that he would provide $10,000 in student loan forgiveness for federal student debt borrowers. Along with this, Biden said he would cancel up to $20,000 for those borrowers who also qualified for Pell Grants.
This announcement was one of Biden's main campaign promises aimed at young people. If it were to happen, it would provide financial relief to millions of Americans. But some people question if this is the appropriate move to make.
Under his current proposed plan you will qualify for relief:
- If your income is less than $125,000
- If your income is less than $250,000 for married couples
The plan is estimated to cost the federal government around $400 Billion, according to a breakdown released by the Congressional Budget Office.
This gigantic number has led to a controversial debate over whether or not loan relief is an ethical move or an abuse of taxpayer dollars.
While many remain optimistic, there are a few things that are upholding the forgiveness process and are leaving many worried about their future.
Is Student Loan Forgiveness in Oblivion?
Since applying for student loan forgiveness, many Americans have received an email from the U.S. Department of Education that seems to contain positive news - or does it?
Secretary Miguel Cardona sent out the following Letter to the 26 Million people who already applied for student loan forgiveness.
This email provides you with an update on the one-time Student Loan Debt Relief plan that President Biden and I announced on August 24th.
We reviewed your application and determined that you are eligible for loan relief under the Plan. We have sent this approval on to your loan servicer. You do not need to take any further action.
Unfortunately, a number of lawsuits have been filed challenging the program, which have blocked our ability to discharge your debt at present. We believe strongly that the lawsuits are meritless, and the Department of Justice has appealed on our behalf.
Your application is complete and approved, and we will discharge your approved debt if and when we prevail in court. We will update you when there are new developments.
The Biden-Harris Administration is committed to helping borrowers as they recover from the pandemic.
Education is a great equalizer, and we will never stop fighting for you!
Miguel A. Cardona
U.S. Secretary of Education
Quickly after the President made his announcement, many conservative states attacked the policy in the courtrooms. They argued that this action is illegal and unethical.
With that said, the current administration confidently believes that its plan is perfectly legal and will ultimately help millions. For now, it seems like things are on a hiatus, leaving millions of Americans with gloom and uncertainty.
Two lawsuits have been successful so far in temporarily discontinuing the debt relief. This resulted in the loan cancellation application being closed by the Education Department.
Along with this, it doesn't seem like a resolution will happen anytime soon. Payments are also still on freeze until the end of 2022.
How Long Will this Take?
The Biden administration urgently requested the Supreme Court to reinstate its federal student loan program after a federal appeals court issued a nationwide ruling against it.
They argued that these legal battles could take months or even years to come to a resolution if they were not decided upon urgently. However, some experts on the situation remain optimistic and believe loan servicers will apply for the relief as soon as they get the go-ahead.
Will Loan Payments Resume?
It is unclear what will happen before year-end when the student loan payment freeze ends. Payments could very well start back up again in January 2023.
It will be an important situation to monitor in the meantime.
However, with all this skepticism surrounding this important topic, the current administration is considering extending the payment freeze.
The federal student loan payments have been on freeze since March 2020, when the coronavirus pandemic first hit the United States, causing a hiccup in the economy.
It is safe to say that if the administration does not extend the freeze, millions of Americans will be very angry, and rightfully so.
They were promised forgiveness, so why would they make payments on loans that are soon to be forgiven? That doesn't make much sense.
Many experts suggest that there would be a record number of student loan defaults if the debt forgiveness plan were not to go through.
Even prior to the pandemic, there were millions of people with student loan problems. It seems like going to college might not have been the smartest option for many.
Are You Doomed?
Honestly, who knows?
There are a bunch of different outcomes that could happen, but either way, they will affect the economy. There are a few options you may want to consider.
People who work for the government and certain nonprofits can clear their debt after a decade through The Public Service Loan Forgiveness program.
You can also look at refinancing and consolidation options for your loans.
Prepare for the worst and hope for the best.