A promise to cancel huge amounts of student loan debt for millions of Americans was notably absent from the proposed $6 trillion budget President Joe Biden unveiled last week.
Democrats in Congress say freeing borrowers from their loan burdens would allow them to buy their first homes, start businesses or invest for the future. Lawmakers and borrowers are continuing to urge the president to cancel up to $50,000 in student debt per person.
With that issue still far from settled, the Biden administration is taking some smaller steps toward forgiving student loans. Here’s a look at where things stand.
Student debt cancellation — canceled?
Advocates of student loan forgiveness expressed frustration when Biden last week released his 1,740-page budget — without any specific mention of college debt cancellation.
“President Biden campaigned on a promise to cancel student debt, and millions of Americans expect him to follow through with that promise,” says Cody Hounanian, program director at Student Debt Crisis. “Not including debt cancellation in his budget proposal is a missed opportunity.”
During his campaign for president, Biden proposed creating a new program that would offer $10,000 in student debt relief for every year of national or community service, for up to five years. He said individuals working in schools, government and other nonprofit settings would automatically be enrolled in the program.
During a CNN town hall in February, the president reinforced his commitment to certain student debt forgiveness, but said $50,000 in relief per borrower was not on the table.
“I’m prepared to write off a $10,000 debt, but not 50″ thousand, Biden said. “Because I don’t think I have the authority to do it.”
Shaking up the student loans status quo
Though the issue remains very much unresolved, the Biden administration is making progress on certain fronts.
Biden’s Education Department is moving forward with steps to clean up existing federal student loan programs to make them easier on America’s debt holders.
“The Department of Education’s primary responsibility is to serve students and borrowers,” Education Secretary Miguel Cardona says in a news release. “That means taking a fresh look at a range of regulations to make sure they are not creating unnecessary barriers, but instead can ensure that institutions and programs serve our students well.”
Last month, more than 50 mostly Democratic lawmakers urged Cardona to pursue reforms in what they said was a mismanaged program designed to help teachers, nurses and other public sector workers get relief from their college debt.
Approval rates through the program have been below 2.5% since the first round of relief became eligible more than three years ago. The Education Department has announced plans to hold public hearings later this month to discuss how to make improvements.
The waiting on the $50K question continues
Despite the president’s doubts about his ability to offer borrowers large-scale student loan relief, he’s still being pressed on the issue by Senate Majority Leader Chuck Schumer and other congressional Democrats.
Schumer has said Biden could cancel $50,000 in student debt per person with just “the flick of a pen.”
The White House has had Education Secretary Cardona looking into whether Biden can, in fact, do that through an executive order, but it’s been about two months now and there’s been no word.
Skeptics have emerged as the waiting continues. Even Biden hasn’t shied away from pointing out potential problems with the broad request.
“The idea that you go to Penn [the University of Pennsylvania] and you’re paying a total of 70,000 bucks a year and the public should pay for that? I don’t agree,” Biden said in a recent interview with David Brooks of The New York Times.
What if you can’t afford to keep waiting?
Roughly 45 million Americans share $1.7 trillion in student debt, according to Federal Reserve data. If you’re one of the millions struggling to get ahead while paying off your student loans, you have plenty of ways to improve your financial situation.
First, consider refinancing your student loans. Interest rates on private student loans have hit record lows, so a refinance loan could cut your monthly payment substantially.
Note that refinancing out of a government loan would disqualify you from any federal student debt forgiveness, if it ever happens.
Interest rates on mortgage loans have dropped, too. If you own your home, you could consider refinancing into one of today’s bargain mortgage rates.
Some 14.1 million homeowners still have an opportunity to save an average $287 a month through a refi, the mortgage technology and data company Black Knight said recently.
Finally, look into ways to grow your income without having to stretch your budget much. One popular app helps you earn returns in the stock market simply by investing your “spare change.”
