Resuming student loan payments without debt forgiveness would be 'disastrous,' Democrats warn
More than 80 lawmakers signed a letter to President Joe Biden urging him to cancel up to $50,000 worth of federal student loan debt per borrower before loan payments resume in May 2022.
"In light of high COVID-19 case counts and corresponding economic disruptions, restarting student loan payments without this broad cancellation would be disastrous for millions of borrowers and their families," the Jan. 26 letter reads.
The push for student loan cancellation is led by prominent progressives, including Senate Majority Leader Chuck Schumer and Sen. Elizabeth Warren. The Senate Democrats are joined by several members of the House, including Democratic Reps. Pramila Jayapal, Ayanna Pressley, Ilhan Omar and Katie Porter.
The authors also called on the president to release an April 2021 memo from the Department of Education outlining the Biden administration's legal authority to cancel student debt. The White House released a heavily redacted version of the memo in November, but its contents remain unknown to the public.
"Publicly releasing the memo outlining your existing authority on canceling student debt and broadly doing so is crucial to making a meaningful difference in the lives of current students, borrowers, and their families," the lawmakers wrote.
Keep reading to learn more about the likelihood of student loan cancellation as the forbearance period comes to an end, including how to prepare for the return to federal student loan repayment. One debt repayment strategy is refinancing to a private student loan at a lower interest rate. You can compare student loan refinance rates on Credible for free without impacting your credit score.
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Democrats call for student loan forgiveness before payments restart
As a presidential candidate, Biden campaigned on forgiving at least $10,000 worth of federal student loans per borrower. But more than a year since taking office, he has not yet enacted widespread student loan cancellation.
The lawmakers in their letter urge the president to utilize executive authority to "deliver relief to the millions of families inspired by your proposal to make a debt-free college degree within their reach."
"Canceling $50,000 of student debt would give 36 million Americans permanent relief and aid the millions more who will eventually resume payments their best chance at thriving in our recovering economy," the letter continues.
The authors also wrote that President Biden has the legal authority to cancel student loans under the Higher Education Act of 1965, but not all Democrats agree on this point. House Speaker Nancy Pelosi previously said that student loan forgiveness "has to be an act of Congress," and Biden himself has suggested that he doesn't believe he has the power to discharge federal student debt.
Despite numerous calls from prominent lawmakers, it's still unclear whether the president will enact student debt forgiveness before federal loan payments resume in May. If you're looking for alternative ways to get out of student loan debt, consider refinancing for better repayment terms. Refinancing your student loan balance to a lower interest rate may help you reduce your monthly payments. You can learn more about student loan refinancing on Credible.
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Will the federal student loan payment pause be extended again?
Most Americans (59%) believe that the federal student loan forbearance period should be extended through the end of 2022, according to a Data for Progress poll. However, the Biden administration hasn't announced plans to extend the pause again — or to cancel student debt.
As lawmakers push for student loan cancellation, borrowers should still prepare for federal loan payments to restart in May. Education Secretary Miguel Cardona recently said that while the Biden administration is discussing "broad loan forgiveness," borrowers should expect to resume repayment. Here are a few things you can do now to prepare for the end of forbearance:
- Income-driven repayment plan (IDR). Borrowers may be able to reduce their monthly federal student loan payments to 10-20% of their disposable income, as long as they meet the eligibility requirements on the Federal Student Aid website.
- Unemployment deferment. Student loan borrowers receiving unemployment benefits or who are struggling to find full-time employment may be eligible for up to three years of additional federal loan forbearance. It's important to keep in mind that interest may accrue during deferment.
- Economic hardship deferment. Similar to unemployment deferment, you may be eligible to pause your payments for a limited time if you receive a means-tested benefit like welfare. It may also be possible to qualify if you work full-time but are earning below 150% of the poverty guideline for your state and family size.
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Another way to manage your student loan debt ahead of May is to reduce your monthly payments by refinancing to a lower interest rate. Keep in mind that refinancing your federal loans into a private student loan will make you ineligible for IDR plans, COVID-19 emergency forbearance and select student loan forgiveness programs.
You can browse current student loan refinancing rates from multiple private lenders in the table below. Then, use Credible's student loan refinancing calculator to determine if this student loan repayment method is right for your financial situation.
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