Zack Friedman
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Personal Finance
Bestselling Author, The Lemonade Life.
Bestselling Author, The Lemonade Life.
I write and speak about leadership and greatness.
President Joe Biden cancels student loans
President Joe Biden cancels student loans
(Photo by Joshua Roberts/Getty Images) GETTY IMAGES
This story is developing.
The Biden administration is cancelling $1 billion of student loans.
Here’s what you need to know.
Student Loans
In the ongoing debate over student loan cancellation, at least some borrowers will get student loan forgiveness. In a major announcement, the U.S. Department of Education will enact student loan cancellation for 72,000 student loan borrowers who previously had some student loans cancelled, but now will get full student loan cancellation. The Biden administration says the previous formula to cancel student loans in cases of fraud or school closure that was used in the Trump administration — which often created partial student loan forgiveness — was unfair to student loan borrowers.
Under a federal law known as the borrower defense to repayment, borrowers could get federal student loan cancellation if they attended a school that engaged in deceptive or illegal practices or closed suddenly. In 2016, the Obama administration issued new rules to protect student borrowers and get student loan relief. These rules existed as a form of consumer protection because absent these rules, student loan borrowers would still have to pay off student loans even if they didn’t find gainful employment after attending schools such as ITT Technical Institute or Corinthian Colleges.
Betsy DeVos: Student loan forgiveness is too generous
Former U.S. Secretary of Education Betsy DeVos said the borrower defense to repayment rules were too generous to student loan borrowers, awarding too much student loan forgiveness, and hurting taxpayers who footed the bill. Last year, attorneys general from 22 states, plus the District of Columbia, sued U.S. Secretary of Education in federal court over her decision to limit student loan forgiveness for students. DeVos rewrote the borrower defense to repayment rules so she could, in her words, strike a balance between the needs of students and taxpayers. DeVos says her student loan forgiveness rules would save taxpayers $11 billion over 10 years. Under the DeVos standard, student loan cancellation was not automatic, borrowers had to apply for student loan relief, and borrowers had three years to prove their claim of financial harm.
How this will change student loan cancellation
Easier to get student loan cancellation
U.S. Secretary of Education Miguel Cardona will replace the previous formula for student loan cancellation in cases of fraud with a new standard that will provide “a streamlined path” so borrowers can get full student loan cancellation. This decision to roll-back decisions (and create new policies) regarding student loans likely are the first of more to come. For example, in the history of income-driven repayment plans, only 32 student loan borrowers have ever received student loan forgiveness. In the coming months, expect additional policies that could advance rights for student loan borrowers and help with student loan forgiveness and even student loan cancellation. This could include, for example, improving income-driven repayment plans. The Education Department will also work to ensure that these borrowers remain eligible to get federal student loans and have their credit scores repaired, as necessary.
“Borrowers deserve a simplified and fair path to relief when they have been harmed by their institution’s misconduct,” Cardona said. “A close review of these claims and the associated evidence showed these borrowers have been harmed, and we will grant them a fresh start from their debt.”
Student loans and bankruptcy
Student loan borrowers also have been successful in gaining student loan discharge through the bankruptcy process. This student loan borrower, for example, got $430,000 of student loans cancelled.
Student loan servicers
Student loan servicers also could face increased scrutiny in the Biden administration. A federal judge recently found that Navient, which services $300 billion of student loans, misled student loan borrowers.
Tax-free student loan forgiveness
The new stimulus package, the American Rescue Plan of 2021, does not include any student loan cancellation for student loan borrowers. However, the stimulus bill makes any student loan forgiveness tax-free through December 31, 2025. So, if Congress or the president cancels student loans or you get student loan forgiveness through an income-driven repayment plan, you won’t owe any income tax on the amount forgiven.
Will your student loans get cancelled?
You may be wondering what this means for your student loans and whether your student loans will get cancelled. Today’s announcement signals an Education Department that is friendlier to student loan borrowers and that is open to student loan cancellation, particularly in cases of fraud. However, this is not the only student loan cancellation to expect. Biden still wants to cancel $10,000 of student loans immediately, which is separate from the announcement today to cancel $1 billion of student loans for 72,000 student loan borrowers. According to the latest student loan debt statistics, There are still 45 million more borrowers who collectively owe $1.7 trillion of student loan debt, many of whom are hoping for some amount of student loan cancellation. While wide-scale student loan cancellation may come in some form, it may take longer than expected. While there are various proposals for student loan cancellation, Democrats have not formulated a student loan forgiveness plan that Congress can pass.
This story is developing.
The Biden administration is cancelling $1 billion of student loans.
Here’s what you need to know.
Student Loans
In the ongoing debate over student loan cancellation, at least some borrowers will get student loan forgiveness. In a major announcement, the U.S. Department of Education will enact student loan cancellation for 72,000 student loan borrowers who previously had some student loans cancelled, but now will get full student loan cancellation. The Biden administration says the previous formula to cancel student loans in cases of fraud or school closure that was used in the Trump administration — which often created partial student loan forgiveness — was unfair to student loan borrowers.
Under a federal law known as the borrower defense to repayment, borrowers could get federal student loan cancellation if they attended a school that engaged in deceptive or illegal practices or closed suddenly. In 2016, the Obama administration issued new rules to protect student borrowers and get student loan relief. These rules existed as a form of consumer protection because absent these rules, student loan borrowers would still have to pay off student loans even if they didn’t find gainful employment after attending schools such as ITT Technical Institute or Corinthian Colleges.
Betsy DeVos: Student loan forgiveness is too generous
Former U.S. Secretary of Education Betsy DeVos said the borrower defense to repayment rules were too generous to student loan borrowers, awarding too much student loan forgiveness, and hurting taxpayers who footed the bill. Last year, attorneys general from 22 states, plus the District of Columbia, sued U.S. Secretary of Education in federal court over her decision to limit student loan forgiveness for students. DeVos rewrote the borrower defense to repayment rules so she could, in her words, strike a balance between the needs of students and taxpayers. DeVos says her student loan forgiveness rules would save taxpayers $11 billion over 10 years. Under the DeVos standard, student loan cancellation was not automatic, borrowers had to apply for student loan relief, and borrowers had three years to prove their claim of financial harm.
How this will change student loan cancellation
Easier to get student loan cancellation
U.S. Secretary of Education Miguel Cardona will replace the previous formula for student loan cancellation in cases of fraud with a new standard that will provide “a streamlined path” so borrowers can get full student loan cancellation. This decision to roll-back decisions (and create new policies) regarding student loans likely are the first of more to come. For example, in the history of income-driven repayment plans, only 32 student loan borrowers have ever received student loan forgiveness. In the coming months, expect additional policies that could advance rights for student loan borrowers and help with student loan forgiveness and even student loan cancellation. This could include, for example, improving income-driven repayment plans. The Education Department will also work to ensure that these borrowers remain eligible to get federal student loans and have their credit scores repaired, as necessary.
“Borrowers deserve a simplified and fair path to relief when they have been harmed by their institution’s misconduct,” Cardona said. “A close review of these claims and the associated evidence showed these borrowers have been harmed, and we will grant them a fresh start from their debt.”
Student loans and bankruptcy
Student loan borrowers also have been successful in gaining student loan discharge through the bankruptcy process. This student loan borrower, for example, got $430,000 of student loans cancelled.
Student loan servicers
Student loan servicers also could face increased scrutiny in the Biden administration. A federal judge recently found that Navient, which services $300 billion of student loans, misled student loan borrowers.
Tax-free student loan forgiveness
The new stimulus package, the American Rescue Plan of 2021, does not include any student loan cancellation for student loan borrowers. However, the stimulus bill makes any student loan forgiveness tax-free through December 31, 2025. So, if Congress or the president cancels student loans or you get student loan forgiveness through an income-driven repayment plan, you won’t owe any income tax on the amount forgiven.
Will your student loans get cancelled?
You may be wondering what this means for your student loans and whether your student loans will get cancelled. Today’s announcement signals an Education Department that is friendlier to student loan borrowers and that is open to student loan cancellation, particularly in cases of fraud. However, this is not the only student loan cancellation to expect. Biden still wants to cancel $10,000 of student loans immediately, which is separate from the announcement today to cancel $1 billion of student loans for 72,000 student loan borrowers. According to the latest student loan debt statistics, There are still 45 million more borrowers who collectively owe $1.7 trillion of student loan debt, many of whom are hoping for some amount of student loan cancellation. While wide-scale student loan cancellation may come in some form, it may take longer than expected. While there are various proposals for student loan cancellation, Democrats have not formulated a student loan forgiveness plan that Congress can pass.
America Reacts To $1 Billion Of Student Loan Cancellation
President Joe Biden cancels $1 billion of student loans (Photo by Scott Eisen/Getty Images) GETTY IMAGES
President Joe Biden just cancelled $1 billion of student loans—and this is how America reacted.
Here’s what you need to know.
Student Loans
Student loan cancellation is here, and the the U.S. Department of Education just cancelled $1 billion of student loans for 72,000 student loan borrowers. These student loan borrowers previously had some student loans cancelled, but now will get full student loan cancellation if they attended a school that engaged in deceptive or illegal practices or closed suddenly.
What do people think about this major decision to cancel student loans? Here is a non-comprehensive, general cross-section of some of the feedback from across social media:
1. Biden cancels $1 billion of student loans — let’s celebrate
Many people on social media lauded the decision to cancel $1 billion of student loans, saying it was a significant step to address student loan cancellation. Student loan borrowers have been hoping for financial relief, and they say Biden delivered on his promise. Not only did Biden ensure student loan cancellation, but he did so in the first 100 days of his administration. Importantly, this student loan cancellation will be tax-free to the student loan borrowers. The new stimulus package makes student loan forgiveness tax-free through December 31, 2025
2. Student loan cancellation — this is just the beginning
Congress may cancel student loans more than once. While some borrowers cheered the decision to cancel student loans, others framed this student loan cancellation as only the first step in a bigger process for student loan forgiveness. They view this announcement as a potential precursor to Biden cancelling student loans through executive order or Congress cancelling student loans through legislation. Whether the amount of student loan forgiveness is $10,000, $50,000 or another amount, this group views this student loan cancellation as only the beginning of a broader plan to fix student loans.
4. Will my student loans get cancelled?
A fourth group of people are asking: “Will my student loans get cancelled?” Some of these student loan borrowers attended schools that closed, while others say their college defrauded them. If your school misled you or engaged in illegal deceptive practices, you may be able to get student loan forgiveness for some or all of your federal student loan debt. You can apply for student loan cancellation under borrower defense to student loan repayment forgiveness
Biden student loan forgiveness: what’s next?
This may not be the only student loan forgiveness that will happen during the Biden administration. Congress and the president are both considering wide-scale student loan forgiveness. Importantly, this $1 billion of student loan cancellation is different than the wide-scale student loan cancellation that potentially could impact millions of student loan borrowers. The borrowers impacted through this major student loan announcement are a select group of people who got partial student loan forgiveness, but Biden wants to make these borrowers whole through borrower defense to repayment and cancel the remainder of their federal student loans too. The debate to cancel student loans for more student loan borrowers will continue. Therefore, don’t expect wide-scale student loan cancellation now. However, don’t expect all 45 million borrowers to get student loan forgiveness or get all their student loans forgiven. It’s more likely that Congress will limit who qualifies, how much student loan forgiveness there will be, and when the student loan cancellation might come. If Congress, rather than the president, cancels student loans, progressives in Congress will need to deliver a student loan bill that moderate Democrats can support. Make sure you create your own student loan plan because there is no guarantee that your student loans will get cancelled. Here are some potential options to consider:
Student loan refinancing (lower interest rate, lower monthly payment)
President Joe Biden cancels $1 billion of student loans (Photo by Scott Eisen/Getty Images) GETTY IMAGES
President Joe Biden just cancelled $1 billion of student loans—and this is how America reacted.
Here’s what you need to know.
Student Loans
Student loan cancellation is here, and the the U.S. Department of Education just cancelled $1 billion of student loans for 72,000 student loan borrowers. These student loan borrowers previously had some student loans cancelled, but now will get full student loan cancellation if they attended a school that engaged in deceptive or illegal practices or closed suddenly.
What do people think about this major decision to cancel student loans? Here is a non-comprehensive, general cross-section of some of the feedback from across social media:
1. Biden cancels $1 billion of student loans — let’s celebrate
Many people on social media lauded the decision to cancel $1 billion of student loans, saying it was a significant step to address student loan cancellation. Student loan borrowers have been hoping for financial relief, and they say Biden delivered on his promise. Not only did Biden ensure student loan cancellation, but he did so in the first 100 days of his administration. Importantly, this student loan cancellation will be tax-free to the student loan borrowers. The new stimulus package makes student loan forgiveness tax-free through December 31, 2025
2. Student loan cancellation — this is just the beginning
Congress may cancel student loans more than once. While some borrowers cheered the decision to cancel student loans, others framed this student loan cancellation as only the first step in a bigger process for student loan forgiveness. They view this announcement as a potential precursor to Biden cancelling student loans through executive order or Congress cancelling student loans through legislation. Whether the amount of student loan forgiveness is $10,000, $50,000 or another amount, this group views this student loan cancellation as only the beginning of a broader plan to fix student loans.
3. Student loan cancellation — this only help some borrowers
Another group of people on social media criticized Biden’s student loan cancellation. Why? While they recognized the magnitude of the headline number of $1 billion, they mentioned that the actual amount of student loan forgiveness paled in comparison to both the amount of outstanding student loan debt and the aggregate numbers of student loan borrowers. For example, the latest student loan debt statistics show that 45 million borrowers collectively owe $1.7 trillion of student loan debt. On a percentage basis, $1 billion of student loan forgiveness equates to 0.6% of all student loans outstanding. Similarly, 72,000 student loan borrowers benefits about 0.2% of all student loan borrowers. So, this group of people aren’t particularly impressed with this latest move for student loan cancellation.
Another group of people on social media criticized Biden’s student loan cancellation. Why? While they recognized the magnitude of the headline number of $1 billion, they mentioned that the actual amount of student loan forgiveness paled in comparison to both the amount of outstanding student loan debt and the aggregate numbers of student loan borrowers. For example, the latest student loan debt statistics show that 45 million borrowers collectively owe $1.7 trillion of student loan debt. On a percentage basis, $1 billion of student loan forgiveness equates to 0.6% of all student loans outstanding. Similarly, 72,000 student loan borrowers benefits about 0.2% of all student loan borrowers. So, this group of people aren’t particularly impressed with this latest move for student loan cancellation.
4. Will my student loans get cancelled?
A fourth group of people are asking: “Will my student loans get cancelled?” Some of these student loan borrowers attended schools that closed, while others say their college defrauded them. If your school misled you or engaged in illegal deceptive practices, you may be able to get student loan forgiveness for some or all of your federal student loan debt. You can apply for student loan cancellation under borrower defense to student loan repayment forgiveness
.
5. Biden cancels $1 billion of student loans, but taxpayers will pay
A final group of people on social media say that this student loan cancellation is an unfair wealth transfer that sticks taxpayers with the bill. They say that student loan cancellation isn’t free; it’s funded by taxpayers. Some social media users question why taxpayers must bail out student loan borrowers who made bad decisions to attend for profit colleges, for example. (One retort from several social media users: Congress has bailed out large corporations. Why not forgive student loans for individual borrowers in financial need?). Others ask why there should be wide-scale student loan forgiveness for some borrowers when millions of other borrowers duly paid off their student loans by making financial sacrifices and, in some cases, working multiple jobs. They say there are several reasons why student loans shouldn’t be cancelled and they don’t want taxpayers paying for student loan forgiveness when the vast majority of Americans either don’t have student loans or didn’t attend college.
5. Biden cancels $1 billion of student loans, but taxpayers will pay
A final group of people on social media say that this student loan cancellation is an unfair wealth transfer that sticks taxpayers with the bill. They say that student loan cancellation isn’t free; it’s funded by taxpayers. Some social media users question why taxpayers must bail out student loan borrowers who made bad decisions to attend for profit colleges, for example. (One retort from several social media users: Congress has bailed out large corporations. Why not forgive student loans for individual borrowers in financial need?). Others ask why there should be wide-scale student loan forgiveness for some borrowers when millions of other borrowers duly paid off their student loans by making financial sacrifices and, in some cases, working multiple jobs. They say there are several reasons why student loans shouldn’t be cancelled and they don’t want taxpayers paying for student loan forgiveness when the vast majority of Americans either don’t have student loans or didn’t attend college.
Biden student loan forgiveness: what’s next?
This may not be the only student loan forgiveness that will happen during the Biden administration. Congress and the president are both considering wide-scale student loan forgiveness. Importantly, this $1 billion of student loan cancellation is different than the wide-scale student loan cancellation that potentially could impact millions of student loan borrowers. The borrowers impacted through this major student loan announcement are a select group of people who got partial student loan forgiveness, but Biden wants to make these borrowers whole through borrower defense to repayment and cancel the remainder of their federal student loans too. The debate to cancel student loans for more student loan borrowers will continue. Therefore, don’t expect wide-scale student loan cancellation now. However, don’t expect all 45 million borrowers to get student loan forgiveness or get all their student loans forgiven. It’s more likely that Congress will limit who qualifies, how much student loan forgiveness there will be, and when the student loan cancellation might come. If Congress, rather than the president, cancels student loans, progressives in Congress will need to deliver a student loan bill that moderate Democrats can support. Make sure you create your own student loan plan because there is no guarantee that your student loans will get cancelled. Here are some potential options to consider:
Student loan refinancing (lower interest rate, lower monthly payment)
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