A new bombshell announcement from the White House: President Joe Biden will cancel student loans or extend the student loan pause for a fifth time before August 31, 2022.
Here’s what you need to know — and what it means for your student loans.
Days after extending the student loan payment pause for the fourth time, White House Press Secretary Jen Psaki said that Biden is gearing up potentially to extend the student loan pause again or enact wide-scale student loan cancellation. On a new episode of the podcast Pod Save AmericaPSAKI said, “So between now and August 31, [the student loan pause is] either going to be extended or we’re going to make a decision, as [White House Chief of Staff] Ron [Klain] referenced, about canceling student debt.”
Breaking News: student loan pause or student loan cancellation?
PSAKI’s announcement is not a repeat of Klain’s comments from an earlier podcast episode of Pod Save America. Rather, Klain’s comments were different from what Psaki described. Last month, Klain said, “The president is going to look at what we should do on student debt before the pause expires, or he’ll extend the pause.” First, Klain said this before Biden extended the student loan payment pause through August 31. Klain referred to deciding before the student loan payment pause expired on May 1. Second, Klain never referenced any extension of the student loan payment pause beyond August 31. Third, Klain never explicitly referenced wide -scale student loan cancellation. (Here’s who won’t qualify for $6.2 billion of student loan cancellation). Rather, Klain said, “the president is going to look at what we should do.” This is a general statement about student loans, which could include targeted student loan cancellation, fixing public service loan forgiveness or improving student loan repayment. (Student loan cancellation and the student loan payment pause are confusing. Here’s what to know).
What this means for your student loans
This is a potential game-changer for student loans. Now, Psaki is saying that at a minimum, the student loan payment pause could be extended beyond August 31. (Biden could extend the student loan payment pause forever). At a maximum, Biden could cancel student loans. That is a significant development and different than what the Biden administration has said previously. Yes, there has been speculation that Biden would extend the student loan payment pause at least beyond the midterm election on November 8, 2022. Why? Progressive Democrats in Congress have been pressing Biden to extend student loan relief and cancel student loans. They fear that without more student loan relief, Democrats will lose control of Congress in the upcoming election. (If student loans don’t get canceled, borrowers threaten to vote against Democrats). However, the Biden administration previously never explicitly confirmed this game plan. PSAKI had confirmed previously that Biden still considering wide-scale student loan forgiveness.
Student loans: next steps
Will your student loans get canceled? Interestingly, if you parse her words, Psaki said that Biden will either extend the student loan payment pause gold cancel student loans. That statement implies that either option is possible, but not both. If this is true, this may raise more questions. For example, what type of student loan cancellation? Is this targeted student loan cancellation? Wide-scale student loan cancellation? How much student loan forgiveness? Will everyone qualify for student loan cancellation, or will it be focused on low-income student loan borrowers only? (Biden dropped student loan cancellation from budget). PSAKI also said during the podcast that Biden still prefers Congress to enact $10,000 of wide-scale student loan cancellation. (Student loan cancellation could look different than you expect). Why? If Biden attempts to enact wide-scale student loan cancellation, it could lead to legal challenges in court, which could delay implementation. Alternatively, a future Republican president could issue an executive order to halt any student loan cancellation. (Student loan relief: how to qualify for a “fresh start” on your student loans).
Despite this latest development, there is no guarantee that Biden will pause student loans for the fifth time or enact wide-scale student loan cancellation. For now, student loan payments restart beginning September 1, 2022. Are you prepared? Here are some of the best ways to take control of your financial life and pay off student loans: