If Biden isn’t canceling student loans, here are 5 reasons why

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If President Joe Biden doesn’t enact large-scale student loan forgiveness, here are 5 reasons why.

Here’s what you need to know — and what it means for your student loans.

Student loans

Biden is actively considering canceling student loans for millions of student borrowers. If Biden forgives student loans, supporters say it’s the most impactful act Biden can do as president. Canceling student loans, proponents say, will boost the economy, reduce disparities and help student borrowers afford to get married, buy homes, save for retirement and start businesses. For student borrowers looking for a fresh start, this is essential student loan relief. While Biden canceled $17 billion in student loans, he remained skeptical of a broad student loan forgiveness. Here are 5 reasons why Biden might decide against embracing large-scale student loan forgiveness.


1. Most people don’t have a student loan.

Most people don’t have student loans. There are 45 million student borrowers and about 250 million American adults. This means that about 20% of American adults have a student loan, while the remaining 80% no longer have a student loan or have never been to college. Since the vast majority of Americans don’t have student loans, the Biden administration could choose to focus on policy priorities that impact a larger portion of the population. Proponents of student loan forgiveness argue that numbers alone should not dictate the effectiveness of student loan relief. (No, Biden is not canceling most student loan debt).


2. Canceling student loans is a redistribution of wealth

Opponents of the large-scale cancellation of student loans say it is a classic distribution of wealth. If Biden forgives student loans for most or all student borrowers, critics say graduate Americans will receive financial aid at the expense of those who did not attend college. On average, college graduates can earn $1 million more over their lifetime than others who don’t have a college degree. Yes, some college graduates may struggle financially. However, critics say it’s unfair to make someone who hasn’t gone to college or can’t afford to go to college subsidize someone who, in average, can generate more income through a college degree. Additionally, about half of the $1.7 trillion in outstanding student loan debt is held by borrowers with graduate student loans. On average, these borrowers earn a higher income than college graduates without a graduate degree. While all student borrowers get student loan relief, wealthier student borrowers, such as doctors and lawyers, may benefit disproportionately.


3. Canceling student loans is expensive

Canceling student loans is expensive. The cost of canceling a student loan depends on two main factors: the amount of student loan canceled per borrower and the number of eligible borrowers. For example, Sen. Elizabeth Warren (D-MA) and Senate Majority Leader Chuck Schumer (D-NY) proposed $50,000 in student loan forgiveness for borrowers. If implemented, their plan could cost around $1 trillion. (Biden Confirms He Won’t Forgive $50,000 in Student Loans – 5 Key Takeaways). Biden’s plan to write off up to $10,000 from student borrowers could cost between $350 billion and $400 billion. Are there ways to reduce these amounts? Yes. (Student Loan Forgiveness: Who Might Qualify Under Biden’s Plan). For example, Biden could limit student loan forgiveness to only federal student loans or only university student loans. Biden could also impose an income threshold. The lower the income threshold, the lower the overall cost of student loan forgiveness. The downside of imposing limits is that fewer student borrowers receive student loan relief. (3 ways Biden could cancel student loans).


4. Republicans can block student loan forgiveness

Republicans can block student loan forgiveness. Although Republicans do not control Congress, Republicans could block a broad cancellation of student loans. For example, five Republican U.S. senators this week introduced the Stop Reckless Student Loan Actions Act to Congress. The proposed legislation would, among other things, end the current pause in student loan payments and prohibit the president from canceling student loans due to a national emergency. If the president proceeds to cancel student loans, the proposal would grant Congress the legal power to disapprove of the president’s action. Republicans and other critics of large-scale student loan forgiveness could also seek a legal injunction, which could prevent student loan forgiveness from being implemented.


5. Biden has no legal authority to cancel a student loan

Biden could decide he doesn’t have the legal authority to cancel a student loan. (That said, the attorneys general say Biden has the power to cancel student loans for all federal borrowers). The president doubted he had the executive power to enact large-scale student loan forgiveness without further authorization from Congress. House Speaker Nancy Pelosi (D-CA) agrees and said only Congress has the power to write off student loans broadly. Warren and Schumer disagree, and they argued that the president has the authority existing in the Higher Education Act of 1964. That said, Biden may decide that the general cancellation of student loans by the through a decree may not be permitted. Alternatively, Biden could seek to implement student loan forgiveness through the regulatory process. However, even if Biden proceeds to cancel student loans, it is expected that opponents could sue, which could leave borrowers in student loan limbo.


Student loans: next steps

Biden could potentially cancel student loans for millions of student borrowers. That said, there is no guarantee that Biden will carry out a large-scale student loan forgiveness. It’s also unclear how much student loan debt Biden would forgive and how many student borrowers might be eligible. Temporary student loan relief is scheduled to end on August 31, 2022. That’s why it’s essential to have a student loan repayment game plan in place based on your financial situation. Here are several ways student borrowers repay their student loans to save money:


Student Loans: Related Reading

Biden confirms he won’t forgive $50,000 in student loans – 5 key takeaways

3 ways Biden could cancel student loans

Student loan forgiveness: Who might qualify for Biden’s plan

Student loan forgiveness: 5 key takeaways from a major announcement

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