3 ways Biden could cancel student loans


When it comes to large-scale student loan cancellation, President Joe Biden can cancel student loans in 3 ways.

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

Student loans

Biden is potentially weeks away from making one of the biggest decisions of his presidency: whether to enact large-scale student loan forgiveness. For years, student borrowers have dreamed of the possibility of permanent student loan relief. Now, with the midterm elections six months away, Biden can forgive your student loans. Here are 3 ways Biden could cancel student loans:

1. Biden enacts large-scale student loan cancellation through executive order

Option 1: Biden enacts large-scale student loan forgiveness through executive order. This is the path that Sen. Elizabeth Warren (D-MA) and Senate Majority Leader Chuck Schumer (D-NY) favor. They believe Biden has the existing legal authority to cancel an unlimited amount of student loan debt for an unlimited number of student borrowers. Under their proposal, Biden could simply — with a “stroke of the pen” — erase billions of dollars in student loan debt. (That said, Biden is not canceling most student loan debt).

2. Biden uses the regulatory process to cancel student loans

Option 2: Biden is using the regulatory process to cancel student loans. As president, Biden canceled $17 billion in student loans. Rather than using an executive order, as Warren and Schumer prefer, Biden could rely on regulatory changes and work with the US Department of Education to implement student loan forgiveness. For example, Biden made several regulatory changes to student loans, including major changes to income-contingent repayment and cancellation of student loans. (Student Loan Forgiveness: 5 Key Takeaways from a Major Announcement). Why would Biden choose this approach? If Biden proceeds with a large-scale student loan forgiveness with an executive order, there will likely be legal challenges. If a court issues an injunction, for example, student loan forgiveness could be delayed for months or indefinitely. Despite rhetoric from some politicians, it is unclear whether Biden has congressional authorization to enact large-scale student loan forgiveness. To minimize the possibility of a court blocking the cancellation of student loans, the US Department of Education could find a way to cancel student loans through existing federal programs or through other regulatory changes. (Student Loan Forgiveness: Who Might Qualify Under Biden’s Plan).

Biden teams up with Congress to pass student loan forgiveness legislation

Option 3: Biden is joining Congress to pass student loan forgiveness legislation. In this scenario, Congress would pass legislation to enact large-scale student loan forgiveness. (Biden said he would not cancel $50,000 in student loans). If Congress passes legislation to forgive student loans, the law is unlikely to be challenged in court. Why? Congress is the branch of the federal government that has the spending power. Congress can pass legislation to cancel student loans, and the president can sign the legislation. The challenge is that Congress will not approve the cancellation of a student loan of any amount in its current form. Congress needs at least 60 votes in the US Senate to pass major legislation. While Biden — a longtime former U.S. senator — could perhaps hammer out a comprehensive spending package that could include student loan forgiveness, the possibility seems unlikely if Biden is planning a student loan announcement in a few weeks.

Student loans: next steps

Biden will make a final decision in a few weeks on large-scale student loan forgiveness. If Biden cancels student loans, he will also need to address these 5 things. The legislative option is not a viable option. Therefore, if Biden proceeds to cancel student loans, expect Biden to pursue either executive action or regulatory change. Above all, if Biden cancels $10,000 in student loans for borrowers, expect eligibility requirements. This could include limiting student loan relief to only federal student loans and university student loans, for example. It is likely that there will be income limits, which could disqualify student borrowers with higher incomes. Finally, student loan relief is scheduled to end on August 31, 2022. Know all of your student loan repayment options based on your unique financial situation. Here are some ways other student borrowers have successfully paid off their student loans faster:

Student Loans: Related Reading

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

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

Student loan forgiveness: 5 key takeaways from a major announcement

Biden to cancel student loans or extend student loan pause by August 31


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