If President Joe Biden enacts large-scale student loan forgiveness, he needs to address these 5 points.
Here’s what you need to know — and what it means for your student loans.
Biden is actively considering whether he will cancel your student loans, and he could decide within weeks. While student borrowers with existing student loan debt may be pleased, there are at least 5 things Biden needs to address if he enacts large-scale student loan forgiveness.
1. Student loan relief: there must be a plan for student loans in the future
First, if Biden cancels student loans, one-time student loan cancellation does not solve the fundamental problems of higher education. Among them, college is too expensive, student borrowers can borrow too much money, and tomorrow’s student borrowers get no student loan relief. Certainly, canceling student loans today will help current student borrowers. However, any student loan forgiveness plan must be accompanied by detailed policy prescriptions to address persistent student loan issues. (Student Loan Forgiveness: Who Might Qualify Under Biden’s Plan).
2. Prospective student borrowers need clarity on their student loans
Second, unless Biden decides otherwise, student loan forgiveness is likely a one-time event. (Cancelling a student loan may be different than you think). If so, student loan forgiveness will happen one day. If you have student loans that day, at least some of your student loans could be forgiven. However, if you borrow student loans the day after a large-scale student loan cancellation, you may be out of luck. The Biden administration should let prospective student borrowers know what will or will not happen to their student loans. Should they expect student loan forgiveness? Or will student loan forgiveness be a one-time event? Prospective student borrowers should plan accordingly. Otherwise, these student borrowers could expect their student loans to be forgiven, which could lead to moral hazard. (Biden Confirms He Won’t Forgive $50,000 in Student Loans – 5 Key Takeaways).
3. Will former student borrowers be compensated?
Third, the Biden administration should reach out to all student borrowers who have paid off their student loans before any large-scale student loan cancellations. There is no obligation to compensate these student borrowers. However, many of these student borrowers also struggled to repay their student loans. They worked multiple jobs, delayed buying a home, and failed to save for retirement, all in the name of paying off their student loan. What is the message to these student borrowers? Are they excluded from “student loan forgiveness” or can they receive a student loan refund? Will there be a look-back period for any student borrower who has repaid a student loan more recently? At a minimum, these former student borrowers should not be ignored.
4. Student loan relief for everyone else cannot be ignored
Fourth, if there is large-scale student loan cancellation, the Biden administration should expect the displeasure of the 80% of American adults who have not gone to college or do not have student loans. . These people, many of whom are also struggling financially, will wonder, “Where is my student loan relief? There are 45 million student borrowers, but there are 250 million Americans who either didn’t go to college or no longer have a student loan. These people, especially those who have not attended college, are on average low-income people and more likely to need financial support. There is no obligation to provide financial assistance beyond the student loan forgiveness Biden is considering. However, the majority of American adults may be wondering about mortgage relief, credit card debt relief, or car loan relief.
5. Biden should consider reducing the amount of student loan debt borrowers can borrow
Fifth, Biden should consider reducing the amount of student loan debt borrowers can borrow. The goal should be to prevent student borrowers from taking on too much debt. Having said that, it is essential to allow everyone to have access to higher education. At the same time, young people should not start their professional lives with insurmountable student debt. If the government lowers the ceiling on student loans, colleges and universities could also reduce their tuition fees.
Student loans: next steps
Biden plans to enact large-scale student loan forgiveness, but there is no guarantee that Biden will forgive student loans. If it cancels the student loan, it is not obligated to compensate previous borrowers or offer financial assistance to those who did not attend college. Likewise, he doesn’t have to address the prospect of future student loan forgiveness. However, providing greater clarity and transparency – as well as introducing a comprehensive solution to these core higher education issues – is essential to any student loan forgiveness plan.
Temporary student loan relief is ending soon and student borrowers should evaluate their student loan repayment strategy. If these issues aren’t resolved, you need a plan to pay off your debts. Here are some smart places to start: