Groundwork laid for Biden to write off $ 50,000 in student loan debt

Groundwork laid for Biden to write off $ 50,000 in student loan debt

The third stimulus checks are paid, it is not clear if there will be never be a fourth, and President Joe Biden is interested in spending money on roads, bridges and other infrastructure, and raising some taxes.

But what happens with the cancellation of the student loan? This has been the subject of a lot of discussion in Washington – so if you are inundated with college debt, will the government soon write off some of it?

Biden has publicly stated that he is prepared to write off $ 10,000 in federal student loan debt per borrower, but several developments pave the way for the president to forgive up to five times more. Here is a preview.

1. Members of Congress demand $ 50,000 in pardon

The United States Capitol, one of the most recognizable buildings in the world, and the seat of Congress in Washington, DC

Sherry V Smith / Shutterstock

Senate Majority Leader Chuck Schumer, Massachusetts Senator Elizabeth Warren and other leading Democrats have actively encouraged Biden to write off up to $ 50,000 in student loan debt for all borrowers.

“Student loan debt weighs on millions of families,” Schumer said in a statement in February. “We must do everything in our power to bring real relief to the American people.”

Pressure from Schumer and Warren to write off up to $ 50,000 in student debt per person began while President Donald Trump was still in office. Last September, they issued a press release with a headline stating, “Next President Can and Should Write Off Up To $ 50,000 In Student Loan Debt Immediately.”

2. Biden has people exploring the $ 50,000 question

The president said he was not sure he had the authority to get rid of $ 50,000 in student loan debt per borrower. Senator Schumer therefore announced in mid-March that the Justice Department had launched a legal review of the president’s ability to grant comprehensive student debt relief.

Meanwhile, Biden has asked his secretary of education to investigate the matter as well – and prepare a report.

“I hope we see this in the next few weeks,” said Ron Klain, White House chief of staff. says Politico. “And then he’ll look at that legal authority, he’ll look at the policy issues around it, and he’ll make a decision.”

3. A new law facilitates forgiveness, fiscally

An eraser from a pencil begins to erase the word Taxes, which makes for a great concept.

Keith Bell / Shutterstock

The recent COVID-19 relief bill the President signed – the one with those third, stimulus checks of $ 1,400 – also includes a tax exemption on student loan forgiveness which could save borrowers a lot of money.

With few exceptions, student loan debt canceled by the government has always been considered taxable income. But a provision added to the stimulus bill by Sen. Warren and fellow Democratic Senator Robert Menendez of New Jersey would exempt student debt from federal taxes until 2025.

Previously, Biden canceling $ 50,000 of your student loans all at once would have left you with a big tax bill. Now that the cancellation does not threaten to result in a painful tax penalty, the President could move forward with the knowledge that borrowers will not be burdened with onerous taxes.

4. The president has already canceled part of the student debt

In the space of about 10 days, the Biden administration recently wrote off about $ 2.3 billion in student loan debt: $ 1 billion held by borrowers who said they were cheated by their schools, and 1 , An additional $ 3 billion owed by Americans described as totally and permanently disabled. .

The measures have affected more than 300,000 borrowers – a tiny fraction of the estimated 43 million people who owe an estimated $ 1.7 trillion in federal student loans.

Clearly, forgiving up to $ 50,000 in debt per person would be a massive move for Biden, costing the government around $ 1,000 billion, according to multiple sources.

Waiting for an answer

Young concentrated African American couple examining their student loan debt.

fizkes / Shutterstock

If your student loan balance is wreaking havoc on your finances, try a few ways to cut spending while Congress, the president, and members of his administration work through the forgiveness problem.

Start by looking in refinance your student loans. Interest rates on student loan refinances have reached record highs, so if you can replace your federal student debt with a new, cheaper loan from a private lender, you could significantly reduce your monthly payments.

Look for savings elsewhere in your budget. Are you paying too much for your auto insurance? With many people now working from home and driving less, some auto insurers have given price reductions. If yours isn’t getting you a good deal, it’s time to shop around for new coverage that might save you hundreds of dollars per year.

Other small steps can mean big savings. When you go to the grocery store, use an app that gives you cash back just for take a picture of your receipt. To save when shopping online, download a free browser add-on which will automatically search for better prices or coupons.

Taking charge of your finances where you can is almost always a safer bet than waiting for Washington to get its act together.

About Robert Pierson

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