He’s probably missing for some reason

As borrowers on federal student loans brace for the current suspension of payments and interest until Jan.31, 2022, many are still awaiting a memo on Biden’s legal authority to extend the loan cancellation to millions of dollars. people through executive action.

As early as April of this year, the Biden administration said it had asked the education ministry to prepare a memorandum on this important topic. Since then, however, we have hardly heard of student loan cancellation, which is a shame as many borrowers try to decide what to do based on this information. And last week, progressive Democrats including Ilhan Omar (D-MN) and Alexandria Ocasio-Cortez (D-NY) sent a letter to Biden asking him to release the memo by October 22.

While loan cancellation through executive action can actually materialize, educating borrowers about what the cancellation might look like can help them make sound decisions about their future. While canceling the loan through executive action is probably illegal, on the other hand, people can swallow it and plan accordingly.

Nivine Megahed, Ph.D., who is president of National Louis University, says more borrowers are waiting for this note, and for good reason.

“President Biden’s memo is something many of us in the education community have been eagerly awaiting,” said Megahed, noting that the student debt crisis is one of the few defining issues of our time. and cannot be postponed any longer. .

“The weight of student loans on the well-being of college graduates and on our global economy has been overwhelming,” says Megahed. “We must act now.”

Unfortunately, it all comes down to this memo. He was supposed to clarify whether Biden really has the legal power to write off student loan debt with the stroke of a pen – and without involving Congress. Unfortunately, this is an area on which no one, not even those at the highest levels of government, seems to agree.

The enigma of debt forgiveness

Mark Kantrowitz, student loan expert, author of How to Appeal for More College Financial Aid, says there are a few reasons we may still be awaiting information on potential loan cancellation plans, including the possibility that the report may be delayed due to delays in confirmation from policy staff .

However, Kantrowitz says it’s also possible that the report confirms that only Congress has the capacity to authorize a large student loan forgiveness.

In this case, the Biden administration “may want to wait until Congress passes the infrastructure bill and the Build Back Better Act, and deals with the debt ceiling, before introducing another major bill.” .

According to Kantrowitz, the president does not has the legal power to cancel student loans on its own, and executive action can only be used when authorized by Congress.

“Only Congress has the power of the stock market,” he explained in a essay on the subject.

Interestingly, there are many others who disagree, including Democratic Senators Elizabeth Warren and Chuck Schumer. Both are on the record saying he Is have authority with several other members of Congress. In fact, they say student debt cancellation “is the most effective executive measure available to provide massive consumer stimulus.”

Not only do they agree that President Biden has the legal authority to write off million dollar student loan debts with federal loans, but they say he should write off up to $ 50,000 in student loans per borrower at the time. nationwide. The press release for this announcement cites the Higher Education Act of 1965 as proof of their claim since it states that the president may “… modify, compromise, waive or release any right, title, claim, privilege or demand, whatever the mode of acquisition, including any equity or right of redemption. “

“By writing off up to $ 50,000 in federal student loan debt for borrowers, President Biden can take the most effective executive action available to massively stimulate our economy, help narrow the racial wealth gap, and ease that burden. impossible of tens of millions of families, ”said Senator Warren in the press release.

Sounds good, but is she right? Like before, no one seems to know … at least not yet.

So where’s the memo?

There’s probably a good reason the Biden administration is withholding this memo – it’s going to put them in a difficult position politically one way or another.

If the note allows for the cancellation of the student loan, it could become a burning issue that derails other elements of political action – such as infrastructure. He will likely face political and legal challenges if he attempts to grant any type of blanket student loan cancellation without Congress.

Also, canceling the loan alone only partially solves part of the problem – it does nothing to deal with the rising cost of higher education and does nothing to solve the problem for the future.

More likely, the memo will say Biden does not have the authority to cancel student loans without Congress. In which case, it would also deal a political blow (or at least the Progressive Democrats who pushed it) as well since it has been a huge talking point over the past couple of years.

It would really leave a bitter taste in the mouths of young Americans who may have been relying on Biden to provide some type of student loan relief.

Should borrowers count on student loan forgiveness?

If you’re a federal student loan borrower hungry for answers, you are definitely not alone. However, you should also plan to resume your loan repayments after the current break ends on January 31, 2022. If you need to change your payment plan or are hoping to access income-based repayment plans, you should also start. look through your options now.

According to Megahed, we know the importance of credit in the lending process, and making late or withheld payments on student debt could negatively impact a student’s credit and cause other long-term financial hardship. With this in mind, the default approach of honoring existing loan commitments when possible “is probably the safest decision”.

Michael Lux, known as Sherpa student loan, also points out that taking a “wait and see” approach and paying the minimum on your loans can potentially backfire. This is because you are spending money on interest each month that you are in debt, and you can also prolong the pain of your debt if you pay less than you normally would.

“If you delay paying off your loans in the hope of a large-scale forgiveness, you are literally betting on the forgiveness,” he says. “The question you need to ask yourself is whether or not you are making a good bet.”

According to Kantrowitz, borrowers should not take any action on the assumption that they will be eligible for a loan forgiveness, mainly because the loan forgiveness amount and eligibility criteria have not yet been specified. With that in mind, any action you take should be based on speculation.

However, he says borrowers who are considering refinancing their federal loans into a private student loan may want to “wait a few months, just in case the loan cancellation is limited to federal loans only.”

If you refinance your federal loans with a private lender and the Biden administration offers thousands of federal loan discounts the next day, you’re out of luck.

About Janet Young

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