With President Joe Biden still yet to announce his decision on the cancellation of federal student loans, millions of borrowers have grown anxious. Student debt has become somewhat of a crisis, with the ever-increasing cost of getting a college degree nowadays. The total federal student loan debt is currently sitting at around $1.6 trillion and affecting over 40 million Americans.
Biden is reportedly considering canceling up to $10,000 per person would remove roughly $250 billion of debt for struggling students. This student loan cancellation may be limited based on certain income thresholds. It is said that the cancellation may only be applicable to those earning less than $150,000 a year. Democratic lawmakers were initially aiming for a larger amount of debt relief per person, but Biden stated that he is not considering a $50,000 debt reduction.
While federal student loans account for the vast majority of loans, there are also students who have taken private loans from financial institutions such as banks. In the case of federal student loan cancellations, the federal government will be willing to shoulder the cost of the loans and lost interest. However, private loans are unlikely to be canceled and students would have to pay them back as they normally would.
For the millions of students drowning in student debt, a full or partial cancellation can go a long way in relieving them financially. For current students or even those who put their education on hold, any form of relief would allow them to become more financially independent. On the other hand, this would not solve the underlying issue and direct cause of student debt which is unreasonably high college tuition fees. Any student loan cancellation would provide a temporary solution for current borrowers, but future borrowers will also encounter the same issues with student debt.
Student loan repayments were temporarily paused during the pandemic but are scheduled to resume after August 31, 2022. This has put pressure on President Biden to come to a decision regarding student loan cancellations before the end of this month. Still, an official announcement has not been made yet and it is unclear whether students will have their loans canceled or not. If the debt cancellation is announced, borrowers can benefit from it by applying for the program on StudentAid.gov. This will help verify that they are eligible to receive the debt relief.