President Joe Biden (Photo by Oliver Contreras/for The Washington Post via Getty Images)
U.S. Treasury Secretary Janet Yellen says that wide-scale student loan relief could be good for the economy.
Here’s what you need to know — and what it means for your student loans.
During testimony on Capitol Hill Tuesday, Yellen said:
Sen. Elizabeth Warren (D-MA), a leading advocate in Congress for wide-scale student loan cancellation, has argued that student loan forgiveness stimulates the economy. The argument goes like this: if people don’t have to pay student loans, they can spend money in other parts of the economy. Warren says that wide-scale student loan cancellation also unlocks a generation of student loan borrowers from the shackles of student loan debt. Without crushing debt, Warren says, people can get married, start a family, buy a home, save for retirement and start a business. While progressive Democrats support the economic and social benefits of student loan cancellation, not everyone agrees. For example, Republicans in Congress say wide-scale student loan cancellation will hurt the economy and increase inflation. (New proposal would prevent Biden from canceling student loans). Sen. Tom Cotton (R-AR AR ) said the most recent extension of the student loan payment pause is a “terrible idea.” Rep. Virginia Foxx (R-NC), the top Republican on the House Committee on Education and Labor, has said that extending the student loan payment pause again is “outrageous.” Both Cotton and Foxx oppose wide-scale student loan cancellation for all or most student loan borrowers. (Bill Maher: student loan forgiveness is a ‘loser issue’),
Biden, who has canceled $17 billion of student loans since becoming president, is considering whether to enact wide-scale student loan cancellation. Importantly, Biden has not said that he will cancel everyone’s student loans, or that he will cancel any student loans. If Biden cancels student loans, student loan cancellation could mean the end of student loan relief. Biden also could limit student loan forgiveness in several ways. This has many student loan borrowers wondering if they will qualify for student loan cancellation. For example, Biden could limit student loan cancellation only to federal student loan borrowers, borrowers with college student loans, low-income borrowers, borrowers who didn’t graduate, or Social Security recipients whose wages are being garnished to pay student loans.
Notably, any student loan cancellation would be one-time student loan cancellation. This means that many student loan borrowers will still have student loans after any student loan forgiveness. That’s why it’s critical to plan for student loan repayment now. Evaluate all your options based on your financial circumstances. Consider these popular strategies to pay off student loans faster: