To kick off the new year, Senate Majority Leader Chuck Schumer said he thinks it's "a great day" for the Biden administration to cancel student debt — something he also said about 20 times on Twitter in December alone.
For the past several weeks, Schumer has been ramping up pressure on President Joe Biden to forgive up to $50,000 worth of federal student loan debt using executive action. Although Biden advocated for broad student debt cancellation as a presidential candidate, he has not delivered on his campaign promise since taking office.
While Schumer and several other outspoken progressives have been advocating for Biden to lean on his executive authority to forgive student loans, the White House recently said that the president is waiting on Congress to deliver on student forgiveness legislation.
Keep reading to learn more about the likelihood of widespread student loan forgiveness, as well as your alternative loan repayment options like refinancing. You can see your estimated student loan refi rates on Credible for free without impacting your credit score.
Can Biden forgive student loans with an executive order?
According to the Higher Education Act of 1965, the Secretary of Education has the legal authority to "enforce, pay, compromise, waive, or release any right" to collect on federal loans, but it's unclear whether that includes widespread debt forgiveness.
Although Schumer and other prominent lawmakers like Rep. Alexandria Ocasio-Cortez and Sen. Elizabeth Warren have urged Biden to cancel student loan debt, not all Democrats are in agreement that the president can do so.
Biden himself has cast doubt on his power to cancel student loans — White House press secretary Jen Psaki recently told reporters that the president was waiting on a bill from Congress. She also added that Biden’s presidential authority to cancel student loans was "under review." House Speaker Nancy Pelosi has also previously said that the president doesn't have the authority to forgive student loans, adding that it "has to be an act of Congress."
Passing student loan forgiveness legislation through a divided Congress would be a difficult task. Democrats hold a narrow 50-50 majority in the Senate, which means they would need the support of moderates like Sens. Joe Manchin and Kyrsten Sinema in order to cancel student debt.
Plus, federal student loan forgiveness wouldn't apply to private student loans, which make up 8.4% of all student loan debt, according to the Education Data Initiative. Private student loan borrowers could instead consider refinancing on Credible while rates are at record lows.
3 ways to manage your student loan debt
About 43.2 million Americans have student loan debt, with an average balance of $39,351, according to the Education Data Initiative. If you're struggling to manage your student loans, consider the following alternative debt repayment options:
- Income-driven repayment plans. Enrolling in income-driven repayment (IDR) will limit your federal student loan payments to 10-20% of your discretionary income, depending on the type of loans you have. You can get started on the Federal Student Aid (FSA) website.
- Additional federal forbearance. Federal student loans are currently in administrative forbearance until May 2022, but borrowers may be eligible for up to 36 additional months of student loan relief through economic hardship or unemployment deferment.
- Student loan refinancing. It may be possible to reduce your monthly student loan payments by refinancing to a lower rate through a private lender. Fixed student loan refinance rates are currently at record lows, making it a good time to lock in better terms.
Be aware that refinancing federal student loans into a private loan will make you ineligible for government benefits, including the current federal student loan payment pause, IDR plans and select student loan forgiveness programs.
If you don't plan on taking advantage of these federal benefits — or if you're one of the millions of borrowers with private student loan debt — then student loan refinancing may help you pay off debt faster, lower your monthly payments and save money on interest over time. Browse current student loan rates in the table below, and visit Credible to see offers tailored to you.
Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at firstname.lastname@example.org and your question might be answered by Credible in our Money Expert column.