Borrowers of federal student loans hoped that the government would eventually forgive some of their debts during the COVID-19 pandemic.
Most Republicans have opposed the idea of forgiving up to $50,000 for each borrower, which has been supported by some Democrats in Congress. Meanwhile, Biden has frequently stated his support for canceling about $10,000 per borrower.
It is just a “pipe dream,” Andrew Crowell said, who is the vice-chairman of wealth management at financial services firm D.A. Davidson & Co.
Jen Psaki, White House Press Secretary, said the administration is not considering a new payment pause after being asked about it on Friday. “It expires Feb. 1, so right now we’re making a range of preparations,” said Psaki,
According to Psaki, a smooth transition back into repayment for people with student loans is a priority for the administration.
Nearly 600,000 borrowers have benefited from over $11.5 billion in student loan relief under the Biden administration.
There is still no legislative or executive plan to broaden the forgiveness of federal student loans by the end of 2021.
Meanwhile, the Biden administration continues to examine broad-based loan forgiveness, Education Secretary Miguel Cardona reported at the end of October.
Students will have to resume federal student loan payments in just over two months, and experts say it would be a mistake to set your strategy based upon the perception that student loan forgiveness will occur.
Prior to Psaki’s recent statements, the latest extension of the forbearance duration was described as “final” by the U.S. Department of Education.
You can begin taking control of your student loan debt right now by reading about what to go about wide-scale student loans.
Experts Say Mass Student Loan Cancellations are Unlikely
At least a dozen experts were interviewed throughout the year to learn more about the student loan landscape. Some of them were even asked for their predictions on student loan forgiveness.
Congress or the White House haven’t announced any new developments on the topic since then, experts were contacted to find out about their predictions.
There was only one thing all the experts consulted agreed on: ‘don’t expect loan forgiveness to happen’.
Expert 1: Dr. Tisa Canady
When asked why, Canady who discovered and is managing director of educational research and consulting firm, believes there is “little hope” that student loans will be forgiven. This is because Congress remains divided on whether to forgive student loans and how much to forgive.
“I don’t think total student debt cancellation is going to happen,” Canady said.
“It’s something that seems to be such a polarizing issue. I could be wrong, but I just don’t see Congress coming together on this.”
With the prospects of widespread student loan forgiveness looking increasingly bleak, Canady said the effects of lingering this debt weigh even heavier on Black women, who “traditionally face a larger wage gap and tend to borrow more for undergrad and pursue advanced degrees.”
Expert 2: Robert Farrington
A question was raised a few months ago, and Farrington responded by saying there would be improvements to the current federal loan programs, such as income-driven repayment plans and the Public Service Loan Forgiveness program, rather than a blanket policy that forgives all student loan debt.
“I think we’ve seen a little bit of that. Not much with Congress, but we definitely see the current administration working to fix the existing programs,” Farrington said.
“I think it’s just becoming clearer that borrowers should not expect any type of blanket student loan forgiveness.”
Expert 3: Leslie Tayne
Tayne, an attorney who specializes in debt relief, shares the view of many other experts that not all borrowers will get their student loans forgiven. The system needs to address more important structural problems first, according to Tayne.
“My opinion is still the same: there will not be widespread student loan forgiveness,” Tayne said. “But the wheels are in motion to change in how student loans and educational expenses are structured.”
As Tayne predicted in April, any student loan forgiveness proposal that passes Congress or Biden would most likely be targeted at specific groups. That prediction came to pass when through executive action, the Biden administration erased debt owed to students defrauded by their colleges or who were disabled.
Expert 4: Adam Minsky
Minsky, a lawyer who specializes in student loans, has said that addressing mounting student debt requires a combination of solutions. He said this will include a number of existing federal loan programs will be restructured and fixed during this process. The Public Service Loan Forgiveness program, for instance, is undergoing a short-term overhaul that may lead to more borrowers receiving loan forgiveness.
“I think so far that prediction has been fairly spot on,” he noted.
“The administration has used some executive action to streamline, improve, or expand existing federal loan programs.”
About the cancellation of all student loans? That’s not likely to happen, Minsky stated. “We haven’t heard anything about that potentially happening, and I don’t foresee everyone getting their loans wiped out.”
Expert 5: Andrew Pentis
Earlier this year, Pentis predicted that all borrowers will be forgiven some amount by the end of 2021, such as a $10,000 loan cancellation policy. But, Pentis no longer believes that will be the case.
“It seems that the [Biden] administration is focused on providing student loan relief — just maybe not in the way that people initially assumed,” he said.
“It has offered forgiveness to students who were wronged by their schools, students with disabilities, and students that are veterans.”
Due to the Biden administration’s targeted loan forgiveness, Pentis is pessimistic about wide-scale forgiveness that will “circumvent the more complicated conversation around mass forgiveness,” he added.
Expert 6: Andrew Crowell
Crowell’s company D.A. Davidson & Co recently conducted a survey to see how borrowers feel about student loan forbearance. A majority of respondents supported government forgiveness of student loans on a large scale. However, only 43% of respondents believed that it would occur during the Biden administration.
It is consistent with the viewpoint of Crowell who said widespread student loan cancellations are a “pipe dream” at this stage.
“I just don’t think there’s going to be any consensus on Capitol Hill and there’s questions of whether the president even has the political authority to do it on his own,” he explained. “I think that divergence in opinions about how and how much is just too big at this point.”
How to Deal with Private Student Loans
The cancellation of student loans would only be applicable to federal student loans even if new legislation or executive action were implemented. Government relief hasn’t been much available to private student loan borrowers throughout the COVID-19 pandemic, but some steps can be taken to ease the burden.
A dialogue with your lender about refinancing or modifying your private student loans can help you mitigate any financial challenges in the future. Refinancing student loans at a lower rate than your current one is would be a great idea now, especially given the historically low rates. Shop around for the lowest rates and compare multiple lenders to make sure you aren’t paying too much.
Top Five Ways to Get Ready for Student Loan Repayments in 2022
Next month, student loan borrowers will have to start repaying their loans. It is a good idea to take some time this holiday season to update your information, figure out what your loans are, and determine whether your repayment plan is right for you. Here are a few things you can do to prepare to restart paying on your student loans in early 2022, given that student loan forgiveness is becoming increasingly unlikely.
1. Updating and Verifying your account information
It has been two years since a lot has changed. Perhaps you have changed your address, phone number, or email address.
For that reason, it’s crucial that your personal information, including your address, phone number, and email address, is up-to-date on your student loan accounts. By doing this, you’ll be able to stay informed about any latest information about your loans and the forbearance period if you do that, according to experts. Visit studentaid.gov to see if you forgot to make a payment, or if your loan servicer has changed since you last made a payment.
“You want to do everything possible to make sure that the information is properly updated so that you stay in communication,” Tayne explained.
2. Revisit your Repayment Plan
Consider whether the current repayment makes sense in light of your current financial situation. if it doesn’t, get in touch with your loan servicer immediately if you do not have a payment plan, or begin exploring your options soon, as loan servicers are likely to be overwhelmed next year. “I think there will be a lot of chaos when payments resume,” Farrington said.
3. Review the Loan Terms and Conditions
Double-check your loan payoff date and grace period. You should know what you owe.
“Success in getting back into repayment really depends on student loan borrowers having a clear view of how much they owe,” Canady explained.
Start by creating a master list of your student loans, along with their services, amounts owed, minimum monthly payments, plus interest rates. You can stay organized and figure out who to contact for help or advice by finding a place where you can go with all your information right in front of you.
4. Create a Budget
Most borrowers haven’t made a payment on their student loans for almost two years. You will want to be prepared for your next payment as we approach the end of the forbearance period so you won’t be caught by surprise.
It’s important to set up automatic payments again if you had them set up before the pause, Farrington stated.“It’s been two years, so the Department of Education doesn’t want to debit peoples’ bank accounts automatically.”
A budget should also be created now in preparation for when payments resume. Make sure you budget for upcoming student loan payments by taking into account changes in your income and adjusting your spending accordingly. As you approach January 31, 2022, put your money to work on areas where you can make it last longer, such as paying down high-interest debt, building up an emergency fund, and saving for retirement.
5. Develop a Backup Plan if you Cannot Afford Payments
Reach out to your lender if you don’t think you can afford your repayments once they begin. You may be able to work out a plan to avoid missing or defaulting on payments.
Applying for income-driven repayment may enable you to reduce your monthly payment. An income-driven repayment plan is calculated according to your family size and your discretionary income. Your payments may be as low as $0, if your income is below 150% of the federal poverty line.
“Don’t scramble at the last minute and try to figure this out, even if your budget changes year to year,” Tayne advised.
“Don’t assume that you’ve slipped through the cracks if you haven’t received anything because it’s unlikely.”