NEW YORK, October 22, 2021 (Newswire.com) - Campaign promises are fickle creatures. Politicians make them, yet often don't have the power to fulfill them. Is that the case with President Biden's pledge to eliminate student loan debt? According to the legal experts, he may need a Congressional action to do so, despite certain partisan assurances that he can use an executive order.
For just under 13% of Americans, student loan debt is a stark reality. If balances are high, this debt drops to the bottom of the list when using a snowball calculator. And the payments can stretch well into our thirties. Proponents for eliminating this burden stress the positive impact that it could have on our economy. Could it really happen? Let's examine the issue further.
Canceling Student Loan Debt with an Executive Order
Senator Elizabeth Warren has claimed that President Biden can wipe out federal student loan debt with "the stroke of a pen," using powers granted to the President in the Higher Education Act of 1965. The language of the act, which is geared more towards loans for teachers, does not seem to support that statement. President Biden is seeking legal advice on it now.
Muddying the waters further, Speaker of the House Nancy Pelosi stated earlier this year that forgiveness of student loan debt requires an act of Congress. The payment "freezes" enacted by the Trump administration during the pandemic are not forgiveness programs. They're payment deferrals that expire on January 31, 2022. Congress is crafting legislation to offset that.
Executive orders, which became more popular under both Obama and Trump, indicate that Congress is too polarized to take bipartisan action. Both houses currently have a slim democratic majority, but student loan forgiveness is a controversial issue. President Biden may not have the authority to cancel debt on his own, so expect the debate to rage on.
Refinancing Your Student Loan Debt
Waiting for the government to step in has not historically been a sound personal finance strategy. Student loan debt cancellation will be great for borrowers if it happens, but there are things you can do in the meantime to get out from under it. One of those is to refinance now while interest rates are at an all-time low. Speak to your local bank about this.
Some online lenders specialize in student loan refinancing and consolidation loans to lower interest rates on loans and credit card debt. You can generally prequalify on their websites without impacting your credit score, so it's worth looking into. Some sites will take your request and shop it at multiple lenders, getting you the best rates and terms available.
Despite having its hands tied on this issue, the Biden administration has not been idle on student loan debt forgiveness this year. The Department of Education has forgiven $9.5 billion in debt under closed school and TPD (total and permanent disability) provisions previously enacted. There's also a Public Service Loan Forgiveness (PSLF) for public servants.