During the 2020 presidential election, President Biden campaigned on a platform that included forgiving federal student loan debt. The goal of offering this was to help U.S. citizens find a way out of debt and continue the path of the American Dream; buy a home, have a family, and start to create a healthy retirement savings.
But in the meantime, while we wait to see if forgiveness happens, we need to create a plan to keep us from drowning in an unwinnable situation. But what about Biden’s plan? Should you wait for the forgiveness order to go through, or is it better to play it safe and keep paying your loans?
That’s where we come in. We will tackle the options Biden has for creating student loan forgiveness and the challenges he faces. We’ll also show you a few ways you can have your loans canceled without waiting for his order. Plus, we’ve got a few methods for how you can start lowering your debt now while waiting to see what happens.
Biden’s student loan forgiveness: Plan for the worst, but hope for the best
Though it was a campaign promise, there’s no guarantee that Biden will be able to follow through on forgiving student loans. There are two avenues he can take: issuing an executive order or getting a bill through Congress, and both are tall hills to climb.
To have student loans forgiven by executive order, Biden would have to write the order in such a way that would prevent it from being struck down by the Supreme Court if the justices see it as an overreach of his authority. Lawsuits could drag on for years. During that time, you would be required to continue making payments as if there were no executive order.
To have student loans forgiven by a bill would be even more difficult. While the Democrats currently have a majority in the Senate and House of Representatives, that doesn’t mean every Democrat is on board with forgiveness. To have the bill signed into law would involve having every Democratic representative vote for it in the House, and it would need the same plus a few Republican senators to pass through the Senate.
Finally, the only student loans that would be forgiven are federal if either of these paths worked. Private student loans wouldn’t apply to the federal mandate, so you’d still be on the hook for any private loans taken out.
Other options for student loan forgiveness
There are other avenues to explore for having your federal student loans forgiven. After making 120 successful payments on your loans, you may be eligible for the Public Service Loan Forgiveness (PSLF) program.
The PSLF program is designed to assist employees at any level of government (including federal, state, and local) with the option to have the remainder of their loans forgiven. There are more requirements and a detailed process on the Department of Education’s website. If you’re eligible, the PSLF is an excellent program that you should use as quickly as you can.
If one of your loans is a Federal Perkins Loan, you may be able to have your debt partially or fully forgiven. Unfortunately, the Perkins Loan is no longer an option as of 2018, meaning the Class of 2022 is the last class that had the chance to take out one of these loans. If you already have a Perkins Loan and work in one of the eligible career paths, you could have your loans canceled altogether.
Lastly, the U.S. Department of Education also offers an Income-Driven Repayment (IDR) program. Though it won’t cancel your student loan debt, it can help make your payments more manageable by extending the duration of your repayment terms and lowering your monthly payment. There are four different plans offered as IDRs:
- Income-based repayment
- Income-contingent repayment
- Pay as You Earn (PAYE)
- Revised Pay as You Earn (REPAYE)
How to tackle your student loan debt
For the rest of us who don’t qualify or who have private loans, we have to figure out ways to knock down our debt on our own. How can you tackle the mountain of student loan debt in front of you? There are a few ways.
Two popular ways are the debt avalanche and debt snowball methods. Both require you to take a cold, hard look at your debt situation to develop (and stick to) a plan for accelerating repayment. They also both require minimum payments to be made across all your debts while throwing any extra money toward one loan.
Where they differ in their approach is deciding which loan gets knocked out first. The avalanche method says you should attack the loan with the highest interest rate if you have multiple student loans. By focusing on the loan with the highest interest, you’ll end up paying less overall in the long run.
The snowball method is more emotionally driven because it gives little wins quickly that can help keep you motivated. With the snowball method, you attack the loan with the lowest balance first. Once that’s paid off, you’d move on to the next lowest loan, and so on.
Both are excellent methods for getting out from under debt; the best system depends on what motivates you. If you’re looking for more information about how to get started with lowering your debt load, try this free debt snowball calculator. It can help calculate the best repayment strategy for your situation so that you can begin paying off your loans today.