Democrats Want Student Loan Cancellation, But Not Everyone Would Qualify

With all the headlines about student loan cancellation, let’s separate fact from fiction.

Here’s what you need to know — and what it means for you.

Student Loans

Before you get your hopes up about student loan cancellation, it’s important to recognize the following to have a full understanding of the latest on student loan forgiveness:

1. No guarantee there will be student loan cancellation

President Joe Biden wants to cancel student loans immediately. Similarly, Democrats in Congress want to cancel student loans now. However, that’s where the agreement ends. While Biden wants $10,000 of student loan forgiveness, some Democrats, including Sen. Elizabeth Warren (D-MA) and Senate Majority Leader Chuck Schumer (D-NY), want $50,000 of student loan cancellation. The differences don’t end there. Biden wants Congress to pass legislation for student loan cancellation, while Democrats want Biden to cancel $50,000 of student loans through an executive order. Warren and Schumer, using a textualist approach to legislative interpretation of the Higher Education Act of 1965, say that Biden has existing authority from Congress to cancel student loans through an executive order. Biden says he’s unlikely to do so, implying he doesn’t think the president has unilateral authority to cancel billions of student loans. Instead, Biden, a former U.S. senator from Delaware, likely agrees that Congress is the appropriate branch of government to decide federal spending. The good news for borrowers is that Biden is considering student loan cancellation by executive order. However, there is no guarantee that Biden unilaterally can cancel student loans nor any guarantee that Congress has enough votes to cancel student loans either.

2. You won’t get student loan cancellation for all your student loans

This may comes as a surprise to many student loan borrowers, but there’s no discussion of cancelling all student loan debt. (Here’s what the new stimulus package says about student loan cancellation, if it’s any indication where things stand). It’s important to clarify this point so that borrowers can level set their expectations. Sen. Bernie Sanders (I-VT) proposed cancelling all $1.7 trillion of student loan debt. However, Congress is not considering his proposal and there’s no expectation that Schumer, Warren or Biden endorse that position. Both the Warren-Schumer and Biden proposals also focus on federal student loans only. That said, Congress could adopt this other student loan forgiveness proposal from Sanders.

3. Not everyone will get student loan forgiveness

Another potential surprise for student loan borrowers is that not everyone will get student loan forgiveness. It’s not as simple as saying “student loan forgiveness” or “no student loan forgiveness.” Even if Congress passes student loan cancellation and Biden signs the legislation, there will be limitations. For example, only federal student loans likely will be eligible. Second, there may be income limitations on who qualifies. Currently, Warren and Schumer say that only borrowers who earn $125,000 or less annually would qualify. If Congress lowers the income threshold for stimulus checks in the new stimulus package, this could be bad news for student loan cancellation. It’s possible that Congress lowers the income threshold for student loan forgiveness too. For example, Congress potentially could limit qualification to $50,000 for individuals and $100,000 for married or joint filers, which is the same income limit proposed for the new stimulus package.

4. Student loan cancellation may only be for college debt

If you only have graduate student loans, you may not get any student loan forgiveness. It’s possible, although not guaranteed, that Congress cancels student loans for college debt only. Several of Biden’s student loan cancellation proposals apply only to college…