Biden is canceling $5.8 billion in student loan debt, the largest amount so far
The Biden administration is erasing billions of dollars more in student loan debt, wiping the slate clean for hundreds of thousands of Americans.
The new announcement is this year's biggest yet from the U.S. Department of Education, which has now canceled a total of almost $9 billion in federal student loans since President Joe Biden took office in January. With their balances gone, the borrowers are better able to save, invest or pay off other debts.
Meanwhile, tens of millions of Americans continue to wait for word on whether the president will provide student loan forgiveness on a grand scale.
New forgiveness is granted to disabled borrowers
The fresh debt cancellation — totaling over $5.8 billion — extends to more than 323,000 severely disabled people, says Education Secretary Miguel Cardona.
"Today's action removes a major barrier that prevented far too many borrowers with disabilities from receiving the total and permanent disability discharges they are entitled to under the law," Cardona explained in a news release on Thursday.
From now on, borrowers who are identified by the Social Security Administration as having a "total and permanent" disability will have their federal student loan debt canceled automatically — they won't need to fill out an application for relief, and the department won't ask for information about their earnings.
"We've heard loud and clear from borrowers with disabilities and advocates about the need for this change and we are excited to follow through on it," Cardona says in the release. "This change reduces red tape with the aim of making processes as simple as possible for borrowers who need support."
Earlier actions forgave around $2.9 billion in student debt
Earlier this year, the administration eliminated $1.3 billion in student debt held by seriously disabled borrowers whose canceled loans were reinstated after they failed to supply details about their earnings.
A few additional waves of student loan forgiveness in 2021 applied to borrowers whose schools made phony-baloney promises — or abruptly closed up shop.
Officials say with the latest action, the administration has now wiped out roughly $8.7 billion in student loan debt for around 455,000 Americans.
The Education Department also recently stretched out the pandemic pause on federal student loan payments and interest, for what's being called a final time — until Jan. 31. The moratorium had been scheduled to end next month.
Broad student loan forgiveness remains a question
But many, if not most, of the 42.9 million Americans holding $1.59 trillion in federal student loan debt — according to Education Department data — want more than just a temporary freeze. They're counting on the sweeping student loan forgiveness that Biden campaigned on.
He has said all along he wants to cancel $10,000 in student debt per borrower. High-profile Democrats in Congress, including Senate Majority Leader Chuck Schumer and Massachusetts Sen. Elizabeth Warren, have been urging him to go bigger — and erase $50,000 per person.
So far, there's been no movement on any widescale debt forgiveness. Biden reportedly asked Secretary Cardona to study whether a president has the authority to forgive $50,000 in debt on his own, but that was months ago.
Lawmakers and advocates arguing for the generous relief say it would provide a more meaningful break from crushing student debt that's kept people from buying homes and cars, getting married and investing for the future.
How to deal with your student debt right now
If you're not one of the hundreds of thousands whose student loans have been canceled this year, here are a few ways to financially fight back against overwhelming student debt.
Refi the debt. You might want to look into refinancing your student loans. Interest rates on student loan refinances from private lenders have been historically low this year, so replacing your debt with a new private loan could slash your monthly payments. But note that if federal loan forgiveness ever happens, it would not extend to private refi loans.
Refi your mortgage, if you've got one. If you own a home, consider refinancing your mortgage. With 30-year rates averaging less than 2.90%, around 14 million mortgage holders could save an average of about $300 a month by refinancing, mortgage technology and data provider Black Knight has said. Compare loan offers from at least five lenders to find the best rate for your area and your credit profile.
The best rates go to borrowers with the highest credit scores. If you haven't seen your score in a while, nowadays you can easily get a peek at your credit score for free.
Build your pennies into a portfolio. Another way to give yourself some financial breathing room is through low-stakes investing in the stock market. One popular app helps you build a diversified portfolio by investing just "spare change" from your everyday purchases.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.