Why the Election May Mean Relief From Your Student Loan Debt

In fact, some borrowers may even see their loans canceled for good.

Here are a few of the ways your student debt burden may change after the Biden administration arrives in 2021.

Pandemic forbearance could be extended

The current pause on federal student loan payments and interest during the coronavirus pandemic — instituted in March as part of the broad economic rescue package called the CARES Act — is set to expire at the end of the year.

Although Congress remains deadlocked on a new stimulus package, it’s possible another pandemic relief bill could be passed prior to the Dec. 31 deadline.

If not, Biden will likely try to push Congress to pass additional student loan and economic aid measures as soon as he takes office.

Even without a new stimulus package, Biden could exercise his executive power to extend the forbearance on federal student loans, much like President Trump did in March and August.

You may have more flexible repayment options

President-elect Biden has called for overhauling the current income-driven student loan repayment plans, which require that borrowers pay between 10% and 20% of their discretionary income. That’s the money left over after taxes and essential spending, like food.

Biden aims to cap income-driven repayment for federal student loans at 5% of discretionary income. And, after 20 years of responsible payments, the remaining balance on any federal student loan would be forgiven.

But that’s not all: Federal loan borrowers earning less than $25,000 per year would not be required to make any loan payments or pay interest.

Biden also plans to make enrollment in income-driven repayment plans automatic, unlike the current system that requires student loan borrowers to enroll manually.

New relief likely wouldn't apply to private student loans

At the start of the pandemic, Biden tweeted his support for having the CARES Act forgive up to $10,000 each for borrowers carrying federal student loans.

That didn’t happen. But what’s important to note is that forgiveness proposals, like that one, generally apply only to federal loans, not the private student loans obtained from banks and other nongovernment lenders.

If your loan is from a private lender and you need relief, you’ll have to pursue other options, like refinancing into a cheaper rate. Refinancing could help reduce your monthly payment, and allow you to pay off the balance of your loan years sooner.