Expert offers new way for Biden to cancel student loans without Congress or executive action
Expert offers new way for Biden to cancel student loans without Congress or executive action

President Joe Biden may be able to provide significant relief to direct loan borrowers by overhauling an existing student loan forgiveness program, an analyst has said. (iStock)

As a presidential candidate, Joe Biden campaigned to forgive $10,000 in student loan debt per borrower. But more than a year into his term, President Biden has yet to find a way to deliver on his campaign promise.

Prominent Democrats have called on Biden to forgive student debt by executive order “with the flick of a pen,” though not all legal experts agree the president has the legal authority to enact debt forgiveness. Biden himself has previously indicated that he wants Congress to enact this type of legislation. However, existing bills aimed at canceling student debt have not garnered enough support among moderates in the House and Senate.

Now, an analyst has offered another way for the Biden administration to enact broad student debt forgiveness.

Student loan expert Mark Kantrowitz said in a recent blog post that Education Secretary Miguel Cardona has the regulatory authority to change the rules of an existing federal program, income-contingent repayment (ICR), to effectively cancel student debt for millions of borrowers .

“This regulatory authority is so broad that the U.S. Department of Education could use the rulemaking process to issue new regulations that turn ICR into a new student loan forgiveness program,” Kantrowitz said. .

Keep reading to learn more about this new student loan debt forgiveness proposal through ICR. And if you have private student loans that aren’t eligible for forgiveness, it may be possible to lower your monthly payments and pay off debt faster by refinancing at a lower interest rate. You can visit Credible to compare student loan refinance rates for free without affecting your credit score.


How Biden could use the ICR to implement widespread student loan forgiveness

Income-contingent repayment (ICR) is one of four income-contingent repayment plans offered by the Department of Education. Under an ICR plan, eligible borrowers can limit their federal student loan payments to 20% of their discretionary income. After making payments for 25 years, the remaining balance of a borrower’s loan is forgiven.

The Department of Education has the legal authority to change the rules of the ICR program to bring borrowers closer to obtaining forgiveness, Kantrowitz says. In fact, the Biden administration has already done this once when it temporarily modified the Public Service Loan Cancellation Program (PSLF), making it easier for public servants to qualify for debt cancellation.

Kantrowitz said the Department of Education may be able to:

  • Shorten the repayment period by 25 years. The department could cancel a student loan’s remaining balance after making payments for 15 or 10 years, for example. According to the regulations in force, however, the repayment term cannot be less than five years.
  • Count the periods when the borrower was not enrolled in an ICR plan. This would include eligible payments made on a standard repayment plan and under the Federal Family Education Loan (FFEL) program, as well as periods of economic hardship deferment.
  • Provide full student loan discharge to disadvantaged borrowers who meet certain income thresholds based on the poverty line. It could also prevent wealthy borrowers from qualifying for full student loan forgiveness.


While other proposals to cancel student debt through an executive order would likely face lawsuits, Kantrowitz said the ICR amendment is “more likely to survive legal challenges.”

It is important to note that this proposed student debt cancellation would only be available to federal borrowers. Those with private student loan debt may consider other repayment options, such as refinancing. You can learn more about student loan refinancing by contacting a knowledgeable loan officer at Credible.


What to do if you don’t qualify for student debt forgiveness

The Department of Education has forgiven about $16 billion in student loan debt since Biden took office for more than 680,000 Americans who have qualified for programs like the PSLF, borrower defense through repayment and school exits closed.

However, the vast majority of borrowers have yet to receive the large student loan forgiveness promised by Biden during the campaign trail. In addition, about 2.4 million borrowers with private student loans would not benefit from widespread debt cancellation measures.

If you have not benefited from federal student loan relief, you may want to consider these alternative debt repayment strategies:

  • Enroll in an Income Driven Repayment (IDR) plan. Federal borrowers may be able to limit their monthly payments to between 10% and 20% of their disposable income. Federal Student Aid (FSA) recommends that you contact your student loan officer to enroll in an IDR plan.
  • Apply for employer-sponsored student debt relief. Nearly a third of large companies plan to offer some form of student loan assistance in the near future, according to recent research. And several top employers like Google, Honeywell, and SoFi already offer student loan repayment assistance.
  • Refinance your student loans at a lower rate. Refinancing student loans can help some borrowers lower their monthly payments, get out of debt faster, and save money on interest charges over time. A recent analysis by Credible found that borrowers who refinanced a longer-term private student loan saved more than $250 per month, on average.

Keep in mind that refinancing your federal student loan debt into a private loan would make you ineligible for IDR plans and some federal student loan forgiveness programs. But if you don’t plan to use those benefits — or if you already have private student loans that don’t qualify for federal protections — then you may qualify for refinancing at a lower interest rate.

You can compare student loan refinance rates from private lenders in the table below. Then you can use Credible’s student loan calculator to determine if refinancing is the right strategy for your financial situation.


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