Biden Cancels $11.5 Billion in Student Debt
- When President Biden took over the White House in early January 2021, one of his primary goals was to cancel student loan debt.
- According to the Federal Reserve, the current outstanding student loan debt is $1.73 trillion.
- Recently, President Joe Biden announced that the government has canceled $11.5 billion in student loan debt which is one percent of the total debt owed.
President Joe Biden recently announced that the government has canceled $11.5 billion in student loan debt. When President Biden took over the White House in early January 2021, one of his primary goals was to cancel student loan debt. Currently, the outstanding student loan debt is $1.73 trillion, according to the Federal Reserve. Although debt cancelation is helpful for many individuals, the amount of student loan debt canceled so far is less than one percent of the total debt owed.
Who has gotten their debt canceled?
So far, a couple of groups have gotten their debt canceled by the Biden Administration. The groups are the following:
- Borrowers with permanent disabilities have had $7.1 billion of their debt canceled
- Those who attended and were misled by the ITT Technical Institute had debts of $1.1 billion forgiven.
- Borrowers whose schools defrauded them had a total of $1 billion forgiven
- Students who went to three trade schools that were misled had $55.6 million forgiven
In addition to these groups, current or past military members with outstanding loans have had their student loan interest fees waived.
With these groups having their loans forgiven, hopefully, there are more groups to follow.
Which groups are next to have their student loan debt canceled?
Although the cancellation of debt within these groups and pausing all repayments until January 2022 are steps in the right direction, there is still a large sum of debt outstanding that needs to be addressed. President Biden has asked the Department of Education if it is legally allowed for a President to forgive the debt of borrowers through executive action. However, there has been no development in this story since April, when Biden first asked about this plan of action.
President Biden mentioned that if he is allowed to forgive student loan debt, he would forgive $10,000 per person. In the United States, the average student loan debt is nearly $30,000, and it takes an average of 20 years to repay. Therefore, forgoing $10,000 of student debt per person would help the population in debt to pay off their remaining debt.
Fortunately, there are people within the United States Congress who believe that the $10,000 threshold is too low. For example, Senate Majority Leader Chuck Schumer says the amount Biden is ready to forgive is too low and should be raised to $50,000. Schumer usually posts the following statement regularly on social media, “Today would be a great day for President Biden and Vice President Harris to #CancelStudentDebt.”
For the students who are studying to become doctors and lawyers, their student loan debt almost always reaches the six-figure mark. The increased forgiveness will allow Americans to pay off their debts quicker.
What to do with any extra money?
Fortunately, those who have had their debts canceled now have a higher disposable income, allowing them to improve their financial situation. However, those who haven’t received any form of debt cancellation have other routes to paying off their debt.
Pay off any other outstanding debts
Paying off any liabilities outside of student loan debt such as credit card debt is extremely important. Falling behind on monthly payments can negatively affect both the credit report and credit score. Therefore, it is essential to pay off outstanding debts as soon as possible to ensure the credit score is not affected.
Save for a rainy day
The future is unpredictable so it’s a must to build your emergency fund. An emergency fund is essential because it allows you to set aside money for any emergencies such as job loss, car repairs, or unexpected medical bills. A rule of thumb is to build your emergency fund to cover at least three to six months’ worth of expenses.
If you have a higher disposable income, it is vital to invest in the future. When you invest your money it allows your money to grow without much work on your part (depending on your form of investment). Whether you want to invest in stocks, Roth IRA, or real estate, it’s important to invest when you understand how your money will be used and how it will grow.
What are other ways to save money?
Although the United States government has helpful resources and solutions for its citizens, relying on the government too heavily can put you under financial strain. By taking control of your finances, you may find that there are ways that can help you to save money. Below are two methods that could help you save money.
Cut back on expenses
Some people may face the main issue that expenses are too high, and there is not enough income left over to do anything, such as putting it aside for an emergency fund or investing it. Fortunately, it is easy to cut back on expenses; all it requires is simple budgeting.
Over the period of one month, record all transactions, both revenue and expenses. After the month is over, review these transactions and determine which purchases were unnecessary or not useful. Once these expenses have been outlined, stop purchasing these items to save money that can be used elsewhere with more value.
Refinance your mortgage
Currently, the interest rate on mortgages is at an all-time low, with most rates being less than three percent. Therefore, if you wish to reduce your monthly mortgage payments, then refinancing your mortgage is a possible plan of action. By lowering your monthly payments, you have the opportunity to use the money saved to do one of the things mentioned above.
All in all, the steps made so far for the forgiveness of student loans have been beneficial to those in debt. Those pursuing or are in fields in which their fees were significantly expensive can now pay off the money in a shorter period of time.
What are your thoughts on President Biden forgiving student loans? Let us know in the comments below.