4 Potential Impacts on Student Loans Now That Biden Has Withdrawn From the Election
Written by
Jordan Rosenfeld
Edited by
Rebekah Evans
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After facing calls from Democrat leaders to withdraw from his reelection bid against former President Donald Trump, President Biden caved to that call today and announced his exit from the presidential race.
One aspect of personal finance could be impacted now that Biden has withdrawn — student loan forgiveness — one of Biden’s signature policies.
“What happens to student loan debt following the election is anyone’s guess as it will truly depend on who the new candidate is,” according to Janie Mackenzie, a former political communications manager.
GOBanking Rates explored four possible impacts on student loans now that Biden has withdrawn from reelection.
Also see reasons you can (or can’t) be taxed on student loans.
Potential Impacts
Questions about the future of Biden’s student loan forgiveness programs come as his administration recently announced that it waived a total of $168.5 billion in student loan debt for roughly 4.8 million Americans. This tally also includes the latest round of $1.2 billion in student loan forgiveness for public sector employees.
Critics argued that student debt forgiveness immediately increases the national debt, which reduces the amount of money the federal government has to spend on programs and services to repay the outstanding balance.
In addition, the U.S. Supreme Court struck down Biden’s plan last year to cancel up to $400 billion in student loans. The Biden administration has instead taken a piecemeal approach by incrementally canceling debt for millions of Americans.
For borrowers, the future of student loan forgiveness will depend on several factors:
- Biden’s replacement and their public stance on student loan forgiveness.
- Whether former President Trump wins in November.
- Which political party controls the White House and Congress.
Here’s what you can expect under the various scenarios.
If Harris Replaces Biden
Biden endorsed Vice President Kamala Harris as the nominee now that he has withdrawn, though it is still to be seen whether the Democratic party accepts this nomination or chooses another candidate. Whether she would continue his policies or implement her own, if elected, is unknown.
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In April, Harris advocated for a Biden Administration proposal that would automatically cancel student loan debt for those who began entering repayment more than 20 years ago, have current balances higher than what they originally borrowed due to interest rates, enrolled in low-value programs or are experiencing hardship because of current student loan debt.
However, as a presidential candidate in 2020, Harris’ stance on student loan forgiveness was narrow. For example, under Harris’ plan, borrowers would have to be Pell Grant recipients who started a business in a disadvantaged community and continued their business for at least three years to qualify for $20,000 in student loan relief.
If Trump Wins
Trump has consistently opposed student loan forgiveness efforts.
After the U.S. Supreme Court struck down Biden’s plans for universal student debt relief last year, Trump said Biden’s plan was “very, very unfair to the millions and millions of people who have paid their debt through hard work.”
As President, Trump proposed eliminating subsidized student debt, reducing the number of repayment plans for borrowers and ending a loan forgiveness program for public service employees.
If Democrats Control Congress
Dustin Siggins, a former journalist and political commentator, said Democrats have prioritized student loan forgiveness for years.
He said Biden’s withdrawal “will have little to no impact on student loans if a Democrat still wins the White House.”
However, if Trump wins reelection, a Democratic-controlled Congress is likely to resist GOP efforts to end or downgrade student loans for forgiveness.
If Republicans Control Congress
Congressional Republicans oppose student loan forgiveness efforts and would likely call on Trump, if reelected President, to reverse Biden’s policies, such as the income-based repayment plan that reduces monthly student loan payments from 10% to 5% of discretionary income.
A Republican-led Congress is also likely to stall any student loan forgiveness programs if a Democrat wins the White House in November.
What You Need to Know Now
Michael Feuz, an economist, explained that the amount of student loan forgiveness could increase before January 2025 because Biden may spend more time issuing Executive Orders to cancel debt now that he will no longer be on the campaign trail.
“In the short run, this means more cash on hand for younger workers just as the economy is becoming sluggish,” Feuz said. “It would be a boost to home ownership and the overall consumer economy and potentially reduce outlays for businesses that provide student loan forgiveness benefits.”
Editor’s note on election coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
