President Joe Biden's
Biden's plan is currently paused as the 8th U.S. Circuit Court of Appeals looks at lawsuits introduced by six conservative states: Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina. These states are claiming that student loan forgiveness would harm their tax revenue or state-based loan agencies. While some lawsuits have already been dismissed, the question of legality is still being weighed.
But borrowers shouldn't lose hope — or stop applying for forgiveness, says Aaron Smith, co-founder of Savi, a student loan management company.
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"There are different arguments against the Biden program, ranging from it not being fair for those who already paid off their student loans to it being a bad use of taxpayer dollars," says Smith. "But this is going to help a majority of student loan borrowers, so we encourage people to check out the online form and apply."
The Biden administration plans to cancel up to $20,000 worth of federal student loan debt for Pell Grant recipients and $10,000 for non-recipients, so long as annual income is less than $125,000 for an individual or less than $250,000 for married couples. Smith advises anyone who qualifies to submit the
But as the federal court decides whether Biden misused his executive power in canceling student loan debt, there is cause for uncertainty. With the cost of housing, groceries and gas skyrocketing in the last year, millennials and Gen Z are especially vulnerable to additional economic hardship as they enter the workforce with an average of $30,000 worth of debt.
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For Jan Perry, debt relief is one essential piece of making the U.S. a liveable country for a majority of Americans. Perry is the executive director of the Infrastructure Funding Alliance, an organization that advocates for environmental and fiscally sustainable projects in Los Angeles, as well as a congressional candidate for California Congress District 37.
"Millennials went to college and did everything adults asked them to do, but they still can't get a job making enough money to live on their own," says Perry. "They have to go back home as if college never even happened because of the lack of affordability."
On top of existing concerns, the impact of the midterm elections will soon become clear, however, Smith is confident that changes in Congress will not seriously affect Biden's forgiveness plan.
"The debt relief proposal was done by the Biden administration directly — it was not done through legislation," he says. "But with every new Congress and administration, there may come new reforms made to the overall student loan system."
This may be in the shape of new repayment or forgiveness programs that borrowers qualify for based on their income and occupation, such as the Public Service Loan Forgiveness program. Yet, with every piece of reform, there comes a need for education to ensure borrowers are saving money, explains Smith.
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That's where employers can make a difference. Smith points out that monthly loan payments have been paused since March 2020, with the average borrower contributing nearly $400 a month to their loans before the pandemic. Now, starting in January, borrowers will have to completely rearrange their budgets amid record inflation and talks of a recession.
"That $400 has to come out of other things people need, creating substantial challenges for employees," says Smith. "It's a very confusing environment for borrowers, and they will need all the help they can get in navigating these changes and making their payments manageable."
Perry recalls hearing her daughter's friend say she pays $900 in student loans every month. She decided not to go to medical school, knowing the loans would only get worse. For Perry, it's clear that student loan help is more than necessary.
"Relief might enable [younger] generations to generate more income, live independently of their parents and spend more money in our economy," she says. "Why wouldn't you want that?"
Smith advises employers to recognize student loan management as a vital piece of financial wellness and act accordingly. This means giving employees the tools to pick relevant repayment and forgiveness programs, keeping employees up to date on any reform or additional programs and offering financial contributions. Whether or not Biden is able to deliver relief, employers and employees alike cannot escape the additional financial stress that comes into play once loan payments resume — but the worst thing employers could do is ignore it, says Smith.
"One of the big fears is once payments resume, borrowers will fall behind or go into default on their loans, which has implications for their overall financial health," says Smith. "That's why it's critical for employers to get employees the right information and benefits."
