Should You Bank on Student Loan Forgiveness in 2021?

It’s no secret that in the United States, going to college is expensive. 

The average college graduate leaves school with an average of $37,584 in student loans. The Federal Reserve reports that, nationally, Americans owe $1.6 trillion in student loan debt.

Student loan debt is an enormous financial difficulty for many people in America. The average person takes about 20 years to pay off their student loans, meaning that even people well into their 40s are saddled with student loan debt, and many older parents are dealing with helping their children manage student loan debt. The payments become a constant burden, weighing people down through much of their adult life.

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One common theme on the presidential election campaign trail in 2020 was how to address student loan debt, and one common solution was student loan forgiveness. The federal government has the power to forgive federal student loans, so simply forgiving a significant portion of this debt can have a profound impact on people’s lives.

But the important question is: Will student loan forgiveness happen in 2021?

In this article

    Joe Biden’s student loan forgiveness plan 

    “We should forgive a minimum of $10,000/person of federal student loans,” Biden tweeted March 22, 2020, as part of a COVID-19 response.

    But if we look into the Biden campaign’s statements on student loan forgiveness, it seems that further student loan forgiveness doesn’t include every person carrying federal student loan debt — just graduates who join public service programs like Teach for America or Peace Corps and are eligible for the Public Student Loan Forgiveness program.

    [ More: You Don’t Have to Pay Federal Loans Until 2021 — But You Should ]

    “Biden will create a new, simple program which offers $10,000 of undergraduate or graduate student debt relief for every year of national or community service, up to five years,” the campaign states on its website.

    These plans are in line with the plans proposed by many of Biden’s Democratic colleagues in the Senate and House of Representatives. 

    However, other Democrats have proposed more aggressive forgiveness plans in the past. While Senator Elizabeth Warren’s proposed to forgive up to $50,000 in student loan debt and Senator Bernie Sanders’ proposed to forgive all student loan debt, there seems to be a consensus among many in Congress and the incoming White House administration that some level of student loan debt forgiveness is desired. 

    Should you bank on student loan forgiveness? 

    There are several important things to consider before making plans that rely on student loan forgiveness.

    First, it appears likely that there will be a split government under Biden’s presidency. Congress appears to be headed for a Republican-controlled Senate and a Democratic-controlled House, which means that any significant bill that passes through Congress is going to have to involve some compromise between the two parties. 

    Most of the proposals for student loan forgiveness have come from Democrats, but it’s not hopeless. There have been proposals from Republicans, too, for at least some level of student loan forgiveness, though these proposals appear to offer much smaller amounts per student. 

    In 2020, these proposals have been part of economic stimulus packages meant to encourage spending and economic growth during COVID-19. Thus, you’re most likely to see action on student loan forgiveness through an economic stimulus bill in the near future, with a smaller total amount than Biden is proposing. As the economy recovers and America comes out of the coronavirus era, there will be much less desire for an economic stimulus bill, which means that the likelihood of Republican support for student loan forgiveness will decrease.

    So, what does this mean for you?

    There is a strong likelihood of some form of student loan forgiveness in the near future, but the amount will likely cover only a portion of your student loans. While many in Congress are on board with such proposals in general, others support it mainly as a means of stimulating the economy. Thus, if the economy begins to rebound in the future as a coronavirus vaccine becomes widely available, we’re less and less likely to see significant student loan forgiveness.

    [ Read: How to Avoid Capitalized Interest on Student Loans ]

    In short, some small level of student loan forgiveness is highly possible in the coming months, but becomes less likely as more time passes. While you shouldn’t make major financial plans based on this, you do have room to feel optimistic that there will be some amount of relief in the near future. This is particularly true if you are on track to perform public or national service in the coming years.

    What if I’m not eligible for student loan forgiveness?

    Unfortunately, even the most optimistic proposals — aside from the one proposed by Senator Sanders — do not cover all student loan debt for everyone. 

    Most students will still have some student loans even if these proposals are enacted. Some of your student loans may go away, but you’ll still be left with a balance on your student loan account. In this situation, your best options are to have a smart debt repayment plan that helps you determine which debts to pay off first and which debt deserves an extra payment when you can afford it. 

    [ Next: Jobs That Offer Student Loan Forgiveness ]

    Another route to consider is student loan consolidation or student loan refinancing. This lets you combine and lock in your student loans at a lower interest rate, which will minimize your monthly payments or shorten the length of your repayment terms.

    You can also consider consolidating your federal student loans through a Direct Consolidation Loan, which combines all your federal loans into one with a weighted average interest rate. 

    We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.

    Trent Hamm

    Founder of The Simple Dollar

    Trent Hamm founded The Simple Dollar in 2006 after developing innovative financial strategies to get out of debt. Since then, he’s written three books (published by Simon & Schuster and Financial Times Press), contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.

    Reviewed by

    • Courtney Mihocik
      Courtney Mihocik
      Finance Editor

      Courtney Mihocik is an editor at The Simple Dollar who specializes in insurance, personal finance, and loans. Previously, she wrote and edited for Interest.com, PersonalLoans.org, Ballantyne Magazine, Thread Magazine, The Post, ACRN, The New Political, Columbus Alive and the Institute for International Journalism.