Student Loan Cancellation: Congress Proposes 0% Interest Rates For Student Loans – Forbes

President Joe Biden (Photo by MANDEL NGAN/AFP via Getty Images)
Several members of Congress have an alternative answer to student loan cancellation — 0% interest rates for your student loans.
Here’s what you need to know — and what it means for your student loans.
As President Joe Biden considers whether to enact wide-scale student loan cancellation of $10,000 or $50,000, there are two main proposals in Congress to make student loans interest-free:

With Biden weeks away from 3 important deadlines for your student loans, could student loans have no interest?
Sen. Marco Rubio (R-FL) proposed the Leveraging Opportunities for Americans Now (LOAN) Act. Here’s how this proposed legislation would work:

While a one-time financing fee would replace student loan interest, this proposed legislation aims to reduce the overall financial burden on student loan borrowers.
Sen. Sheldon Whitehouse (D-RI) introduced the Zero-Percent Student Loan Refinancing Act. Here’s how it would work:

Currently, the federal government doesn’t refinance student loans. This legislation would not only change the government’s role in student loans, but it would also eliminate student loan interest for eligible student loan borrowers. In contrast to the LOAN Act, which would eliminate student loan interest when borrowing a student loan, this proposed legislation would refinance student loans after borrowing.
There are several key takeaways related to Biden’s potential decision to cancel student loans and the future of student loans more broadly. First, Biden’s decision to enact wide-scale student loan cancellation will be independent of this proposed legislation in Congress. Why? If Biden enacts student loan forgiveness, it will be a one-time cancellation of a student loan borrower’s principal student loan balance (a separate determination from a reduction in student loan interest). Second, while Democrats and Republicans have proposed legislation to address student loan interest, Congress is unlikely to pass either of these bills. Why? Neither political party will support the elimination of all student loan interest. The financial loss to the federal government would concern both Democrats and Republicans. Third, Congress, not the president, sets student loan interest rates. Higher student loan interest rates began on July 1. Without congressional approval, Biden can’t unilaterally lower student loan interest rates. That said, Biden announced major changes to student loan forgiveness. For example, through the rulemaking process with the U.S. Department of Education, Biden proposed lowering student loan interest. Fourth, federal student loan payments will restart on September 1, 2022. Neither Congress nor Biden is likely to lower student loan interest before then. That means you should expect your regular interest rate before the Covid-19 pandemic to resume once student loan payments restart. Evaluate all your options for student loan repayment so you have a complete financial picture. Here are some great places to start saving money:


Leave a Comment