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What we know about student loan payments pause and possible debt cancellation

Three weeks out from the end of the federal student loan payment pause, borrowers are still waiting to hear what's next.

WASHINGTON — With just three weeks remaining until the federal pause on student loan payments ends, borrowers have been left in limbo while President Joe Biden stays mum on whether he will forgive student debt for millions of Americans, and whether payments will resume after the moratorium expires on Aug. 31. 

The White House has said Biden will make a decision by the end of August, after the president initially said in April he’d announce a decision within a “couple of weeks.”

“When he’s ready to make that decision we’ll let you know,” said White House press secretary Karine Jean-Pierre during a press briefing Tuesday. Jean-Pierre said “no decisions have been made” when it comes to either debt cancellation or an extension of the payment pause.

If Biden does not extend the pause, student loan payments will begin again on Sept. 1 and interest will start accruing again. 

Federal student loan borrowers have not had to make any loan payments since March 2020 when then-President Trump signed the CARES act, pausing payments and interest accrual. Biden has extended the moratorium four times during his presidency.

On the campaign trail, Biden supported forgiving $10,000 per borrower. But internal negotiations have stretched on for months, while some Democrats call on the president to do more and Republicans staunchly oppose any mass debt cancellation efforts.

While it’s unclear if Biden will issue any sort of widespread debt cancellation, it is unlikely the president would resume required payments so close to the midterm elections and with so little advance notice to borrowers. In late July, the Department of Education told student loan servicers not to contact borrowers about resuming payments, the Wall Street Journal and NBC News reported, signaling an extension of the pause is likely. 

RELATED: 'Fixing a broken system': More flexibility proposed for student debt forgiveness

When could it go into effect?

According to Politico, the Department of Education has prepared plans for possible widespread debt cancellation, the scale of which would be unprecedented in the history of the federal student loan program. 

If Biden gives it the green light, the education department is prepared to cancel debt within a matter of weeks for many borrowers who have income information on file with the agency, documents obtained by Politico show, such as borrowers who have already certified their income for income-driven repayment plans. While that applies to several million borrowers,  most other borrowers would self-report their income to attest their eligibility through the federal student aid website, Politico reports. 

The plans indicate the Department of Education is preparing for all types of student loans to be eligible for forgiveness, including Grad and Parent PLUS loans, according to Politico.

Who would qualify?

The White House is considering an income cap for loan forgiveness, according to the Washington Post. While nothing has been finalized, the Washington Post reported the cap being considered would be $125,000 or $150,000 for individual filers, and $250,000 or $300,000 for married couples filing jointly. 

According to CNBC, more than three-quarters of borrowers would still likely qualify for forgiveness under those rules.

Borrowers with private student loans will be unlikely to see relief. Because their debt is held by private companies, those loans are not subject to the payment pause or federal debt forgiveness. 

RELATED: Yes, interest rates for new federal student loans are set to increase for 2022-2023 academic year

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