Unpaid student loans are now a possibility, even with President Biden’s ‘Plan B’ for a new student loan forgiveness plan.
Unpaid Student Loans, Now A Possibility
After President Biden’s initial student loan forgiveness plan under the HEROES Act of 2003 was struck down by the Supreme Court. The president was quick to announce for a ‘Plan B’ for student loan forgiveness under the Higher Education Act. However, even if the president was successful in formulating a new student loan forgiveness plan, unpaid student loans are still a possibility, as reported by GOBankingRates.
Education Under Secretary James Kvaal issued a warning about not approving student loan forgiveness programs as it might lead to large defaults and delinquencies to ever be recorded in American history. Kvaal added that these are the effects in the educational sector brought about by the pandemic.
With student loan payments about the restart in October after Biden issued a payment pause last March 2020 and was extended up to October of this year, unpaid student loans of up to $1.8 trillion will never be forgiven, as previously reported by Fortune. Unpaid student loans are possible regardless of the implementation of Biden’s ‘Plan B’, should it be approved the second time around.
Conclusion Behind The Possibility Of The Unpaid Student Loans
The conclusion of the possibility of unpaid student loans came from the study conducted by the Jain Family Institute. The institute analyzes credits report of over one million individuals that have outstanding student loan balances from 2009 up to 2019. The institute arrived at the conclusion that unpaid student loans are possible regardless of the loan relief status of a single borrower and after the shutdown of Biden’s initial student loan forgiveness plan. The idea of unpaid student loans is disheartening for some borrowers, but it is a possibility backed up by statistics.
With this troubling news, the Supreme Court’s decision to block Biden’s student loan forgiveness plan may prove as a mistake in the near future, as unpaid student loans became a possibility following its disapproval. Marshall Steinbaum, Economics professor at the University of Utah and co-writer of the study conducted by the Jain Family Insititute, commented that unpaid student loans may be avoided if the government focused on the “how” rather than the “when”.