Joe Biden on Student Loans: What Can Borrowers Expect?
The odds of major student loan relief likely waned last week, even as the country elected a president who vowed to tackle the pervasive debt problem.
Joe Biden, who was declared president-elect on Saturday after a long, narrow vote count, led a campaign loaded with educational platforms, including ideas to reduce the student loan burden on many of the country’s 45 million borrowers .
But with Biden in the White House a stone’s throw from a divided Congress, big campaign proposals like debt cancellation or free college will have to be scaled back. We will not know the final composition of the Senate until January, after two play-offs in Georgia. But if it is a Republican Senate, pundits have gone back on their predictions of what was possible for the widespread relief offered by Biden’s campaign.
“I find it hard to see major legislation pass through Congress unless one or two Republicans are prepared to break ranks,” said Robert Kelchen, associate professor of higher education at Seton Hall University in New Jersey.
So does this mean that all of Biden’s higher education ideas are dead in the water? Not necessarily. Here is what you can expect.
Extension of the current interest-free suspended payment period
Since the end of March, more than 35 million student loan borrowers have not been required to repay their loans, nor have they paid interest on their loans, thanks to the CARES law. This relief is expected to end on December 31, and borrower advocates have already pushed to extend it.
As president, Biden is virtually guaranteed to give these defenders what they ask for, experts say. The question is: for whom and for how long? This week, three major higher education institutions wrote a letter to Education Secretary Betsy DeVos urging him to quickly extend the non-payment policy until September 30, 2021 or until the unemployment rate falls below 8% for three consecutive months. But it’s also possible that a Biden administration is trying to expand eligibility to cover borrowers who have not been captured the first time, like those with older federal loans or private loans.
Lawmakers initially gave borrowers with federally-held student loans a six month period at 0% interest and no payment required. When Congress failed to reach consensus on a second back-up plan, President Trump used his executive powers in September to extend that.
This means that Biden does not need congressional support to expand the policy further; it can simply follow the precedent set by Trump.
Generalized loan forgiveness
Biden has repeatedly told the public during the election campaign – especially those with younger voters – that he would write off a significant portion of the country’s $ 1.5 trillion in student debt. Specifically, he said he would forgive $ 10,000 for every federal loan borrower under a pandemic relief program. For borrowers earning less than $ 125,000, he also wanted to write off all federal student loan debts for undergraduate tuition fees from public colleges and private colleges that primarily serve minority students.
But if republics control the Senate, it dramatically reduces the likelihood of meaningful debt cancellation, says Iris Palmer, senior adviser for higher education and the workforce with think tank New’s Education Policy program. America.
Opinion polls show that much of the country agrees that student debt is a significant problem. And a recent investigation of the National Student Legal Defense Network found that 43% of Americans supported some form of generalized forgiveness.
Still, Republican senators will find a lot to hate about the idea, including its price. Critics also say widespread forgiveness is unfair – offering nothing for Americans who haven’t gone to college or have already paid off their loans – and is arbitrary, doing nothing to remedy the reason. for which people borrow loans.
There would be current students who lost $ 10,000, for example, but then had to turn around and take out more loans to continue paying for their education, says Jason Delisle, resident researcher at the American Enterprise Institute (AEI ).
Palmer also points out that it can be difficult to sell Republicans forgiveness as a necessary stimulus. Since most federal borrowers haven’t been required to pay for almost nine months, and this is likely to continue, then paying off a lump sum of debt doesn’t free money in budgets. households at the moment, she said.
This means that debt cancellation should probably come through executive action rather than Congress, says Michele Streeter, senior policy analyst at the Institute for College Access and Success. Details of who qualifies – for example, all borrowers or only financially troubled borrowers – and how much debt would be forgiven are still very unclear, she said.
Does a president really have the legal authority to cancel debt is still in place for debate. But the idea has caught on in the past two years. In September, Democratic Senators Elizabeth Warren and Chuck Schumer called for the next president write off up to $ 50,000 in debt by decree.
In that sense, President Trump’s decision to extend the policy of suspension of payments by decree may have opened the door to further executive action on student debt. Since there has been no legal challenge to Trump’s decision, it could make it harder for Republicans to mount court challenges when a Democrat uses the same power, Kelchen said. He says he would still expect legal action, however.
Reduce monthly payment amounts
Biden wants to take the government’s existing revenue-based repayment plans and make them more generous for many borrowers.
He said he would reduce the amount borrowers have to pay through income-based repayment plans from 10% to 5% of their discretionary income. Undergraduate borrowers owe nothing until they earn at least $ 25,000. After 20 years of payments, the remaining debt would be canceled, tax-free.
The current income-based reimbursement system has four different plans with different rules and qualifications. In total, more than one in five borrowers repay their loans this way, and it has become much more common among more recent graduates.
Biden could introduce a new plan through regulatory action, Streeter says. president obama did the same in 2015 with the revised Pay as You Earn plan, which stems from an existing program. That means it’s something borrowers might see in a Biden administration even without Congressional action, but don’t expect it immediately.
“It would be very difficult and complicated,” says Palmer. “It’s just logistically difficult given the grandfather issue. You already have all of these borrowers on repayment plans.”
One thing that is unlikely: to streamline all of these different plans into one. It has been a bipartisan goal for years now, although there is disagreement over the details, Streeter says. This kind of overhaul of the reimbursement system would require an update of the Federal Law on Higher Education. The reauthorization is long overdue, but it won’t happen with the likely makeup of Congress, experts say.
Overhaul of public service loans
Of all the debt proposals on the table – extending the forbearance period, forgiving certain debts and changing repayment plans – changing the rules for the forgiveness of civil service loans is the least likely to go anywhere immediately.
Changes to the program, through which public sector workers and employees of nonprofits can obtain debt cancellation after 10 years of qualifying payments, would require congressional action. And the changes suggested by Biden’s campaign “would make an already expensive program even more expensive,” AEI’s Delisle says.
Instead of requiring workers to pay for 10 years while in qualifying employment, Biden’s plan called for giving them $ 10,000 in rebate every year for five years. Then they would continue to repay under an income-based repayment plan for another five years. After that 10-year period, whatever was left would be forgiven.
It’s just not likely to be a top priority, when there are other expensive education proposals on the table, even if Democrats control the House and Senate, Palmer says.