As of this writing, little — if anything — has been confirmed about the incoming Biden administration’s take on student loans. That hasn’t, of course, stopped the speculation about what the near-future president will do when it comes to the debt. What’s more, House Democrats have already started making demands on the Biden administration — even though he hasn’t been sworn in yet.
Let’s separate the fact from the fiction about what President-elect Biden will, and won’t, do when it comes to student loans.
What Have The House Democrats Demanded Of The Biden Administration When It Comes To Student Loans?
Reps. Ayanna Pressley (D-MA), Ilhan Omar (D-MN), Alma Adams (D-NC), and Maxine Waters (D-CA) have issued what they’re calling a “call to action” for the Biden administration.
The House Democrats are hoping that Biden will forgive student loans that are $50,000 or less, and they say that this is a “companion” to the Senate resolution introduced by Sen. Chuck Schumer (D-NY) and Sen. Elizabeth Warren (D-MA).
Representatives from both parts of the legislative branch are keenly aware of the mounting problem of student loan debt.
According to the Federal Reserve, 45 million Americans owe a total of about $1.6 trillion in student loans, and one in 10 loans are in delinquency or default.
And, of course, it goes without saying that the precarious nature of the job market in the wake of the COVID-19 pandemic has only made these student loans more of a burden to the average American.
“The student debt crisis is a racial and economic justice issue and we must finally begin to address it as such,” Pressley said in a statement. “Broad-based student debt cancellation is precisely the kind of bold, high-impact policy that the broad and diverse coalition that elected Joe Biden and Kamala Harris expect them to deliver.”
Will Biden Revise The Current Loan Structure?
Some experts are saying that when Biden is sworn in next month, he will take a three-pronged approach in restructuring student loans.
The first prong would involve revising income-driven repayment plans. If you make less than $25,000 a year, you wouldn’t have to pay any part of your student debt.
If, however, you make more, only 5% of your discretionary budget would go towards repaying student debt — and after 20 years of responsible payments, the loan would be forgiven.
The second prong would involve free or reduced tuition. If you or your family make less than $125,000 a year, tuition at a public (not a private) university would be free for four years.
Community colleges would have two years that are tuition-free. This would be a federal & state cooperative effort — the federal government would subsidize 75% of this proposition, while the state would subsidize 25%.
Finally, “loan forgiveness” would be on the table, though mass forgiveness of student loans is highly unlikely given Biden’s moderate political stance.
Biden’s various proposals involving forgiveness of student loans include getting a $10,000 forgiveness every year for five years, so long as community service is performed.
Would that be a fair enough trade-off for the more left-leaning members of Congress and the House?
What About An Executive Order?
The Trump presidency proved that presidents have the power of the executive order at their disposal — and they’re not afraid to use it.
While it’s unlikely that Biden will be as quick with the executive pen as Trump was, it’s something that he could do in the case of student loans — especially if he’s serious about wiping them out for struggling Americans.
“Even before the coronavirus pandemic plunged our economy into chaos, student loan borrowers were already in crisis,” said Senator Warren in a press release about the matter. “The President of the United States has the power to broadly cancel student loan debt, help close the racial wealth gap, and give a big boost to families and our economy. It’s time to use this existing authority and permanently improve the lives of tens of millions of Americans.”
It will be interesting to see if Joe Biden is, ultimately, bullish or bearish about the forgiveness of student loans.