Joe Biden’s Student Loan Plan: What’s Happening Now

Biden has extended payment forbearance and offered a proposal for free college, but is resistant to forgiving debt.

Joe Biden’s Student Loan Plan: What It Could Mean for You
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President Joe Biden campaigned on a platform that included ambitious changes for higher education as well as relief for student loan borrowers.

On Biden's first day in office, he extended the student loan payment pause through Sept. 30, 2021.

Since then, he has laid the groundwork for student debt cancellation, but he has not offered a specific proposal or amount yet. Depending upon pending legal interpretation, Biden could use executive authority to cancel debt or ask that Congress pass a bill doing so.

On April 28, the White House unveiled its American Families Plan, which, among other things, proposes to increase Pell Grants, provides for free community college and steps up aid for schools that serve minorities. It must pass both houses of Congress before it becomes law.

Biden’s proposals — which also include plans for additional types of loan forgiveness — may or may not become law. Those that are passed could evolve significantly between now and then.

Broad student loan forgiveness

Even before Biden’s inauguration, his staff reiterated the president's support for Congress to "immediately" cancel $10,000 of federal student loan debt per person as part of COVID-19 relief.

That amount could wipe out debt completely for nearly 15 million borrowers who owe $10,000 or less, according to federal data. The majority of student loan borrowers (roughly 67%) have more than $10,000 in debt.

But Democrats are still wrangling over both the concept and the amount of student loan forgiveness. Democrats and progressives alike believe Biden can use his executive authority to cancel debt; the president has asked Congress to send him a bill. Progressives want forgiveness of as much as $50,000 for all federal borrowers; the administration has underlined $10,000 as its target.

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The back and forth grabs headlines, but there is no legislation before Congress that includes forgiveness. There is some indication that Biden is rethinking his stance on executive action. The moves so far:

  • Before the inauguration: Biden's transition team said Biden would expedite a request to Congress for $10,000 in loan cancellation for all federal borrowers.

  • Feb. 4: Democratic lawmakers introduced a pair of resolutions in both houses of Congress reasserting a call made previously by Sens. Chuck Schumer and Elizabeth Warren for Biden to cancel $50,000 in student debt per borrower. White House Press Secretary Jen Psaki affirmed Biden’s support for some kind of cancellation but stopped short of promising action by executive order. “Our team is reviewing whether there are any steps he can take through executive action and he would welcome the opportunity to sign a bill sent to him by Congress,” Psaki responded via Twitter.

  • Feb. 16: Biden said during a CNN town hall that he would not forgive $50,000 through executive action. He said "I am prepared to write off the $10,000 debt but not $50 [thousand], because I don't think I have the authority to do it."

  • Feb. 19: A group of 17 state attorneys general called on Biden to forgive $50,000 in federal student loans per borrower through executive action, asserting he has the authority to do so under the Higher Education Act.

  • March 11: Biden signed the American Rescue Plan Act, which includes a provision that makes any student loan debt forgiveness tax-free from December 2020 through Dec. 31, 2025. Sen. Elizabeth Warren tweeted on March 6: “This clears the way for President Biden to #CancelStudentDebt without burdening student borrowers with thousands of dollars in unexpected taxes.”

  • April 1: White House Chief of Staff Ron Klain said, during a Politico Playbook interview, Biden is waiting on a memo he requested from Education Secretary Miguel Cardona that would explore the president's legal authority to forgive student debt.

  • April 13: Warren, during a Senate subcommittee hearing on student loan debt, once again called on Biden to forgive student loan debt and argued the action would advance racial equity.

  • April 13: 416 organizations called for Biden to cancel federal student loan debt. They asserted it would “boost the economy, tackle racial disparities, and provide much-needed stimulus to help all Americans weather the pandemic and the associated recession." The effort was led by Americans for Financial Reform, the Center for Responsible Lending, the National Consumer Law Center, Student Borrower Protection Center, Student Debt Crisis, and Young Invincibles.

  • May 6: Sen. Warren said in an event with the Washington Post that she and Sen. Schumer are still pushing President Biden to cancel $50,000 of debt per borrower.

  • May 20: In an interview with The New York Times, Biden suggested that he still supported the move to write off $10,000 of student debt, but not $50,000. The president told columnist David Brooks, “The idea that you go to Penn and you’re paying a total of 70,000 bucks a year and the public should pay for that? I don’t agree.”

  • July 28: House Speaker Nancy Pelosi said in a press conference that the president doesn't have the power to cancel student debt. "He can postpone. He can delay. But he does not have that power [debt forgiveness]. That has to be an act of Congress."

Frequently asked questions

White House Chief of Staff Ron Klain said during an April 1 interview that President Biden had requested an opinion from Education Secretary Miguel Cardona about the president's legal authority to forgive student debt. Though Biden has long included student debt cancellation into his plans, until recently he has expressed reluctance to use executive authority to do so, preferring that Congress act instead.

Since the beginning of his presidency, Biden has shown consistent support for the cancellation of $10,000 in debt per borrower, while resisting calls for cancellation of $50,000 or more.

Biden's proposals would not affect borrowers with private student loans, but he does support making discharge of private student debt in bankruptcy easier.

Biden would introduce a new student loan forgiveness program for borrowers who provide public service that would forgive up to $50,000. It would not replace PSLF, which he has pledged to rework to improve low application approval rates.

More opportunities to cancel debt

No specific plan has been introduced yet to cancel federal student debt. While campaigning, Biden proposed forgiveness in the following instances:

  • If you attended a public college or university. Attendees of private historically Black colleges and universities and additional minority-serving institutions would also be eligible.

  • If you used the loans for undergraduate tuition. Graduate student debt would not be canceled under Biden’s proposal.

  • If you earn less than $125,000. Biden’s platform referenced a phase-out of this benefit but does not offer further details.

These proposals would not affect borrowers with private student loans, but Biden does support making discharge of private student debt in bankruptcy easier.

Additional forgiveness for public service

No specific plan has been introduced yet to change the existing Public Service Loan Forgiveness Program, which has a notoriously high rejection rate.

Biden campaigned on a plan for a new student loan forgiveness program for borrowers who provide public service.

  • Up to $50,000 would be forgiven. Under Biden’s plan, $10,000 of your debt would be automatically canceled for each year you perform eligible service, for up to five years total.

  • It wouldn’t replace Public Service Loan Forgiveness. That program, which is available to government workers, teachers and other nonprofit employees, requires borrowers to make 120 eligible payments to have their remaining balance forgiven.

  • Biden would rework PSLF. Biden proposes qualifying additional federal loans and repayment options for PSLF. Half your balance would also be forgiven after five years. Roughly 98% of PSLF applications have been rejected to date, according to Department of Education data.

The Department of Education announced on July 23, 2021, it would begin soliciting feedback on the PSLF program. Borrowers can submit their stories here.

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Student loan forbearance

The current federal student loan forbearance began in March 2020 and was extended a second time on Dec. 4, 2020. It was set to end Jan. 31, but Biden immediately upon inauguration extended the pause through Sept. 30, 2021.

On June 24, 2021, a group of 125 advocacy organizations called on Biden to extend the pause.

On May 3, 2021, Cardona said, during the Education Writers Association's 74th annual National Seminar, that the administration could extend the forbearance beyond Sept. 30 — though there are no plans to do so at this time.

The administrative forbearance automatically pauses payments on most federal student loans and waives new interest on the loan balance. It also halts all collection activities on loans in default for all federal student loans.

On March 30, 2021, the education department extended the halt to collection activities and interest moratorium for all commercially owned FFEL borrowers in default, retroactive to March 13, 2020. The move should affect 1.14 million of these FFEL borrowers in default. Commercially held FFEL borrowers do not benefit from the payment pause.

Revised income-driven repayment

As yet, there is no rule put out by the Education Department or legislation in Congress to change the student loan repayment plan structure.

While campaigning, Biden proposed a new income-driven repayment plan for federal student loans. Here’s how it would differ from existing options:

  • Only undergraduate loans qualify. Graduate student loans — for which the average student debt is $71,000, according to the National Center for Education Statistics — would be ineligible.

  • You’d pay 5% of discretionary income. Current income-driven options set payments between 10% and 20% of your discretionary income, depending on the plan.

  • Monthly payments would be $0 if you make less than $25,000. You can currently qualify for $0 payments based on your income, the federal poverty line and your family size.

  • Forgiveness won’t be taxed. Biden’s income-based plan would forgive any remaining undergraduate balance tax-free after 20 years. Existing options offer forgiveness after 20 or 25 years, depending on the plan, but tax that amount.

  • You’d have to opt out. All new and existing borrowers would be automatically enrolled in this new plan with the option to opt out.

Bigger Pell Grants

These grants, which are available to students who demonstrate financial need, are worth up to $6,495 for the 2021-22 academic year. That covers less than 60% of tuition and fees at public four-year colleges, according to a NerdWallet analysis — and that doesn't even account for room and board or other expenses included in the cost of attendance.

Biden's fiscal year 2022 budget, released on May 28, included a request to increase the maximum Pell Grant by $400. For academic year 2022-23 the maximum award, when combined with the proposed increase of $1,400 in the American Families Plan, would be $8,370 — a total increase of $1,875. The request, if approved, also would also enable DACA recipients to receive Pell Grants.

The proposed budget and the American Families Plan require approval of both houses of Congress.

On May 6, Cardona, in response to a question while testifying in front of a congressional subcommittee, said that he supported expanding eligibility for Pell Grants. Currently, students can receive Pell Grants for 12 semesters, limiting the number of graduate students who are eligible.

Free college tuition

Biden’s American Families Plan proposes making college tuition-free at some schools:

  • If you attend a community college. Tuition and fees toward a degree or certificate would be free for two years.

  • If you attend a private minority-serving institution. Grants would cover up to two years’ tuition at private and public historically Black colleges and universities, tribal colleges and universities, and additional MSIs.

You’d still need to pay non-tuition costs such as room and board and books.

On April 21, Sen. Bernie Sanders and Rep. Pramila Jayapal introduced the College for All Plan. The bill would enable all students to attend community college tuition-free and would provide students from families earning under $125,000 with tuition-free attendance to any four-year public school, as well as any public or private historically Black colleges and universities and other minority serving institutions.

Either plan would require congressional approval.

Restored borrower defense to repayment rules

On March 18, 2021 the Department of Education announced it was rolling back Trump administration rules that limited how much defrauded borrowers could receive in student loan forgiveness. The rule change provided full loan forgiveness to borrowers with approved Borrower Defense to Repayment claims who received partial or no loan forgiveness under the Trump era rules and granted about $1 billion in forgiveness to approximately 72,000 borrowers.

The Biden administration made clear that the change applies to borrowers with existing approved claims, but did not specify whether the change would also apply to borrowers who have claims approved going forward.

On June 16, 2021, the education department announced it would provide full debt cancellation to 18,000 borrowers who previously attended the now-defunct ITT Technical Institute, a for-profit chain that closed in 2016 following federal sanctions. Borrower claims were approved under two new categories: likely employment prospects and ability to transfer credits. The total relief to borrowers is $500 million, according to the department.

On July 9, 2021 the education department announced the approval of $55.6 million in discharges among 1,800 new borrower defense claims. The claims were approved for student borrowers attending three schools: Westwood College, Marinello Schools of Beauty and the Court Reporting Institute.

Under guidelines effective July 1, 2020, it’s more difficult to be eligible for forgiveness since borrowers must prove their school intentionally misled them and they suffered financial harm, among other requirements.

References

Information in this article is based on the education plan listed on Biden’s official website, the former vice president’s Unity Task Force Recommendations from July 2020, White House Fact Sheet on the American Families Plan and the Department of Education press release on Borrower Defense to Repayment processes.

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