The Biden administration is working to eliminate about $8 billion in debt from students who took out Biden student loans. But before that can happen, Congress needs to act. Biden has paused payments on Biden student loans until Aug. 31. In a speech in Miami in October, he promised to erase $10,000 of student debt. The Biden administration also suspended payments for six months during the recent pandemic. That policy may be the first step toward eliminating student debt.
Biden has accelerated the processing of Biden student loans
President Joe Biden has accelerated the processing of his student loan claims, following his decision earlier this month to cancel eight billion dollars in student debt. But that doesn’t mean a lawsuit will be filed or that the case will make it to the Supreme Court. It doesn’t mean the president will give up on his campaign promises to help millions of Americans. And the decision doesn’t mean that he will cancel his own student loans, either.
While he promised to void up to $125,000 of federal student loan debt, the bipartisan administration is pursuing a broader plan to eliminate these student debts. While it would be ideal for every borrower to be wiped clean of student debt, many Democratic officials are pressing Biden to use his executive authority instead of waiting for Congress to pass a bill. The Biden administration has accelerated the processing of existing student debt forgiveness programs.
The Biden administration is extending relief to students who have been defrauded by for-profit colleges. Among the beneficiaries are students whose schools have closed or those who were misled by their college. They’re also helping defrauded students who filed borrower defense claims. And if Biden is able to speed up the processing of their student loan debt, this could help millions of Americans.
Moreover, the Biden administration’s plan will accelerate inflation and create a subsidy from the working class to the educated. And since the US government is ignoring its role in making student debt skyrocket, the plan may backfire in the midterm elections. While this is a great idea in theory, the consequences could be devastating. The Biden plan is unpopular among American voters and will probably backfire politically.
Biden has canceled about $8 billion for Biden student loans
The Obama administration has canceled about $8 billion of student loan debt and a few other bills. The latest move involves a proposed settlement agreement filed in federal court by the Education Department that will fully discharge the debt of former students at 50 specific institutions. But, there’s still a long way to go. The government still has to get a judge’s signature before the deal is final.
The decision to wipe the slate clean for defaulted federal student loans came as a welcome surprise to many borrowers. Foreclosures can have long-lasting consequences, including seizing tax refunds and Social Security checks. But Biden has worked hard to make student loan debt cancellation a reality. The new figure represents significant progress since October 2021, when the administration first announced sweeping changes to the public service loan forgiveness program.
The plan is not without controversy. Former White House spokesperson Jen Psaki said the plan would target students making less than $125,000 a year. Assuming that the proposal focuses on public college students and minority-serving institutions, it’s unclear how this will play out in practice. The plan also included references to a phase-out of the benefit but provided no specifics.
The Education Department is receiving feedback on the new PSLF rules. But the implementation could take years. In the meantime, advocacy groups have been pressing for reforms to the PSLF. However, Biden hasn’t acted on those promises. Student-focused organizations are pushing for comprehensive reforms to the PSLF, including a full debt cancellation. As the president-elect, Dan Zibel will be in a unique position to reform PSLF while holding defunct schools accountable.
The President-elect has repeatedly resisted calls to cancel the debt of student loan borrowers. But a new report in the Washington Post last month claims that the White House plans to eliminate up to $10,000 of student debt for borrowers making less than $150k a year. Combined for married couples, the total amount can reach $300k. That’s an incredibly small number of student loan debt cancellations in a single administration.
Biden has said he’s considering canceling some student loans
The pause on making new payments on federal student loans expires in September, and Vice President Joe Biden has said he is considering canceling some of the debt. The pause came after Vice President Kamala Harris urged President Obama to do the same, but it hasn’t happened yet. So, the Vice President has several options for passing the policy. One of those options is to push for broad student loan forgiveness through executive action. The latter option is more controversial but requires the support of Democrats and bipartisanship.
To begin with, if the plan passes, the government would be helping nearly thirty million students. It would erase debt for at least half of the country’s low-income Black population. Another four million borrowers have been paying off their student loan debt for more than 20 years. If Biden does indeed cancel some student loans, that will free up funds for more important initiatives like infrastructure and housing.
But he must be careful. Republican lawmakers have argued against the idea of canceling student debt. As a result, some Republicans have introduced legislation to block Biden from doing so. The Stop Reckless Student Loan Actions Act of 2022 would prevent a president from canceling federal student loans except in cases of national emergency. The pause in federal student loan repayment began under the Trump administration and was repeatedly extended under Biden. The pause in payments is now set to expire on Aug. 31.
A pause in federal loan payments until the end of the year was also put into effect, as President Obama sought to provide assistance to Ukraine. The pause in payments has helped students avoid defaulting on their loans and ease financial burdens. But it may be too late to grant forgiveness to everyone. In addition to the pause, the president has not yet decided whether to cancel the debt on a large scale. He’s asked his team to investigate all of the legal options for the idea.
While a broad-based program to erase student debt is unlikely to be implemented by the end of the year, it would help millions of Americans avoid making painful repayments and start anew. However, it should be noted that Biden does not have to keep his pledge to cancel student debt by Jan. 31 to get elected president. There are other reasons to consider the program more broadly and test its implementation.
Congress must act first on student loan forgiveness
To implement the Biden plan, Congress must first pass a bill to eliminate federal student loan debt. The president and vice president have asked their departments to look into legal options. That decision is still TBD. The White House has been remarkably quiet about the initiative, raising fears that it is dragging its feet. Moreover, a law to end student loan debt forgiveness is unlikely to pass Congress before the November elections. Moreover, the president has the authority to cancel the debts of millions of people.
However, the Biden administration has been able to get some success through targeted mechanisms that would allow more borrowers to qualify for the loan forgiveness program. The administration is again targeting student loan debt forgiveness through the federal courts. Because this strategy allows for more targeted loan forgiveness, it is likely that the current pause will last until August. While the government may not act until then, bipartisan support for the Biden plan remains a strong reason for Congress to act first on Biden student loan forgiveness.
While the president is not required to fulfill his $10,000 student loan forgiveness pledge before Jan. 31, it would be nice if it happens soon. That way, the federal government can make sure that student loans are based on reality and provide job opportunities after graduation. While it will be difficult to accomplish a major milestone like this without meaningful relief, it would be a huge step in the right direction for millions of Americans.
The Obama administration has also failed to fulfill its promise to offer students the ability to apply for federal student loan forgiveness, as it currently provides only the first $10,000 of student debt to any borrower. However, a bill by Biden would make existing programs more effective and accessible to borrowers. By restoring the right to file for bankruptcy, the government could get rid of student loan debt. In the meantime, the Obama administration’s student loan operation is understaffed and contracts out the servicing to private firms.
The NASFAA bill would direct the Secretary of Education to waive the balances of some federal student loans. To qualify for this program, borrowers must file their most recent tax returns, be employed, and make less than $200,000 a year for single individuals and $250,000 for married individuals. Moreover, the forgiveness received would not be taxable. Further, this bill would be a great boon for American citizens who have spent decades in school.