Biden Student Loan debt has emerged as a major financial burden for millions of Americans. During his presidential campaign, Joe Biden made addressing the student debt crisis a key component of his platform. He pledged to provide Biden Student Loan forgiveness and reform how student loans function. Now as president, Biden aims to make good on those promises through a series of executive actions focused on widespread student loan relief.
Biden’s broad student loan forgiveness plan involves canceling up to $10,000 in federal student loan debt for borrowers earning under $125,000 a year. This would provide relief for millions of Americans struggling under the weight of student loans. Biden also seeks to address the root causes of rising student debt by improving income-based repayment plans and public service loan forgiveness. However, Biden’s ambitious proposal faces criticisms and questions over its legality, economic impact, and whether it goes far enough. The path forward remains uncertain as the administration works to enact Biden’s vision for alleviating the student debt crisis.
Background on Student Loans in the U.S.
Student loan debt has become an escalating crisis in the United States. Total student loan debt now exceeds $1.7 trillion, spread out among more than 45 million borrowers. This debt burden has more than doubled since 2009 and continues rising each year. About 11% of this debt is estimated to be delinquent or in default.
The growth of student debt has far outpaced inflation and has surpassed credit cards and auto loans to become the largest source of household debt outside of mortgages. The average debt load for graduates is close to $30,000. However, balances over $100,000 are becoming more common, especially for graduate school borrowers.
Several factors contribute to the rapid increase in student debt. College tuition and fees have risen dramatically faster than wages and inflation. State funding cuts have also forced public colleges to raise tuition. Students increasingly rely on loans to pay for college as grant aid fails to keep pace with costs. More students are also attending graduate school, further driving up debt.
This mountain of debt makes it difficult for many borrowers to buy homes, start businesses, or save for retirement. It also weighs on the broader economy by reducing consumer spending and demand. Tackling the student debt crisis has become a pressing economic and social issue.
Biden’s Campaign Promises on Student Loans
During his 2020 presidential campaign, Joe Biden made several notable promises related to student debt and loans:
- Biden promised to forgive all undergraduate tuition-related federal student debt from two- and four-year public colleges and universities for debt-holders earning up to $125,000. This broad forgiveness plan was estimated to cost $750 billion over 10 years and help over 25 million borrowers.
- For private Historically Black Colleges and Universities (HBCUs) and Minority-Serving Institutions (MSIs), Biden pledged up to $50,000 of loan forgiveness for families earning less than $125,000 per year.
- Biden also vowed to fix the Public Service Loan Forgiveness program by securing $10,000 of undergraduate or graduate student debt relief for every year of national or community service, up to five years.
- His plans called for making income-based repayment plans more generous for lower-income graduates, with payments capped at 5% of discretionary income.
- Biden promised to pause payments and interest for people earning under $25,000, and also pause payments (without interest accumulation) for everyone with federal student loans as an emergency measure during the pandemic.
- He said he would halt federal student debt collection, end wage garnishments, and improve student loan rehabilitation programs.
- Biden’s proposals included cracking down on private lenders profiteering off of students and allowing private student loan debts to be discharged during bankruptcy.
- He pledged to more than halve payments on undergraduate federal student loans by simplifying and increasing the generosity of today’s income-based repayment program.
- Biden promised to double the maximum value of Pell grants and halve the number of years required to eliminate undergraduate federal student debt by creating a “new income-based repayment plan.”
Biden Administration Student Loan Actions Thus Far
The Biden administration has taken several steps related to Biden Student Loan since taking office in January 2021. The most notable actions include:
Loan Payment Pause
In one of his first acts in office, Biden extended the pause on federal student loan payments and interest that had initially been implemented under the Trump administration in March 2020 due to the COVID-19 pandemic. The pause meant borrowers were not required to make payments on federal student loans and interest would not accrue.
The pause has been extended multiple times under Biden and is currently set to expire on August 31, 2022. Supporters argue the pause has provided critical relief to millions of borrowers struggling financially amid the pandemic. Critics contend extended loan forbearance could hurt borrowers in the long run as interest continues accruing.
Interest Waiver
Related to the loan payment pause, the Biden administration has waived interest on federal student loans through August 31, 2022. This means no interest is accumulating on loans during this time period. Borrowers can potentially save hundreds of dollars in interest fees by having interest waived.
Targeted Loan Forgiveness
Biden has supported some targeted student loan forgiveness for specific groups of borrowers. This includes:
- Forgiveness for borrowers with total and permanent disability discharges
- Expanded Public Service Loan Forgiveness, with over 113,000 borrowers having loans forgiven
- $6 billion in loan discharges for 200,000 borrowers from colleges with misconduct
- $1.5 billion in forgiveness for 30,000 borrowers under borrower defense rules
While Biden’s broad loan forgiveness plan has received more attention, these targeted actions have provided relief for hundreds of thousands of borrowers.
Biden’s Broad Student Loan Forgiveness Plan
President Biden made headlines by announcing his broad student loan forgiveness plan in August 2022. The plan promises to provide up to $10,000 in federal student loan forgiveness for borrowers earning under $125,000 per year. Biden also extended the current pause on federal student loan repayments through the end of 2022.
This broad forgiveness plan aims to provide relief to millions of Americans struggling under the burden of student loan debt. Biden’s administration estimates the $10,000 across-the-board forgiveness will eliminate student loan debt entirely for around 20 million borrowers. They also estimate the plan will provide some amount of relief for up to 43 million Americans saddled with student loans.
The $10,000 forgiveness applies to borrowers with federal student loans who earn under $125,000 per year or households earning less than $250,000. Pell grant recipients can receive up to $20,000 in forgiveness under the plan. While the plan does not completely eliminate student debt, the Biden administration touts it as a significant step in relieving a major financial strain impacting middle-class American families.
However, the plan does face controversy, with some arguing it does not go far enough and others questioning Biden’s authority to enact such sweeping forgiveness without legislation from Congress. The true impact of Biden’s unprecedented student loan forgiveness plan remains to be seen.
Responses to Biden’s Plan
President Biden broad student loan forgiveness plan has elicited both support and criticism from various individuals and groups.
Supporters’ Arguments
- Proponents argue it will provide much-needed financial relief for millions of Americans struggling under the burden of student loan debt. Over 40 million Americans have federal student loan debt totaling around $1.6 trillion.
- Supporters say student loan forgiveness will stimulate the economy by freeing up income people can use for other purposes like buying homes, and cars, starting businesses, and raising families.
- They contend broad student loan cancellation will remedy an unfair situation where borrowing for higher education saddles individuals with debt for decades. This prevents wealth building and disproportionately impacts women and people of color.
- Advocates claim broad student loan forgiveness is necessary to fulfill President Biden’s campaign pledge to provide relief to student borrowers. They say Biden has the authority to cancel debt under the Higher Education Act.
- Some supporters argue all student debt should be eliminated to make higher education universally accessible. They say canceling student debt would reduce inequality and boost opportunities for younger generations.
Critics’ Arguments
- Opponents argue broad student loan forgiveness is unfair to those who worked hard to pay off their loans or chose not to attend college. Blanket forgiveness could incentivize future irresponsible borrowing.
- Critics claim loan cancellation will fuel inflation by putting more money in people’s pockets. This comes when inflation is already high.
- Some argue student debt forgiveness does not address the root causes of rising tuition costs and lenders profiting from student loans.
- Others contend blanket forgiveness is regressive, providing aid to high earners who do not need it. More targeted approaches would be more equitable.
- Legal scholars debate whether the executive branch has authority for broad student loan cancellation without Congressional approval. Courts may overturn unilateral executive action.
- Republican lawmakers unanimously oppose student loan forgiveness and call Biden’s proposal an abuse of power. They argue it does nothing to reform higher education financing.
Potential Economic Impacts
A broad student loan forgiveness plan from the Biden administration could have significant macroeconomic impacts. By eliminating hundreds of billions in outstanding debt, broad forgiveness aims to stimulate the economy by freeing up disposable income for borrowers.
Proponents argue this would lead to increased consumer spending and economic growth. With less money going to service debt, borrowers could instead use funds to purchase homes, cars, and other goods. This rise in consumption could boost GDP. Critics counter that the economic lift would be minimal, as higher earners with the means to repay are the main beneficiaries.
The impact on inflation is debated. On one hand, increased consumer demand may push prices higher. However, supporters say the effect would be minimal over the long run. They argue today’s high inflation is driven by supply chain issues and labor market imbalance, not excess demand.
Broad forgiveness may affect interest rates and credit markets. With less lending from federal student loan programs, broader credit availability could tighten. But others say the private loan market would expand to fill gaps.
The budget impact is also disputed. Forgiveness supporters contend the budget effect would be small, as much student debt is unlikely to ever be repaid. But critics argue it would add substantially to the deficit.
The labor market impact is unclear. Proponents say borrowers freed from monthly payments could better pursue careers and opportunities. However, employers may need to increase wages to attract workers. The impact likely depends on macroeconomic conditions.
Overall, the economic impact of broad student loan forgiveness remains uncertain. But it would likely represent a sizable fiscal stimulus, with both potential benefits and costs. The magnitude depends on the details of any plan put forward.
Alternatives and Other Proposals
Other student debt plans
There are several other proposals beyond Biden’s broad student loan forgiveness plan that aim to address the growing student debt crisis in the United States. Some alternatives include:
- Income-driven repayment plans – These set a borrower’s monthly student loan payment at an amount intended to be affordable based on income and family size. After 20-25 years of payments, any remaining loan balance is forgiven.
- Student loan refinancing – This allows borrowers to take out a new loan at a lower interest rate to repay their existing loans. This can reduce monthly payments but does not address the overall debt amount.
- Employer student loan assistance – Some employers provide programs to help employees pay down student loans faster through contributions to their payments. This provides relief to workers but does not impact the overall debt landscape.
- Free or debt-free college – Proposals for free public college tuition or “debt-free” tuition aim to reduce the need for future borrowing. But they don’t address existing debt.
- Student loan interest caps – Capping interest rates could prevent balances from ballooning but would not reduce principal amounts.
- Student loan bankruptcy discharge – Allowing the discharge of student loans in bankruptcy could bring relief to some borrowers with extreme financial hardship. But bankruptcy has major long-term consequences.
While these and other ideas have merit, most lack the breadth of Biden’s large-scale debt cancellation plan. They would provide limited and targeted relief rather than addressing the massive debt burden facing many Americans. However, they remain part of the debate on tackling the nation’s student debt crisis.
Unresolved Questions and Concerns
President Biden’s broad student loan forgiveness plan has prompted many unresolved questions and concerns. Here are some of the key issues still up in the air:
- What income thresholds will determine eligibility? Biden has proposed limiting forgiveness to those earning under $125,000 per year, but the exact caps are still unclear.
- How much debt will be forgiven per borrower? Biden has floated $10,000, but progressives want more. The final amount is still undecided.
- Will graduate school debt be eligible? It’s uncertain if Biden’s plan will include forgiveness for loans taken for graduate programs.
- How will forgiveness be implemented? It’s unclear how the Department of Education would carry out broad forgiveness operationally.
- Will forgiveness apply to privately held loans? Biden’s authority may only extend to federal student loans.
- How will loan servicers handle adjustments? The logistics for servicers to process mass forgiveness have not been spelled out.
- Will forgiveness be taxed as income? There are questions about whether discharged debt could be taxable.
- How will eligibility be verified for forgiveness? There are concerns about fraud and improper forgiveness claims.
- Will forgiveness boost inflation? Critics argue broad forgiveness could add to inflationary pressures.
- Will forgiveness be challenged legally? Opponents may argue Biden lacks authority for mass forgiveness.
- How will colleges be impacted? Broad forgiveness may influence tuition rates and educational costs.
- Could forgiveness incentives degree inflation? There are concerns debt relief may enable over-borrowing.
The Biden administration still needs to provide details to address these outstanding questions and concerns surrounding his broad student loan forgiveness proposal. The path forward remains murky.
What to Expect Moving Forward
The likelihood of Biden’s broad student loan forgiveness plan passing in its current form is uncertain. The plan faces opposition from Republicans and some moderate Democrats who are concerned about the costs. Some changes will likely need to be made to secure enough votes in Congress.
The timeline for potential passage is also unclear. Biden called for the plan to be passed in 2022, but midterm elections could delay progress depending on the makeup of the new Congress. If Democrats lose their narrow majorities in the House and Senate, the plan’s chances diminish significantly.
Some potential changes to secure more support include lowering the amount forgiven per borrower, imposing stricter income caps to target relief, or offsetting costs elsewhere in the budget. There’s also the possibility of breaking the plan into smaller pieces that could pass individually. For example, making federal loan forgiveness tax-exempt could happen separately from mass cancellation of debt.
The Biden administration is likely to continue championing some form of the proposal and pressuring Congress. But the final version could look different compared to the initial $10,000 across-the-board forgiveness. Compromises may need to be made to provide more limited, targeted relief. The timeline for any resulting legislation remains uncertain, but Biden aims to sign a bill in 2023 before declaring whether he’ll seek reelection.