Biden’s Loan Forgiveness Plan

Biden%27s+Loan+Forgiveness+Plan

Linda Qiu, Staff Writer

Under President Joe Biden’s order, the Department of Education announced on Mar. 18 that 72,000 student loan borrowers will have their collective $1 billion of student debt completely forgiven. This move by the Biden administration could lead to broader student loan forgiveness that is currently being discussed in Washington.

The 72,000 student loan borrowers who will have the entirety of their debt forgiven are borrowers who are eligible for student loan forgiveness under “borrower defense to repayment.” 

According to the official U.S. government Federal Student Aid website, “If your school misled you or engaged in other misconduct in violation of certain state laws, you may be eligible for ‘borrower defense to loan repayment forgiveness,’ sometimes abbreviated to ‘borrower defense.’ This is the forgiveness of some of all of your federal student loan debt.”

Under former President Trump, previous Secretary of Education Betsy DeVos had claimed borrower defense to repayment was both too costly for taxpayers and too generous to student loan borrowers. As such, the 72,000 student loan borrowers in question received only partial loan forgiveness during the Trump administration. The Biden administration will have these loans fully forgiven, reversing former Secretary DeVos’s policy.

Those 72,000 students are not the only ones who may be receiving the cancellation of their student debt. Over 200,000 student loan borrowers have applied for debt forgiveness under the borrower defense program, meaning approximately 130,000 applicants have not received complete student loan forgiveness. In the future, the Biden administration could alter the regulations for determining who is eligible for borrower defense to be less strict. Alternatively, Congress may pass legislation that replaces current regulations with more favorable rules.

“Abandoning partial relief is a strong start for a narrow subset of borrowers, but what we need from the Education Department is an overhaul of the current borrower defense process,” said Toby Merrill, Director of Harvard’s Project on Predatory Student Lending.

Leading Democrats have also urged President Biden to issue executive orders calling for up to $50,000 in student debt to be canceled. Many have cited a clause from the COVID-19 relief stimulus package that made student loan forgiveness non-taxable until 2025.

While campaigning, President Biden himself frequently mentioned his intention to change income-driven repayment and the Student Service Loan Forgiveness program for the better. He has proposed establishing an income-driven repayment plan that would cap the amount student loan borrowers pay at 5% of their discretionary income. If put into action, this plan could decrease the monthly payments of countless student loan borrowers by over 50%.

Though Democratic leaders approve of wide-scale moves involving student loan forgiveness, plans for student loan forgiveness need to make it through the Democrat-controlled House or Senate before anything can happen. Widespread loan cancellation seems to be a topic that will see future developments during President Biden’s term.

 

Graphic courtesy of MONEYUNDER30.COM