If neither pushes the deadline, millions in student loan repayments will fall due weeks before President-elect Joe Biden takes office on January 20. Even if Biden reinstates the break retroactively, it could create confusion for borrowers as well as a mess. for student loan processors who aren’t designed to suddenly stop or start payments – all as the economic recovery slows and cases of Covid-19 increase.
And in any case, Biden will have a choice: keep Trump’s policies in place or increase and completely write off the debt, a step some Democrats argue Biden can take without Congress.
Biden ducked on Monday whether he would use the executive branch to write off student debt. Instead, he expressed support for the House Democrats’ stimulus package, which would extend the suspension of payments until September 2021 and write off some student debt.
“Democratic House legislation calls for an immediate $ 10,000 forgiveness of student loans,” Biden said.
“It is holding people back. They have real problems. They have to make choices between paying their student loan and paying the rent, those kinds of decisions. It should be done immediately,” he added.
An unprecedented movement
Trump initially waived interest on student loans in March, as much of the economy began to shut down in response to the coronavirus pandemic.
A larger version of student loan relief was included in the $ 2 trillion economic stimulus package signed two weeks later. As part of this program, the U.S. government automatically suspended payments and waived interest on federal student loans until September. Trump then moved the expiration date to year-end by executive order.
The interest suspension and waiver only applied to loans held by the federal government, which covered about 85% of federal student loans. This included loans known as Federal Direct Loans, as well as PLUS loans that parents could have taken out on behalf of their children.
It excluded certain federal loans which are guaranteed by the government and which are not technically held by the government. In general, these were disbursed before 2010.
Suspension of payments vs cancellation of student debt
The emergency measures came after years of debate among Democrats over how to ease Americans’ massive student debt.
Yet unlike more progressive Democrats, Biden did not initially include student debt cancellation in his campaign platform. But he eventually adopted a plan to forgive $ 10,000 per borrower to help families during the pandemic as part of a July report released by a joint task force with Sen. Bernie Sanders, his longest-running contender in the election. Democratic primaries.
Progressive Democrats already appear ready to pressure Biden to honor that pledge, including Massachusetts Senator Elizabeth Warren, who urges Biden to “write off billions of dollars in student loan debt” on day one. Warren, along with Senate Minority Leader Chuck Schumer, called on Trump in September to write off $ 50,000 in student loan debt per borrower.
Warren argues that the Education Secretary has the power to largely write off federal student loans, a claim supported by a memo from attorneys at Harvard Legal Services Center and its Predatory Student Loans Project.
But Biden may be reluctant to unilaterally write off the debt and prefer it to come from Congress – which will remain divided unless Democrats win two senatorial elections in Georgia on January 5.
“The secretary has some power to write off student debt. But there is both a legal and a practical question of how far the administration can go,” said Robert Shireman, who has served in the administration. Obama as Assistant Under Secretary for Education and is currently a Senior Fellow at the Century Foundation.
Targeted loan forgiveness is easier
What is clearer is that the Secretary of Education can cancel student debt for borrowers who have been defrauded by their colleges.
This has been happening for years, despite Secretary Betsy DeVos overturning Obama-era rules that made the process of seeking relief easier for these students.
There are thousands of borrowers who say they’ve been scammed by now-defunct for-profit colleges like Corinthian and ITT Tech, and have been waiting for years for the education department to process their claims.
The National Student Legal Defense Network, founded by former Department of Education officials, urges Biden to use executive power from day one to write off student debt for defrauded students and those whose colleges have closed, as well as the debt of people with permanent disabilities. This could provide relief to hundreds of thousands of borrowers.
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