President-elect Joe Biden will extend the nearly one-year break in federal student loan payments on the “first day”, the first concrete promise the new government has made to tackle the $ 1.6 trillion debt crisis.
David Kamin, a Biden transition officer, told reporters on Friday that “easing the overwhelming financial burden of student debt” would be an immediate priority for the next government as part of its commitment to “get our economy moving and keep the Americans afloat “. This includes directing the Department of Education on the “first day” to extend the popular student loan tolerance program, as well as “expanding income-based repayment programs and repairing and expanding loan forgiveness programs for those with public service jobs” .
But how exactly the new government will deal with student loan forgiveness for other borrowers remains unclear. In the liaison with the reporters, the transition official said that Biden “supports Congress’ immediate cancellation of $ 10,000 of federal student loan debt per person in response to the COVID crisis”, but offered no details or a specific deadline.
Student loan debt has been an imminent financial problem since before the pandemic, but job losses and salary cuts related to the coronavirus, especially among millennials, have exacerbated the problem. Last year, student loan debt reached a historic peak, close to $ 1.6 trillion among more than 40 million Americans, according to the Federal Reserve Bank of New York. On average, student loan borrowers owe between $ 200 and $ 299 every month, an amount that for many is simply unsustainable; about one in five debtors is in default, according to the United States Department of Education.
Democrats are divided on how to deal with the crisis. Originally a marginal idea, the concept of student loan cancellation gained momentum among the party’s most progressive pockets. During the 2020 presidential primaries, Senator Elizabeth Warren of Massachusetts proposed to forgive up to $ 50,000 in debt and independent Senator Bernie Sanders of Vermont called for the cancellation of all student loans. In a more moderate approach, Mr. Biden expressed his support for Congressional legislation that would cancel $ 10,000 per borrower.
No matter the details of Biden’s plan, the approach will likely represent a turnaround from the current government’s position. In a letter earlier last week, now former US Department of Education secretary Betsy DeVos asked Congress to “reject” student loan debt forgiveness requests, calling the policy proposals “wrong” and “unfair to most Americans”.
Since March, all federal student loan payments have been suspended as part of the federal government’s COVID-19 response. An extension of the grace period was included in the first drafts of the December stimulus package, but was cut in the final negotiations. Student loan payments are scheduled to resume later this month. The transition team did not indicate how long a new extension could take.
A November Pew study found that nearly 6 out of 10 borrowers said it would be “a little” or “very difficult” to restart their loan payments the following month.
When student loan payments are resumed, the Department of Education does not expect a smooth transition. In its 2020 annual report, the department said it expects credit officers and the federal government to “face a heavy burden by ‘converting’ millions of borrowers into active payments”. Some of these borrowers, the report warns, will default.
Alex Tin contributed the story to this article.