President-elect Joe Biden will extend a nearly year-long pause in federal student loan payments on Day One, the incoming administration’s first concrete promise to tackle the $ 1.6 trillion debt crisis.
Biden spokesman David Kamin told reporters Friday that “easing the crushing financial burden of student debt” will be an immediate priority for the incoming administration as part of its commitment to “move our economy and keep Americans afloat.” This includes directing the Ministry of Education on the “first day” to extend the popular student loan patience program, as well as “expanding income-based repayment programs and defining and expanding loan forgiveness programs for those who have work in public services̵
But how exactly the incoming administration will handle the forgiveness of a student loan for other borrowers remains unclear. Speaking to reporters, a Biden spokesman said he “supports Congress to immediately cancel a $ 10,000 federal student loan per person in response to the COVID crisis,” but did not offer details or a specific time frame.
Student loan debt loomed over a pre-pandemic financial problem, but widespread job losses and wage cuts related to the coronavirus, especially among the millennia, exacerbated the problem. Last year, student loan debt reached a record high, reaching $ 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 each month, which for many is simply insolvent; About one in five borrowers is in default, according to the US Department of Education.
Democrats are divided on how to deal with the crisis. Initially the idea of limiting, the concept of canceling a student loan gained popularity among the party’s more progressive pockets. During the 2020 presidential election, Massachusetts Sen. Elizabeth Warren offered to forgive up to $ 50,000 in debt, and independent Sen. Bernie Sanders of Vermont called for the cancellation of all student loans. A more moderate approach, Mr. Biden expressed his support for congressional legislation that would repeal $ 10,000 per borrower.
Regardless of the specifics of Mr Biden’s plan, the approach is likely to be closer to that of the current administration. In a letter early last week, former US Secretary of Education Betsy Devos called on Congress to “reject” calls for forgiveness of student loan debt, calling policy proposals “wrong” and “unfair to most Americans.”
As of March, all federal student loan payments have been suspended as part of the federal government’s response to COVID-19. The extension of the grace period was included in the early draft of the stimulus package in December, but was finally agreed. Currently, student loan payments are due to resume later this month. The transition team did not specify how long a new extension could last.
A November Pew survey found that nearly 6 out of 10 borrowers said it would be “somewhat” or “very difficult” to restart payments on their loans next month.
When student loan payments resume, the Ministry of Education does not expect a smooth transition. In its annual report for 2020, the department said it expects service loans and the federal government will “face a heavy burden in” turning “millions of borrowers into active repayments.” The report warns that some of these borrowers will become overdue.
Alex Tin contributed to the reporting of this article.