What does the election of Joe Biden mean for student loan borrowers? 44 million Americans carry student loan debt, and many of them are struggling with repayment in difficult economic times.

If you have student loans, you probably have not been paying them because the COVID relief package approved in the spring included a temporary pause on federal student loan payments that has been extended now through Dec. 31. However, as we head into December, the pause has not been extended.

Biden has made a number of statements indicating he will push for some relief for those with student loan debts, but exactly what the new president will be able to do depends on a lot of factors, one of which is the control of the Senate, which is still up for grabs until the early January Georgia Senate run-off elections.

Extending Pandemic Student Loan Relief

There is a possibility that Congress and President Trump could act during the lame-duck session (prior to Biden’s inauguration) to pass a new stimulus bill that would extend existing student loan relief, although nobody really knows yet whether this will happen. If Congress hasn’t taken action, once he takes office, Biden will be under enormous pressure to act to extend the existing payment pause. One Democratic proposal on the table is simply to continue that extension through next fall. That would give Biden and Congress time to work on more extensive student debt reform.

Loan Forgiveness

More recently, Democratic Senators Elizabeth Warren and Chuck Schumer introduced a resolution that calls on President-elect Joe Biden to simply forgive the first $50,000 in federal student loan debt for everybody across the board. So that would mean completely erasing student loan debt for more than three quarters of borrowers.

Biden has said he would tackle loan forgiveness for public servants by providing $10,000 of student debt relief for every year of service, up to five years. That includes working in a school, for the government or in a nonprofit setting. Student borrowers would be automatically enrolled, according to his plan, and previous “national or community service” would also allow a borrower to qualify.

It should be done immediately,” Biden told reporters last week about his student loan forgiveness plan.

Student advocacy groups say the existing Public Service Loan Forgiveness program needs sweeping changes. A 2019 Government Accountability Office report found that the Education Department under Sec. Betsy DeVos had rejected a staggering 99% of applications as part of the expanded loan forgiveness program.

The updated HEROES Act, passed by the Democratic House last fall calls for immediate $10,000 forgiveness of student loans for private, not federal, student loans. It also limits that relief to “economically distressed borrowers.” That’s a different, and actually more limiting plan that what’s in Biden’s campaign plan.

In several places in his campaign proposals, Biden talks about immediately canceling a minimum $10,000 in federal loans, not private loans. And there’s no mention of a means test.

Income-based repayment plans

President-elect Biden is also offering a new income-driven repayment plan for “undergraduate” student loan borrowers that could significantly lower their monthly payments. With much of the current student loan policy discussions revolving around student loan forgiveness, Biden’s income-based student loan repayment plan proposal has been flying under the radar.

Thee are several existing income-driven repayment plans already available to borrowers. All of these plans – sometimes referred to as “IDR” plans for short – allow borrowers to repay their federal student loans using a formula that is applied to their income. While each plan is unique, the plans all function on a basic level in a similar way.

All of them in some way set your monthly student loan payments based on your income. You make those payments – typically adjusted annually based on your current income – for 25 years. After that time frame, the remaining balance is forgiven. For a single student loan borrower with a family size of two making $40,000 per year in Adjusted Gross Income, the monthly payments – depending on the IDR they select, could range from $130 to $395 per month.

Under Biden’s plan, however, the numbers would be dramatically different. That same borrower would pay only $62.50 per month.

According to Biden’s campaign, “individuals making $25,000 or less per year will not owe any payments” on qualifying federal student loans, and also won’t accrue any interest on those loans — a stark difference compared to the existing plans, where interest still accrues and payments continue for 25 instead of just 20 years under Bidens plan.

“Everyone else will pay 5% of their discretionary income over $25,000 toward their loans and unlike the currently-available plans, the Biden plan would also factor in expenses, like housing, food, and utilities. This could lower the monthly payments even further, and in some cases, possibly zero out the payments entirely.

Executive Order Versus

Congressional Approval

The big question remains what can Biden get past Mitch McConnell and the Republican-controlled Senate. That won’t be an issue if the Georgia Senate run-off races in January go the way of the Democrats. If not, Biden may have to temper in some ways his plans for student loan reform. However, Democrats and some legal professionals believe Biden can take significant action using his power of executive order.

Biden — once he is president — could use executive action to extend the pause on federal student loan payments, interest, and collections, and he would be very likely to do so. President Trump exercised such authority in March, before Congress even passed the CARES Act. And Trump did so again in August to extend that relief (which was set to expire in September) to the end of the year. Such executive authority will be available to Biden as well, and he is likely to use it if necessary. 

Legislation to streamline and improve some of the problems associated with the Public Service Loan Forgiveness program (such as simplifying the program’s requirements so more borrowers can qualify) has had bipartisan support during the last several years, indicating that additional improvements could be very possible. Similarly, both Democrats and Republicans have expressed support for simplifying and improving Income Based Repayment programs, which currently involve multiple disparate plans with confusing and often-contradictory formulas and eligibility criteria.

Even if Biden cannot get full Congressional support for some of these changes, he may have the ability to implement improvements through executive action. For example, Biden could dramatically improve the management of the Public Service Loan Forgiveness program. He would likely aggressively move his administration to resolve many of the outstanding lawsuits brought by borrowers against the government regarding these programs on terms favorable to student loan borrowers.

Biden could also enact new, more affordable student loan repayment programs, as well. President Obama, for instance, created the popular Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE) plans through executive action, without any Congressional involvement.

One big wildcard is whether student loan borrowers can expect widespread student loan forgiveness. Some Democrats in Congress have been pushing for across-the-board student loan forgiveness, ranging from $10,000 to $50,000 per borrower or more. Sen. Bernie Sanders has called for complete student loan forgiveness for everyone. But Congressional Republicans have not shown any support for widespread student loan forgiveness of any kind, other than existing programs. So Biden may have difficulty getting any such plan through a divided Congress.

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