How Will Joe Biden Impact Your Student Loans?

A college student sitting behind a stack of textbooks
Pixabay

Joe Biden’s presidency will look a lot different than Donald Trump’s. Although he won’t formally take office until January 20th, President-Elect Biden has already begun laying out some of his major policy points. He has spoken at length about his tax plan, pandemic relief plan, and climate plan. In addition, he has also been an advocate for student loan relief.

Biden, whose wife has a doctoral degree in education, has made education one of his central issues. In particular, Biden has discussed widespread student loan forgiveness and relief. He has promised to make more grants available, make repayment more feasible for low-income households, and potentially wipe $10,000 of debt from anyone with outstanding federal loans.

The Biden plan sounds encouraging, but the devil is always in the details. Does the President-Elect’s education plan make sense, and can it get passed?

Biden’s Plan for Students  

The Biden-Harris campaign published its entire higher education plan online, so you can scan through it for yourself, but we’ve highlighted some of the most important points here. The general goal of the plan, according to the campaign, is to invest in students and schools to help “grow a stronger, more prosperous, and more inclusive middle class.”

Biden will employ a number of tactics to accomplish this. First, he has proposed making two- and four-year public colleges tuition-free. In addition, he would expand student loan forgiveness to families making less than $125,000 annually with children in public colleges.

Biden has also discussed revamping and expanding federal education grant programs. Both moves would theoretically allow students to take out fewer loans in the future, helping to bring down America’s collective $1.5+ trillion student debt.

Biden has also pledged to fix the public service loan forgiveness program. It was created to help public servants complete their education with fewer financial hurdles, but only 1 percent of applicants actually get forgiveness. The President-Elect also plans changes to income-based repayment programs, which require low-income households to pay 10 percent of their discretionary income toward student loan debt each month. Biden would slash this payment to 5 percent and would make enrollment in these plans automatic instead of requiring action.

Student Loan Cancelation

Then there’s the big one: widespread student loan cancelation. While every aspect of the Biden higher education plan is important, the prospect of loan cancelation interests tens of millions of Americans. The median student loan debt in America is around $17,000, and roughly 45 million borrowers have outstanding student debt.

To start to remedy this crisis, Biden has recommended canceling $10,000 in federal debt for every student with outstanding loans. Biden, in a plan with Senator Bernie Sanders (I-VT), outlined this $10,000 cancelation as COVID-19 relief.

“Student debt is holding millions of Americans back. The COVID-19 pandemic and President Trump’s recession are making it harder for those with student loans to make ends meet right now,” the Biden-Sanders proposal says.

While the idea is exciting for student borrowers like me, is it feasible? Experts aren’t so sure. There’s the price tag to consider – the government would need to foot a $400+ million bill to make this work. And while it’s clear that the student loan crisis is worsening, many argue that forgiveness is not the right path toward reform.

“There are many flaws in our student lending programs and too many borrowers are struggling with loans they can’t pay,” wrote Adam Looney, a senior fellow for economic studies at the Brookings Institute. “But that’s a call to fix the system, not scrap it.”

The Bottom Line

Although Biden has won the presidential election, the fate of Congress has not yet been sealed. There are still two Senate races that will be decided in January and if Democrats win both, President-Elect Biden would enter office with his party in control of the House and Senate. While some, like Senate Minority Leader Chuck Schumer (D-NY) and Sen. Elizabeth Warren (D-MA), have argued that the president does not need Congress to cancel student debt, Senate support would make it an easier pill to pass.

All that said, something like student loan cancelation is easier said than done. Even with both chambers of Congress, Biden would face an uphill battle in passing an expensive, controversial student loan package, even if it would benefit millions.

It is worth noting that the student loan freeze expires at the end of the year, and it’s unclear if that will be extended or if Biden will freeze loan payments after his inauguration. All in all, the situation is fluid and features many moving parts, but student borrowers could use some sort of aid soon.