ATLANTA, GA – DECEMBER 15: US President-elect Joe Biden gestures to the crowd as he delivers … [+]
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The idea of canceling student loan debt has been gaining momentum in recent months. And with Biden’s election victory, the chances have increased that widespread student loan waivers will become a reality.
Biden supported widespread student loan issuance and actively spoke about his desire to clean up some student debt during the presidential campaign. He has specifically asked Congress to pass student loan relief. Progressive lawmakers and advocacy groups have urged Biden to use executive power to circumvent Congress, despite not expressing any formal public opinion on whether or not he would support such a big political change without the involvement of Congress or whether he considers it a valid use would of executive action.
While some form of comprehensive student loan facilitation is certainly possible, it is nowhere near guaranteed. And it is almost certain that major relief or reforms would not simply cancel student loan debt for everyone. Neither Biden nor a majority of the lawmakers in either party in Congress voted to end the universal student loan.
This means that if the student debt is waived or waived under the policy, there will be some kind of cap, cap, restriction, or other eligibility criteria. It is too early to know for sure who is eligible and what a student loan assistance program might look like, as a formal plan has yet to be released. But here are some ways the student debt relief restrictions can look like.
Restrictions on student loan cancellation based on the amount of debt
If a student loan waiver is enacted, there would almost certainly be caps on the amount that would be canceled. House Democrats passed law in May that waived $ 10,000 in student loans per borrower. Biden has also publicly expressed his support for the $ 10,000 figure. Cancellation of $ 10,000 student loans would eliminate all student loan debt for an estimated 16.3 million borrowers, or 36 percent of all borrowers, and reduce loan balances by 50 percent for an additional 9.3 million, an additional 20 percent of all borrowers. Thus, with only $ 10,000 in student debt, over half of all outstanding student loan borrowers could experience significant relief.
However, some proponents have called for Biden to go further. Senate minority leader Chuck Schumer (D-NY), along with Senator Elizabeth Warren and other Democratic lawmakers, urged Biden to cut $ 50,000 in federal student loan debt for borrowers. Biden has not commented publicly on this higher amount.
Student Loan Cancellation Restrictions Based On Income
In addition to the maximum amount, there may be other income-related limits on student loan issuance. Economists, policymakers, and even some consumer advocates argue that there must be income caps on student loan issuance to ensure that the benefits of termination benefit lower-income borrowers rather than higher-income individuals who are more capable of theirs Repaying loans outweighs loans.
When Senator Elizabeth Warren campaigned her own student loan scheme, she advocated restricting relief to borrowers earning less than $ 250,000 a year. Her plan was to waive $ 50,000 in student loans for borrowers earning up to $ 100,000 a year, and then gradually discontinue the benefit for borrowers with annual incomes between $ 100,000 and $ 250,000. For borrowers over the $ 250,000 income threshold, there would be no relief at all.
Biden had previously advocated an annual income limit of $ 125,000 while campaigning his own student loan scheme. Senator Chuck Schumer recently suggested that this income limit should also apply if Biden were to cancel the student loan debt through executive action, although Biden did not comment.
Restrictions on student loan cancellation based on the type of loan
The student loan cancellation could also be restricted based on the specific type of student loan of the borrower. In fact, many of the recent student loan assistance programs have only been limited to certain categories of student debt. For example, the current moratorium on payments, interest and collections on student loans under the CARES Act limits relief to government student loans. These include federal direct loans and a small number of other types of federal loans purchased or assigned by the Department of Education. Other types of student loans such as commercially issued FFEL program federal loans, federal Perkins college and university loans, and private student loans are excluded.
Similar restrictions could apply to a comprehensive student loan waiver measure. This issue could depend on whether Congress passes loan forgiveness law or Biden enacts student debt relief through executive action. Biden’s executive powers as president would likely be limited only to federal loans that the government directly manages, meaning that he would likely not be able to issue loan waiver on FFEL program federal loans held by commercial entities, state Perkins Loans or private student loans. Congress could pass laws extending facilitation to these types of student loans, but that would undoubtedly add to the cost of the program.
Borrowers with the “wrong” type of federal loan could potentially convert these loans to a state loan through the state direct consolidation program. This consolidation program is vital for borrowers hoping their loans will be extended under programs such as Public Service Loan Forgiveness and Borrower Defense to Repayment, and allows borrowers to take FFEL program loans and Perkins loans essentially in a government managed one Convert Direct Program Loans. However, direct credit consolidation can have some serious drawbacks, such as: For example, capitalizing on outstanding unpaid interest, resuming the borrower’s repayment period, and wiping out progress on existing student loan cancellation programs. Hence, it may not be a viable or prudent solution for some borrowers.
Restrictions on Cancellation of Student Loans Due to Other Factors
There are myriad other ways Biden or Congress could restrict eligibility for comprehensive student debt relief. For example, certain courses or types of school could play a role. During the campaign, Biden proposed that borrowers attending public colleges and universities, as well as historically black colleges and universities (HBCUs) and private minority service institutions (MSIs), should cancel some of the government debt of students. This does not apply to graduate courses and those who have attended private universities.
There may also be job-related restrictions. For example, in response to the COVID-19 pandemic, some Democrats in Congress have pushed for student loans to be granted to health professionals and frontline workers, or to those who have suffered significant financial damage as a direct result of the associated recession.
Bottom line
After all, it’s too early to know exactly what a formal student loan cancellation initiative would look like. Details would likely depend in part on the outcome of the Georgia Senate runoff election in January, which will determine which party controls the Senate.
Regardless, any final student debt cancellation proposal will likely have limits, restrictions, and eligibility criteria, and some borrowers will inevitably be left out. For those who are excluded, there is hope that additional student loan reforms to improve existing programs and largely more affordable and fairer student loan repayments can help level the playing field. We will see.
further reading
DeVos Extends Student Loan Relief Through 2021: What You Need To Know
New proposed stimulus law could extend student loan and unemployment benefits – but does not include cash payments
Will Trump Extend Student Loan Facilitation? Maybe we will know soon
Could Biden cut some student debt through executive action?
What the election results mean for student loan borrowers
Biden’s win means DeVos will be out by January
source https://collegeeducationnewsllc.com/would-your-student-loans-be-eligible-to-be-cancelled-by-biden-its-complicated/
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