As President Barack Obama continues his campaign for re-election, Biden’s plan to erase the debt of nearly 40 million borrowers could prove to be a political windfall for lower-income borrowers, despite legal challenges. The plan would erase a maximum of $20,000 in Pell Grant debt and would reduce monthly payments on federal student loans. But the plan has its own legal hurdles, and some experts are worried it may not be enacted in time.
Biden’s personal lobbies for student loan relief
It seems like an obvious choice: Joe Biden is a supporter of student loan relief. As vice-president during the Obama administration, Biden voted to make some private student loans dischargeable in bankruptcy. Though he has promised to rescind this vote, he has not yet done so. As a result, he is facing criticism from critics who point out that his vote has hurt millions of American citizens with private student loans.
Student loan relief is an issue that is highly politicized in Washington, but Biden has tried to appeal to progressives with promises of helping borrowers. It is also an issue that is threatening his party’s chances in the upcoming midterm elections. As a result, he has lobbied for legislation to help the nation’s student loan borrowers. Currently, there are 43 million people with federal student loan debt. The average balance is $37,667. However, nearly a third of students have a debt of less than $10,000. If the Biden plan passes, 20 million people would be able to get their loans erased.
Biden’s decision to cancel $20,000 in Pell Grant debt could be challenged in court
The recent announcement from President Biden to cancel up to $20,000 of Pell Grant debt for eligible borrowers could be challenged in court. Higher education policy experts lament that the decision does little to address the underlying problem. With the midterm elections coming up, political issues ranging from a Supreme Court ruling that stripped women of their constitutional right to an abortion to an ongoing investigation of former President Donald Trump’s ties to Russia, the timing is especially problematic.
The White House cites the HEROES Act, a law passed after the 9/11 terrorist attacks, to justify the decision. Under the law, the education secretary has the authority to cancel debt during times of crisis, war, and national emergencies. While the COVID-19 pandemic isn’t a national emergency, it could trigger the cancellation of debt for eligible borrowers.
Biden’s plan to reduce monthly payments on federal student loans
While many Democrats have pushed for broad debt relief, the indecision of the Obama administration has left many borrowers scratching their heads and calling for Biden to move faster. In addition to stymieing young and Black voters, the White House’s indecision has also caused problems for student loan servicers, who have warned the Education Department of possible disruptions.
Biden’s plan to reduce monthly payments for federal student loans would benefit an estimated 43 million borrowers, and would completely wipe out the student debt of more than 20 million Americans. The plan would also make it easier for people with certain jobs to qualify for Få Mer Info loan forgiveness credit. Senate Majority Leader Chuck Schumer, who has long advocated for the cancellation of student debt, urged Biden to make the changes as broad as possible.
Impact on lower-income borrowers
In the United States, almost one-third of students have student loans but have not completed their education. This is due in part to the fact that they were unable to pay the tuition for their college courses. Furthermore, many of these students were forced to work full-time while pursuing their education, which left them with a limited chance of graduating. In addition, they were not provided with career counseling and outside financial resources, which made it difficult for them to finish their schooling.
As a result, COVID-19 will only exacerbate the debt burden of students who are unable to pay for college. However, there are steps policymakers have taken to address the short-term challenges of student loan debt and align repayment obligations with borrowers’ ability to repay. One of the most critical components of student loan policy solutions is targeting relief efforts to meet the unique needs of lower-income borrowers. The average student loan borrower is obligated to repay three percent of their take-home income each month, but many borrowers have debt burdens that are greater than 10 percent.