Biden to extend the break on federal student loan payments
President-elect Joe Biden will extend the nearly one-year hiatus on federal student loan payments on “day one,” the first concrete pledge the new administration has made to tackle the debt crisis of 1, $ 6 trillion.
Biden’s transition manager David Kamin told reporters on Friday that “easing the crushing financial burden of student debt” would be an immediate priority for the new administration as part of its pledge to “move our economy and keep it going” Americans afloat “. This includes leading the Department of Education on “day one” to expand the popular student loan forbearance program, as well as “expanding income-based repayment programs, and fixing and expanding loans. loan forgiveness programs for those with public service jobs ”. Want to apply a loan? get started now
But exactly how the incoming administration will handle student loan cancellation for other borrowers remains unclear. On call with reporters, the transition official said Biden “supported Congress immediately canceling $ 10,000 in federal student loan debt per person in response to the COVID crisis” but did not provide details nor a specific deadline.
Student loan debt has been a looming financial problem since before the pandemic, but coronavirus-related job losses and widespread pay cuts, especially among millennials, have exacerbated the problem. Last year, student loan debt hit an all-time high, hitting $ 1.6 trillion among more than 40 million Americans, according to the Federal Reserve Bank of New York. On average, student borrowers owe between $ 200 and $ 299 each month, an amount that for many is simply unsustainable; about one in five borrowers are in default, according to the US Department of Education.
Democrats are divided on how to deal with the crisis. Originally a fringe idea, the concept of student loan cancellation has gained traction among the more progressive pockets of the party. In the 2020 presidential primaries, Senator Elizabeth Warren of Massachusetts offered to write off up to $ 50,000 in debt and Independent Senator Bernie Sanders of Vermont called for the cancellation of all student loans. In a more moderate approach, Mr. Biden expressed his support for congressional legislation that would write off $ 10,000 per borrower.
Whatever the specifics of Mr Biden’s plan, the approach is likely to be a about-face from the current administration’s stance. In a letter early last week, Betsy DeVos, now former secretary of the US Department of Education urged Congress to “reject” calls for the cancellation of student debt, calling the policy proposals “misguided” and “unfair to most Americans”.
As of March, all federal student loan payments have been suspended as part of the federal government’s COVID-19 response. An extension of the grace period was included in the early drafts of the December stimulus package, but was halted during final negotiations. Student loan payments are expected to resume at the end of this month. The transition team has not indicated how long a new expansion could last.
A Pew Study As of November, nearly 6 in 10 borrowers said it would be “somewhat” or “very difficult” to resume loan payments next month.
When student loan repayments resume, the Department of Education does not expect a smooth transition. In his 2020 Annual Report, the ministry said it expects loan managers and the federal government “to face a heavy burden in” converting “millions of borrowers into active repayment.” Some of these borrowers, the report warns, will become delinquents.