How The Electoral Victory Of Joe Biden Affect Student Loans?
Every presidential candidate promises a range of reformations and changes across different policies, and the mounting student debt crisis is no exception. While President-elect Joe Biden didn’t commit to completely wiping out student debt, we can expect some forthcoming adjustments to relieve the extensive financial burden weighing on current students and graduates.
Biden has outwardly addressed this very struggle, stating that student loan borrowers are in great trouble, especially during this pandemic when being forced to decide between repaying debt or covering rent. This has initiated a conversation on loan cancellation and additional measures for borrowers across the country.
Student Loans In The 2020 Electoral Debate
In the top office race, each party’s nominees touted their positions on debt forgiveness and student loans in the electoral debate. Donald Trump's campaign highlighted its implementation and distribution of Pell grants throughout the year, making it more advantageous than the prevailing policy, limiting grants to specific semesters (spring and fall).
Accordingly, students from low-income backgrounds will have continuous access to funds even during winter and summer breaks. This policy is designed to help students finish their degrees at a better pace without accumulating a substantial amount of debt in the process. The debate effectively showcased how experts in the financial arena were brought in to modernize existing Federal Student Aid policies.
Joe Biden's agenda and proposals center around loan forgiveness. He suggests forgiving all (federal) undergraduate student loans related to public college (two and four-year degree programs) and university tuition expenses. Forgiveness measures would theoretically be applied to borrowers who are earning up to $125,000 annually. This would mean federal coverage of the monthly payment instead of the borrower until the debt’s forgivable portion was repaid. The proposal stipulates that the benefits of this policy would be applied to people who hold federal student loans for tuition from private MSIs and HBCUs as well.
In addition to his forgiveness plans, he supports nullifying at least $10,000 of student loans for each borrower, echoing Elizabeth Warren's student loan forgiveness plan amidst the COVID-19 crisis. If implemented, individuals earning salaries amounting to less than $25,000 annually won’t be required to make payments every month, and no interest will accrue. For the people whose annual salaries are above $25,000, repayment amounts won’t exceed 5% of their total discretionary income.
After 20 years, federal student loan balances that remain would automatically be forgiven. This proposal factors in taxes and will ensure that borrowers don’t face any additional tax burden. People who participate in public services will qualify for extra federal student loan forgiveness that includes $10,000 in forgiveness every year for five years.
Where Do Democrats Stand On Student Loans?
We’ve put together a list of the top Democrats' plans for student loans, considering the importance of the 2020 election for student loan borrowers.
- Student Debt Emergency Relief Act: The Student Debt Emergency Relief Act proposed by Representative Ayanna Pressley intends to provide a sum of $30,000 for all student loan borrowers to deliver across-the-board student loan forgiveness. This bill will freeze all collection efforts focused on student loans that are defaulted on during the pandemic
- Student Loan Forgiveness Senate Resolution: Unveiled by Senators Elizabeth Warren and Chuck Schumer (Senate Minority Leader), this proposal suggests a sum of $30,000 for all borrowers to deliver across-the-board student loan forgiveness. These Senators have also argued that legislation wouldn’t be necessary to enact this forgiveness plan
- Private Student Loan Relief: Representative Madeleine Dean announced an amendment to the National Defense Authorization Act to promise nearly $10,000 in immediate assistance to repay private student loans.
What Is Biden's Plan For Higher Education?
Joe Biden’s student loan debt plan involves two and four-year institutions. It provides two years of debt-free tuition for those students who attend high-quality training programs or community colleges. The strategy would complement an increase in taxes for high net-worth individuals and eliminate "stepped-up basic" loopholes, thereby improving America’s quality of education.
The two-year debt-free plan applies to undocumented immigrants who came to the US as children as well. These very immigrants can also apply for other eligible financial aid. Moreover, he plans to increase the quality of community colleges by providing grants to improve student success.
Beyond these ambitions, Biden aims to unleash students’ potential to pursue degrees in community colleges by investing in them and diminishing entry barriers in these very institutions. Additionally, $10,000 in annual student debt relief will be provided to those graduates who pursue work in national, community, or non-profit services like teaching for up to five years.
The existing cap of 10% of salaries for those individuals earning $25,000 or more would be reduced to 5% of discretionary income per campaign promises. Borrowers earning less than $25,000 won’t be expected to repay back the government, and interest won’t accrue. To round out these measures, Biden proposed that the government increase its spending to hire more teachers and increase their pay.
Joe Biden's education plan will be a first-dollar program that allows students to use their financial aid for purposes other than tuition to reduce disparities. Jill Biden, a community college professor, has stated that Joe’s education plan ranks among the best given its drafting by the very educators and students intimately familiar with their community’s prevailing problems. Besides his aims for student debts, Biden is also endeavoring to bring out the best in students by addressing barriers that prohibit attendance.
Will There Be New Student Loan Forgiveness?
Biden has always considered education important for the growth of the country. He’s also repeatedly expressed his unhappiness about how borrowers suffer throughout life because of their crushing student loan debts. Already, Biden has proposed various strategies to reduce student debt while lowering the barriers preventing more widespread attendance.
In tandem with these initiatives, he suggested a change to the Public Service Loan Forgiveness Program to further ease the debt burden. Considering all the plans that he’s already proposed, it’s pretty clear that there might be a new student loan forgiveness proposal that contains significantly more benefits than the prevailing programs.
Generally, federal loan forgiveness always affects loan lenders directly. Joe Biden is taking a different approach by coming up with new and reformed loan forgiveness programs. If enacted, these policies will likely reduce federal loan refinancing, thereby impacting private loan lenders. While the new loan forgiveness program might provide various incentives and options for students, these alternatives could minimize lender profitability over the long run.
Bottom Line
Although student loan issues may not top the list of pressing concerns given the ongoing pandemic and declining economic activity, considerable reforms in this arena could make a tremendous difference for America’s outlook. Reform plans in this ecosystem will benefit individuals between 18 to 29 years old, primarily because 34% of this age group has student debt balances. Accordingly, these proposals are very likely to be well-received by younger generations struggling to keep pace with higher education’s rising costs and the accompanying debt balances.
