President-elect Joe Biden will extend the nearly one-year break in federal student loan payments on “the first day,” the first concrete promise the incoming administration made to tackle the $ 1.6 trillion debt crisis. dollars.
David Kamin, head of the Biden transition, told reporters on Friday that “easing the overwhelming financial burden of student debt” would be an immediate priority for the incoming administration as part of its commitment to “move our economy and keep Americans afloat. ” This includes directing the Department of Education on the “first day” to expand the popular student loan prevention program, as well as “expanding income-based repayment programs and arranging and expanding loan forgiveness programs for those who have public service jobs “.
But it is unclear how exactly the incoming administration will handle student loan forgiveness for other borrowers. In the call with reporters, the person in charge of the transition said Biden “supports Congress that immediately cancels $ 10,000 in federal student loan debt per person in response to the COVID crisis,” but did not provide details nor a specific term.
Student loan debt has been an approaching financial problem since before the pandemic, but widespread job losses and coronavirus-related wage cuts, especially among millennials, have exacerbated the issue. . Last year, student loan debt hit an all-time high of about $ 1.6 trillion among more than 40 million Americans, according to the Federal Reserve Bank of New York. On average, student loan borrowers owe between $ 200 and $ 299 each month, an amount that for many is simply unsustainable; approximately one in five borrowers is defaulting, according to the U.S. Department of Education.
Democrats are divided on how to deal with the crisis. Originally a marginal idea, the concept of student loan cancellation has gained strength among the party’s most progressive pockets. During the 2020 presidential primary, Sen. Elizabeth Warren of Massachusetts proposed to forgive up to $ 50,000 in debt and independent Sen. Bernie Sanders of Vermont called for the cancellation of all student loans. In a more moderate approach, Mr. Biden has expressed support for congressional legislation that would cancel $ 10,000 per borrower.
Regardless of the specifics of Mr. Biden’s plan, the approach is likely to be a rough approximation of the current administration’s stance. In a letter earlier last week, former U.S. Department of Education secretary Betsy DeVos urged Congress to “reject” calls to forgive student loan debt, and called the proposals policies of “misguided” and “unfair to most Americans”.
Since 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 first drafts of the December stimulus package, but was reduced in the final negotiations. Student loan payments are currently scheduled to resume later this month. The transition team did not indicate how long a new extension could last.
A Pew study in November found that nearly 6 in 10 borrowers said it would be “a little” or “very difficult” to restart their loan payments the following month.
When student loan payments are restarted, the Department of Education does not expect a smooth transition. In its 2020 annual report, the department 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 delinquent.
Alex Tin contributed reporting this article.