Stating that “too many Americans are struggling to pay for basic necessities,” the U.S. Department of Education extended the grace period of payments for student loan borrowers through the end of September.
The move, part of a sweeping list of executive orders signed by new President Joe Biden, provides immediate relief to millions of Americans across the country facing mounting debt during the COVID-19 pandemic.
“At the request of President Biden, the Acting Secretary of Education (Phil Rosenfelt) will extend the pause on federal student loan payments and collections and keep the interest rate at 0%,” the White House said in a release.
During his inauguration speech at the U.S. Capitol, Biden promised to “get right to work” on a number of initiatives to help those in need. Extending help to student borrowers comes just in time for the 41 million individuals whose monthly payments were set to come due at the end of January. Those payments had been frozen since the COVID-19 pandemic began in March, but a further allowance of time was not granted in the most recent stimulus package approved in December.
“Too many Americans are struggling to provide for their families. They should not be forced to choose between paying their student loans and putting food on the table,” the Department of Education said.
Read more from District Administration: 5 steps forward Biden can take on financial aid.
Read more from University Business: How much student loan debt will Biden and Harris cancel?
According to the Pew Research Center, nearly one-third of adults have student loan debt, and it typically hits the youngest graduates the hardest. Pew noted in a 2019 report that only 3 in 10 “young college graduates say they are living comfortably. According to educationdata.org, the average student loan debt per person is more than $36,000 or $200 or more per month. The Biden Administration notes that 20% of borrowers are behind on payments.
Though the student loan extension will help borrowers over the next few months, what to do with the $1.68 trillion in student loan debt is still up for grabs.
Some level of forgiveness has been kicked around, with the Biden campaign discussing a potential $10,000 cancellation for each borrower in the U.S. Some more progressive leaders have called for more, with Sens. Elizabeth Warren (D-MA) and Sen. Majority Leader Chuck Schumer (D-NY) asking for $50,000 for those who earn less than $100,000 or the potential for all of it to be wiped out.
“It’s simple: When people have more money to spend, our whole economy is better off,” Warren posted on Twitter. “The Biden-Harris administration can put more money in people’s pockets by using their existing legal authority to cancel student loan debt for millions of Americans.”
Rep. Alexandria Ocasio-Cortez (D-NY) took it a step further on the social media platform, saying, “OK now let’s cancel them.”
But those ideas and any orders that wipe out large amounts of debt likely will meet with resistance from Republicans and some Democrats in Congress and Biden himself. Aside from the potential economic fallout, forgiving loans for college graduates who are likely to earn more money in their lifetimes than those who did not attend colleges but have other loans undoubtedly would be a topic of debate. The Brookings Institution also noted in a 2020 study that only 6% of those borrowers have $100,000 or more in student loan debt.
Among the other proposals that have been floated by the incoming Biden Administration is the potential for borrowers to pay back a smaller portion of their debt each month toward student loans. Those who earn less than $25,000 per year, for example, would not make any payments. Those making above that threshold would pay only 5% of their incomes (and not include taxes and essentials). He also wants to ensure that those with outstanding debt do not incur further penalty, so he has suggested that borrowers not have to claim the debt forgiveness on their taxes.
In his plan for “Education Beyond High School”, Biden noted that individuals are pursuing both degrees and credentials beyond degrees, but that “for many it is unaffordable and saddles them with too much debt.” In he plan, he outlined several potential strategies to tackle the problem:
- He hopes to provide a two-year, tuition-free community college experience to those who choose it, while at the same time forging a grant program to assist those institutions who “implement evidence-based practices and innovative solutions.” In addition, students would be allowed to use Pell grants for those costs beyond tuition. Biden also wants to invest $50 billion in workforce training alliances between businesses and community colleges.
- One of the boldest suggestions is to offer free tuition to public institutions for families earning less than $125,000. He would like the U.S. to double down on the amount of assistance through Pell grants, citing the rising costs of tuition as barriers to prospective students, which he says covers only about 30% of tuition.
- Public servants would receive a break on student loan repayment, up to $10,000 per year of the service to their communities for up to five years.
- The administration hopes to launch a “Title I for Postsecondary Education” through a grant that would offer emergency support for those who are in financial peril so they can continue to stay in school and earn their degrees.
- He wants to see $10 billion invested and aid tripled through Title III and Title V of the Higher Education Act for Historically Black Colleges and Universities and minority-serving institutions.