If Joe Biden is able to forgive your student loans, when will that happen?

At a press conference on Monday, Joe Biden expressed his support to cancel up to $ 10,000 in student loans by borrower and to reform the utility loan forgiveness program, but he stopped before saying he would use executive action to implement it.

President-elect Biden said, “Legislation passed by the House of Democrats calls for the immediate cancellation of $ 10,000 in student loans” and “it should be done immediately.”

Republicans do not support loan cancellation because it does not address the immediate economic fallout from the COVID-19 pandemic. The suspension of payments and the interest relief responds to the financial challenges caused by the pandemic, but the forgiveness of student loans does not. In their words, it is a “gift”.

Granted, Joe Biden is very likely to extend the payment break and the interest waiver, if Congress and President Trump don’t do so first.

But what about the forgiveness of student loans?

The new administration is under pressure from progressives to write off student loan debt. Senators Chuck Schumer and Elizabeth Warren have asked the next president to forgive $ 50,000 in student loans per borrower. More than 235 organizations, including the American Association of University Women (AAUW), NAACP, National Association of Consumer Bankruptcy Attorneys (NACBA), National Urban League and Veterans Education Success, have signed a letter to President-elect Biden, urging him to use management action to cancel the federal student loan on his first day in office. More than 800,000 people have signed a petition to erase student loan debt.

The top priorities of a Biden administration will include COVID-19, economic recovery, racial equity and climate change. Cancellation of student loans could be included as part of economic recovery legislation. The cancellation of student loans also plays a role in racial equity, as black and brown students are disproportionately affected by student loan debt.

But, Joe Biden wants to work with Congress and unify the country. It needs cooperation with Congress to implement its legislative agenda, not just the cancellation of student loans. He needs congressional support to confirm his cabinet choices. Using executive action to immediately implement student loan cancellation could be too confrontational. He’s likely to give Congress a chance to do the right thing before declaring the country can’t wait. Executive action will only be necessary if Congress blocks most of its proposals.

Much depends on the Georgia Senate races. If Democrats win both ballots, they will control the House and Senate, allowing them to legislate, but with some resistance from Republicans. Democrats will not have the 60-vote supermajority required to interrupt debate in the Senate, so Republicans can use filibusters to block legislation.

The $ 10,000 loan rebate and the overhaul of the utility loan forgiveness program could be included in an economic stimulus bill. Republicans might support the changes to the utility loan forgiveness, even if they don’t like the loan forgiveness, as the proposed changes cap the amount of student loan forgiveness at $ 50,000 and eliminate the risk of forgiveness. moral hazard. Moral hazard arises when students borrow up to the limit because they expect their student loan debt to be canceled.

There are, however, many open questions about the details.

  • Will the rebate be limited to federal student loans only, or will it also include private student loans?
  • If the forgiveness is limited to federal student loans only, will it be limited to federal student loans held by the US Department of Education, such as suspension of payment and waiver of interest?
  • Will the forgiveness be limited to undergraduate student loan debt only or will the graduate student loan debt also be eligible for the forgiveness?
  • Will the forgiveness be limited to tuition-related debt?
  • Will the forgiveness be limited to debt borrowed to pay public colleges and universities, HBCUs, HSIs, and MSIs? Or will student loans from private colleges and universities also be eligible?
  • Will the rebate be limited to borrowers who owe $ 10,000 or less in federal student loans? Such a limit will write off the loans of about one-third of federal student loan borrowers, but only write off about 5% of the outstanding federal student loan debt. Borrowers who have dropped out of school tend to have small loan balances, often less than $ 10,000, but lack the credentials that can help them pay off the debt.
  • Will there be an income limit for loan forgiveness? A debt threshold?
  • Will the rebate be limited to borrowers in economic difficulty? (The Heroes Act defines economic distress as including borrowers with incomes below 150% of the poverty line, borrowers with deferred or forbearance student loans, borrowers in serious delinquency, and borrowers in default. .)
  • Will the student loan forgiveness be tax free?

To pass Congress, student loan cancellations must be narrowly targeted on financially troubled borrowers. Otherwise, it raises a question of fairness. The student loan forgiveness does not benefit people who have not gone to college or have already paid off their student loans.

Whatever action Congress takes, Joe Biden will likely use his existing authority to pay off student loans from borrowers who are eligible for the borrower’s defense against repayment. It will also re-issue the Obama administration’s guidelines that encourage the use of prosecution discretion so as not to oppose financial hardship bankruptcy requests from financially troubled student loan borrowers.

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