Yesterday, President-Elect Joe Biden released a sweeping $1.9 trillion stimulus proposal. No legislative language has been released as of yet, but the summary of the proposal indicates it would provide significant economic relief including additional stimulus checks of $1,400, enhanced federal unemployment benefits, a $15 per hour minimum wage, paid sick leave, and investments in public health infrastructure and pandemic relief programs.
Conspicuously absent from Biden’s proposal, however, is any student loan relief, which left advocates for student loan borrowers concerned.
Congress passed the CARES Act in April 2020 in the wake of the rapid economic collapse brought about by the Covid-19 pandemic. The Act provided substantial relief to student loan borrowers by suspending all payments, freezing all interest, and stopping all collections efforts on all government-held federal student loans, including loans that are in default status. But that moratorium is scheduled to expire on January 31, after being extended twice by the Trump administration.
A poll last year from the Pew Project on Student Borrower Success found that Americans are significantly worried about re-entering repayment on their student loans. Nearly 9 in 10 (87%) of survey respondents agreed that many student loan borrowers will have difficulty paying back their student loans in the current economic environment, and 67% believe that when borrowers struggle to pay back their student loans, it can negatively affect the economy. Nearly 6 in 10 borrowers who benefited from the CARES Act’s pause on student loan payments said that it would be difficult to resume payments if they had to do so, and nearly 1 in 4 borrowers report feeling insecure about their financial stability.
Student loan forgiveness is also in question. House Democrats had previously passed stimulus legislation in May providing for $10,000 in student loan forgiveness for economically distressed borrowers. That legislation was never taken up by the Republican-controlled Senate, but Biden consistently has expressed support for student loan forgiveness during his presidential campaign and after he won the 2020 election. Democrats will have slim majorities in both the House and the Senate once Biden takes office.
Why was student loan relief excluded from Biden’s stimulus proposal?
Biden Can Enact Some Student Loan Relief Through Executive Action
Biden has repeatedly indicated that he intends to use executive authority to quickly enact key policy initiatives, and student loan relief is likely to be among those early actions. Last Friday, his transition team confirmed that as one of his first acts in office, Biden will direct the Department of Education to extend the existing moratorium on student loan payments, interest, and collections, although no further details were provided. This could happen on his first day in office.
Enacting additional student loan relief via executive action will take more time, however. For example, Biden has indicated his support for rolling back strict new regulations governing the Borrower Defense to Repayment program that were enacted by outgoing Education Secretary Betsy DeVos. Biden is likely to start pushing for new regulations easing access to this program and broadening relief for borrowers defrauded by their schools. But the regulatory process requires public input, and it can take months (or longer) to complete. Enacting new regulations too hastily can be legally problematic, and can result in those new regulations being overturned in court.
Advocates and progressive lawmakers have been pushing Biden to enact sweeping student loan forgiveness through executive authority. But he has expressed reluctance about that, saying last month, “I think that’s pretty questionable. I’m unsure of that. I’d be unlikely to do that.” DeVos’s Education Department released guidance this week arguing that it would be illegal to cancel student debt through executive action, but other student loan legal experts disagree with those conclusions.
Student Loan Relief Remains Politically Contentious
While there is broad agreement that the student loan system is unwieldy and problematic for millions of student loan borrowers, there is no clear, bipartisan consensus about how to fix its problems. Student loan forgiveness remains a particularly dicey issue, with sharp divergences in opinions that break down along partisan lines. Progressive Democrats have been pushing for widespread student loan forgiveness as a solution to the student loan crisis, while moderates and conservative Republicans have been reluctant to embrace such reforms, which they view as too radical and expensive. Including widespread student loan forgiveness in Biden’s stimulus proposal could make passage more difficult.
Biden has been clear that his first goal in office is to enact broad economic and pandemic-related relief to stop the economy from free-falling. Since he is likely to extend the pause on most federal student loan payments, interest, and collections through executive action, buying some time for borrowers, he may view enacting more sweeping student loan reforms as less of an immediately urgent matter.
Student Loan Relief Is Likely To Be Introduced Via Separate Legislation
There had been speculation that Biden would include at least some student loan relief in his stimulus plan, but it now appears that Biden will push Congress to enact student loan relief through separate legislation, which transition officials confirmed on Thursday. Transition officials had also said last week that Biden would push Congress to pass legislation providing for $10,000 in student loan forgiveness for every borrower.
Separate, stand-alone student loan reform legislation could be an attractive route for lawmakers given the broad array of student loan relief bills that were introduced in the 2019-2020 Congress. There were proposals to reform and improve the Public Service Loan Forgiveness program, simplify income-driven repayment plans, revamp the Borrower Defense to Repayment program for borrowers defrauded by their schools, reform the bankruptcy code to allow student loan discharges, and enact private student loan relief. Comprehensive student loan reform to address all of these issues at once, in addition to broad student loan forgiveness, could be a more feasible route for lawmakers to tackle student debt.
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