A few Democratic lawmakers want Biden to issue an executive order that would cancel $50,000 in federal student loan debt for borrowers earning under $125,000. There is much debate surrounding whether Biden can forgive student debt using an executive order or if the proposal would need to pass through Congress.
Some argue that Biden can’t just forgive $50,000 of student loans. Others, like the Legal Services Center of Harvard Law School, argue that Biden directing the Secretary of the United States Department of Education to cancel up to $50,000 in student debt “is a lawful and permissible exercise of the Secretary’s authority under existing law.”
Even if permissible, Biden has not given a concrete response about whether he would cancel $50,000 of student debt for eligible borrowers. According to Senate Minority Leader Chuck Schumer, an advocate of the $50,000 loan cancellation, Biden is “considering” using an executive order to provide forgiveness. Schumer also states that Biden is researching to see if he has the authority to use an executive order to cancel student debt.
Regardless of what happens with the recent call for $50,000 in student loan forgiveness, we know that student loans remain an important agenda item for Biden. Below, we’ll cover the proposals he hopes to enact to make student loans more manageable for borrowers.
Joe Biden’s Proposed Student Loan Policies
While campaigning for President, Joe Biden established a campaign website, which includes detailed plans for higher education and student loans. He also published an article in April 2020 on Medium about other plans for student debt forgiveness.
Biden’s student loan platform includes items that he wants to prioritize when he becomes President in January 2021. However, this does not mean that he has the sole authority to execute said plans or that these plans will go into effect during his time in office.
Let’s take a look at what he’s proposing.
Cancel all federal student debt for select borrowers
Biden has proposed canceling all tuition-related federal student loans for borrowers who meet ALL of the following criteria:
- You attended a public university, a public college, a private HBCU (Historically Black College and University), or a private MSI (Minority-Serving Institution)
- You used the loans for your undergraduate tuition
- You earn less than $125,000
His proposal does not forgive private student loans, loans used for graduate school expenses, or loan funds used to cover books, travel, room, board, and other expenses during undergrad. It’s not known how the government would differentiate between loan funds used for tuition vs. room and board, etc.
Simplify the income-based repayment program
Biden wants to automatically enroll federal student loan borrowers in a new income-based repayment (IBR) program. If enacted, Biden’s proposed system would likely replace the several repayment options offered by the United States Department of Education (ED).
His new IBR program would work like this:
- Borrowers make monthly federal student loan payments equal to 5% of their discretionary income
- No monthly payments for borrowers earning less than $25,000 per year
- Complete forgiveness of the remaining balance after 20 years
- You don’t owe income taxes on the forgiven amount
Change tax code to make IBR debt forgiveness non-taxable
Currently, any student loans forgiven through an income-based repayment plan are seen as taxable income by the IRS. In other words, you must pay income taxes on the amount forgiven. Biden’s new plan takes away the tax burden. Once the debt is forgiven, you’re off the hook. You wouldn’t owe taxes on the forgiven amount.
Improve Public Service Loan Forgiveness (PSLF)
Biden plans to revamp the Public Service Loan Forgiveness (PSLF) Program by passing legislation proposed in 2019. The What You Can Do For Your Country Act of 2019 would reform PSLF by:
- Allowing all federal loans to qualify
- Allowing all federal repayment plans to qualify
- Requiring the Department of Education to provide clear info and guidance on the program
- Giving qualified public servants partial public forgiveness after five years of service
- Simplifying the application and certification process
Under the current plan, borrowers receive full loan forgiveness after ten years. Under Biden’s plan, PSLF would forgive $10,000 of federal student loans per year for up to five years and offer full forgiveness after ten years. Individuals working in schools, non-profit settings, and the government would be automatically enrolled in the revamped PSLF program.
Forgive $10,000 in student loans as a form of COVID-19 relief
On March 22, 2020, Biden took to Twitter to express his desire to immediately cancel $10,000 of student debt per person as a COVID-19 relief measure. Senator Elizabeth Warren and her colleagues first proposed the measure.
Make student loans dischargeable in bankruptcy
Student loans can be discharged in bankruptcy, but it’s difficult and not guaranteed. Biden hopes to enact a law that was proposed in 2015 during the Obama-Biden administration. The law would make it easier for borrowers to discharge private student loans in bankruptcy.
Biden Plans to Reduce the Need for Borrowing
Along with relief measures for current borrowers, Biden also plans to reduce the need for borrowing by lowering the cost of college.
He’s proposing:
- Free Community College: No-cost community college or high-quality training programs for all adults, including part-time students and DREAMers
- Free Tuition at Public Colleges & Universities: Students from families who earn less than $125,000 per year would owe $0 for tuition at public colleges and universities. This comes from Senator Bernie Sander’s and Congresswoman Pramila Jayapal’s College for All Act of 2017. Read our coverage of the act here.
- Increased Pell Grant Awards: Double the amount of the Pell Grant to increase its value relative to the rising cost of college and expand eligibility criteria to include formerly incarcerated individuals, more middle-class Americans, and DREAMers
- Investing in MSIs: Provide $70+ billion in funding to improve the quality of programs offered by minority-serving institutions and to make them more affordable
So, Is Joe Biden Canceling All Student Loans?
Joe Biden has plans to forgive student loans for many borrowers, but currently, he’s not advocating for widespread and total student loan cancellation. However, we can expect Biden to make student loans and college affordability a priority while he is in office.
Check out our earlier coverage of Joe Biden on Student Loans for more information about his plans for student loans and higher education.
