President-elect Joe Biden will extend the nearly one-year hiatus on federal student loan payments on “Day One,” the first concrete pledge the incoming government has made to address the $ 1.6 trillion debt crisis.
Biden’s transition official David Kamin told reporters on Friday that “easing the crushing financial burden of student debt” would be an immediate priority for the incoming government as part of its commitment to “get our economy moving and get the Americans afloat. hold”. That includes leading the Department of Education on “Day One” to expand the popular student loan endurance program, as well as “expanding income-based repayment programs and establishing and expanding people loan forgiveness programs. with a public service “.
But how exactly the incoming administration deals with student loan forgiveness for other borrowers remains unclear. In the call with reporters, the transition official said Biden “supports Congress to immediately forgive $ 10,000 in federal student loans per person in response to the COVID crisis,” but did not provide details or a specific time frame.
Student loan debt has been a looming financial problem since before the pandemic, but widespread coronavirus-related job losses and wage cuts, especially among millennials, have exacerbated the problem. Last year, student loan debt hit a record high, nearly $ 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 is simply unsustainable for many; About one in five borrowers is in default, according to the United States 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 traction among more progressive groups of the party. During the 2020 presidential primaries, Massachusetts Senator Elizabeth Warren proposed canceling up to $ 50,000 in debt and Vermont independent Senator Bernie Sanders 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 details of Mr. Biden’s plan, the approach is likely to be a reversal from the position of the current administration. In a letter early last week, now-former US Secretary of Education, Betsy DeVos, urged Congress to “reject” calls for student loan waivers, “misplacing” policy proposals and “unfair to most Americans. called.
As of 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 dropped in the latest negotiations. Student loan payments are currently resuming at the end of this month. The transition team has not indicated how long a new extension could take.
A November survey by Pew found that nearly 6 in 10 borrowers said it would be “somewhat” or “very difficult” to restart their loan payments the following month.
When student loan payments resume, the Department of Education does not expect a smooth transition. In its 2020 annual report, the department said it expects lenders and that the federal government will “face a heavy burden by converting millions of borrowers into active repayment.” Some of those borrowers, the report warns, will become overdue.
Alex Tin contributed to the reporting of this article.