Elected President Joe Biden will extend the near-year hiatus of federal student loan payments on ‘first day’, the first concrete promise the incoming government has made to tackle the $ 1.6 billion debt crisis.
Biden 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 going and Americans up and running’ to keep ‘. This includes ordering the Department of Education on ‘day one’ to expand the popular tolerance program for student loans, as well as ‘expanding income-based repayment programs, and setting up and expanding loan forgiveness programs for those employed in the public service’ . ‘
But how exactly the incoming administration will handle the forgiveness of student loans for other lenders remains unclear. In the call with reporters, the transitional official said that Biden “supported that Congress immediately cancel $ 10,000 federal student loan debt per person in response to the COVID crisis”, but did not provide details or a specific time frame.
Student credit debt has been a looming financial issue since the pandemic, but widespread job losses with coronavirus and wage cuts, especially among millennials, have exacerbated the problem. According to the Federal Reserve Bank of New York, student loan debt peaked last year at $ 1.6 billion among more than 40 million Americans. Student lenders owe on average between $ 200 and $ 299 each month, an amount that is simply untenable for many; about one in five borrowers is missing, according to the U.S. Department of Education.
Democrats are divided on how to address the crisis. The concept of canceling student loans was originally a trendy idea, and has gained more tragedy among the more progressive pocket of the party. During the 2020 presidential election, Senator Elizabeth Warren of Massachusetts proposed forgiving up to $ 50,000 in debt, and independent Sen. Bernie Sanders of Vermont asked to cancel all student loans. In a more moderate approach, Mr. Biden expressed his support for congressional legislation that would cancel $ 10,000 per borrower.
It does not matter what the details of Mr. Biden’s plan is not, the approach is likely to be a general face of the current government’s position. Former United States Secretary of Education Betsy DeVos urged Congress in a letter early last week to “reject” calls for forgiveness of student loan debt, calling the policy proposals “misleading” and “unfair to most Americans.”
Since 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 early drafts of December’s stimulus package, but was cut in the final negotiations. The student loan will resume at the end of the month. The transition team did not indicate how long a new expansion could take.
A November Pew study found that nearly 6 in 10 lenders said it would be ‘somewhat’ or ‘very difficult’ to resume their payments next 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 expected lending services and the federal government would “suffer a heavy burden of converting millions of borrowers to active repayment.” ‘According to the report, some of the borrowers will become criminals.
Alex Tin contributed reporting to this article.