President-elect Joe Biden will extend the break in federal student loan payments by a “first day,” the first concrete promise the future administration has made to address the $ 1.6 trillion debt crisis.
Biden transition officer David Kamin told reporters on Friday that “reducing the overwhelming financial burden on student debt” would be an immediate priority for the administration to come, as part of its commitment to “keep our economy moving and keep Americans afloat.” the waterline ”. This includes guiding the Department of Education on the “first day” to expand the popular student loan waiver program, as well as “expanding income-based repayment programs and fixing and expanding loan forgiveness programs for those in the public service.” .
But how the administration received will handle the forgiveness of student loans for other borrowers remains unclear. In a call with reporters, the transition official said Biden “supports Congress to immediately cancel $ 10,000 in federal student loans per person in response to the COVID crisis,” but did not provide details or a time frame.
Student loan debt has been a financial problem approaching the pre-pandemic, but widespread coronavirus-related job losses and wage cuts, especially among millennia, have exacerbated the problem. Last year, student loan debt hit a record high of nearly $ 1.6 trillion among more than 40 million Americans, according to the Federal Reserve Bank of New York. On average, student loan borrowers have debts between $ 200 and $ 299 each month, an amount that for many is simply unbearable; about one in five lenders are missing, according to the US Department of Education.
Democrats are divided on how to approach the crisis. Initially a marginal idea, the concept of canceling student loans has gained attention among the more progressive pockets of the party. During the 2020 presidential primary, Sen. Elizabeth Warren of Massachusetts proposed to forgive up to $ 50,000, and independent Sen. Bernie Sanders of Vermont called for the cancellation of all student loans. In a more moderate approach, Mr. Biden expressed support for congressional legislation that would cancel $ 10,000 per borrower.
Regardless of the specifics of Mr Biden’s plan, the approach will probably be a rough side of the current administration’s position. In a letter earlier last week, former U.S. Secretary of Education Betsy DeVos now called on Congress to “reject” calls for student loan debt forgiveness, calling the policy proposals “wrong” 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 draft stimulus package in December, but was reduced in the final negotiations. Currently, student loan payments are scheduled to resume later this month. The transition team did not indicate how long a new extension could take.
A Pew study in November found that nearly 6 in 10 lenders said it would be “somewhat” or “very difficult” to resume payments on their loans 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 expects loan services and the federal government to face a heavy burden in “turning” millions of borrowers into active repayment. ” Some of these borrowers, the report warns, will become delinquents.
Alex Tin contributed to the reporting of this article.