Disappointment Looms as Biden Steps Back From Student Loan Relief

Many voters latched onto President Biden’s suggestion that a minimum of $10,000 in student loan debt be forgiven during his presidential campaign. However, nearly a year into his presidency, there's been no meaningful action on broad-based student loan cancelation.

With the current moratorium on student loan payments ending on August 29, 2023, some borrowers hope to see more permanent relief. Unfortunately, it seems that actions already taken to provide relief — along with a new income-driven repayment option — might be the best that embattled student loan borrowers can expect.

What has the Biden administration done so far?

Since the COVID-19 pandemic, certain federal loans have been in forbearance. Borrowers haven’t been required to make payments, and no interest has accrued on these loans. The forbearance has been extended multiple times. The latest extension, put in place by the Biden administration, is set to expire at the end of January 2022.

There has been speculation that the administration would extend the forbearance again, but administration officials have been clear that there will be no additional extension. For borrowers who have used this reprieve to work on their finances, invest or even accelerate student loan debt repayment, this news is likely to come as a disappointment.

In addition to extending the student loan payment pause, the Biden administration also updated the process for receiving Public Service Loan Forgiveness (PSLF). The program, introduced in 2007 under George W. Bush, has been beset by complaints about how difficult it is to take advantage of the benefit.

In October 2021, the Department of Education announced that it would overhaul the program and introduced a waiver designed to forgive about $1.74 billion in student loans. Additionally, a streamlined process to qualify tens of thousands more borrowers for another $2.82 billion in forgiveness was introduced. Overall, the Department expected that 550,000 borrowers would see an average of two more years of progress toward their PSLF qualifying payment requirement.

While this news is welcome to those working in the public and nonprofit sectors, some advocates and borrowers hoped for more broad-based relief. Additionally, with more than $1.7 trillion in outstanding student loans, the problem is more widespread than can be tackled by updating PSLF.

Finally, the Biden administration also announced that it would erase student loan debt for eligible permanently disabled borrowers and discharge federal student loans for those who can prove for-profit colleges defrauded them.

What about the new income-driven repayment plan?

The Department of Education is currently in the rulemaking process for a new income-driven repayment plan, called expanded income-contingent repayment, or EICR.

While the rules aren't yet clear about how it would operate, some estimates that it would only save participants, on average, about $100 per month. Although this would be a welcome relief to those struggling to make student loan payments — and who are worried about loan balance growth — it still doesn’t acknowledge the magnitude of the problem.

So, while the Biden administration has taken some steps to help student loan borrowers, hopes for more substantial and permanent relief are likely to be dashed in the coming months.

Hoping for student loan cancelation? Don’t hold your breath

One of the biggest disappointments for many student loan borrowers and advocates is that Biden has backed away from even the relatively modest proposal to cancel $10,000 in student loan debt for every federal borrower.

Even the proposal for free community college was dropped from the Build Back Better agenda, so it’s difficult to see how the administration would push through outright student loan cancelation. A Brookings Institution report suggests that forgiving $10,000 in federal student loan debt would cost $373 billion. When negotiating with Republicans (and even some Democrats) who oppose student loan cancelation, the price tag always comes up.

That $373 billion total represents less than half of what the House of Representatives just approved for a defense policy bill totaling $768 billion — for only one year. The Brookings Institution suggests that forgiving $10,000 in federal student loan debt would affect about 43 million borrowers, including borrowers currently in default. However, signals from the Biden administration indicate that blanket loan cancelation of any amount is likely off the table.

Student loan debt reality check

Rather than proposing anything sweeping or new, the Biden administration is likely to stick with enhancing current programs and streamlining eligibility. These adjustments will probably benefit some borrowers and make it easier for those who qualify for existing programs to get the benefits they're entitled to. However, for a larger swath of indebted college graduates, this lack of action is a source of disappointment.

Instead of looking forward to continued relief, borrowers likely need to prepare for student loan payments to return with a vengeance. Regular federal student loan payments return starting February 1, 2022, and many borrowers feel unprepared to add this expense back to their budgets. There probably won’t be another extension. On top of that, Biden probably won’t issue an executive order for broad-based student loan forgiveness. Any type of Congressional proposal to cancel student loan debt is likely dead on arrival.

What borrowers can do

If you've been taking advantage of the pause, now is an excellent time to review your monthly payment and make sure your budget is ready to handle it. Double-check income-driven repayment options to see if you qualify. Income-driven repayment can make monthly payments more manageable for those with lower incomes.

If you don't qualify for federal programs, student loan refinancing might be worth considering. Carefully consider your options and individual situation to determine what course of action you should take next. Now is the time to prepare. If you're waiting for the Biden Administration or Congress to step in, you're likely to be disappointed.