In two installments, President Biden canceled student loans in the amount of $ 2.3 billion. First, it canceled student loans for 72,000 borrowers who attended colleges that used deceptive or predatory practices – especially now defunct for-profit colleges like ITT Technical Institute and Corinthian Colleges. Then it canceled another billion dollars for 41,000 totally and permanently disabled borrowers.
In a sense, this is a continuation of the policy started during the Obama years, when many top for-profit colleges were found to have misled students and were forced to close their doors. Schools lied to potential students about things like placement numbers. In the beginning, all students got a 100% loan discount if they attended a school that had committed fraud. But under President Trump that changed and only partial debt relief was offered, depending on the money the candidates earned. This move essentially goes back to Obama’s original decision, ensuring that all students who attended fraudulent schools are completely forgiven for their loans.
For Biden, these actions are starting to define his stance on student loans in general. Student loans have grown dramatically over the past 15 years, with debt reaching $ 1.6 trillion in 2019 – a whopping 7.5% of the country’s GDP. Around 45 million people are currently in debt with student loans and unlike other forms of school-related financial aid like grants or scholarships, ready must be reimbursed.
The case has become a crisis in its own right, especially since many of those who have taken out student loans are not doing very well financially. A 2018 Brookings Institution study claimed that “Almost 40% of students who took out loans in 2004 could default by 2023. As a result, Leading Democrats called on Biden to take decisive action and write off $ 50,000 in federal student loan debt per borrower. .
It would be an unprecedented step, but Biden seems to favor a different approach. The $ 2.3 billion in forgiven debt, while striking at first glance, is only a small fraction (around 0.1%) of total student debt. Biden has shown he is ready to tackle the student loan problem, but in a more cautious way. At most, Biden said he would be open to forgiveness of $ 10,000 per borrower, but said the government shouldn’t forgive the debt of people who went to “Harvard, Yale, and Penn.”
Biden also focused on canceling federal student loans, not private loans. However, in one of his first acts in power, Biden extended the break on student loan payments and interest, a measure that Congress put in place last year. Additionally, in the 2021 stimulus package, Congress also included a provision that would make student loan cancellation tax-exempt for the borrower, hinting that Congress may be looking for ways to cancel loans as well. private.
For now, at least, the Biden administration’s approach appears to be to tackle the student loan problem rather than tackle it head on. A note attorneys from the Harvard Legal Services Center can offer guidance on how the administration can proceed. According to the note, the Education Department has already implemented more targeted debt cancellation policies, focusing on defrauded students as well as disabled veterans.
By simply expanding these programs, Biden could provide relief to hundreds of thousands of additional borrowers. It would also respond to one of the main criticisms of debt relief programs: that they are not targeted and that too many wealthy Americans could benefit from them. In fact, Biden’s main idea seems to be to find ways to reduce student debt for those who need it most. The two steps taken so far are relatively small, but they could be an indication of what is to come.
Biden also called on Congress to make legislative changes to make it more difficult for future administrations to reverse these plans.