President Joe Biden had the first plan to help student loan borrowers in the 2020 presidential election. His plan is called the American Dream Loan Forgiveness Program, and it would forgive up to $10,000 in student loan debt for people who work in non-profits and public service jobs. The program would also reward borrowers who make regular, monthly payments, partially forgive balances for borrowers who work full-time in jobs that serve low-income families, and forgive student loans completely after 10 years of repayment if borrowers still work in public service or non-profit jobs. A lot of the details about the program are still unknown; the $10,000 limit per borrower is higher than President Obama’s current Public Service Loan Forgiveness
The new presidential candidate Joe Biden has proposed a $10,000 student loan forgiveness program. The plan is to help those who have the highest amount of student loan debt, which is typically those who have the highest incomes. This is a tax-free benefit that you won’t find anywhere else. It is available to those who have the following student loan debt: ( # of years in school) * (Annual Pay) * (Average Student Debt)
Whether you agree or disagree with President Barack Obama’s recent proposal to forgive $10,000 in student loans for every graduate, there’s no denying that the actual cost of attending college is a very real and growing concern for many Americans. In fact, according to the Project on Student Debt, a whopping 70 percent of college graduates in the class of 2016 graduated with an average of $30,100 in student loan debt, for a total of more than $200 billion.. Read more about student loan forgiveness bill 2021 and let us know what you think.The pros and cons of a general elimination of federal student loans are currently being debated by political leaders. President Biden has already called for the forgiveness of $10,000 in student loans per borrower. However, he recently asked his Minister of Education, Miguel Cardona, to review his legal authority to waive the $50,000 cap through an executive order. Senators Elizabeth Warren and Chuck Schumer believe the Biden administration already has the ability to cancel student debt. Others oppose the use of executive action for a variety of reasons, ranging from questions of legality to opposition to the widespread cancellation of student loans. Here’s what you need to know about President Biden’s proposal to waive $10,000 on student loans and what it could mean for student loan borrowers.
Can President Biden forgive student loans?
President Biden has repeatedly stated that the driving force behind student debt forgiveness must be legislation, not a stroke of the pen. However, he is under tremendous pressure from Democratic leaders and student loan activists to unilaterally grant student loan benefits through an executive order. But does the president have the power to cancel student loans? This issue is at the heart of the student loan debate, and here’s why.
Why some people favor forgiving federal student debt
The U.S. Constitution gives Congress power over the purse strings, meaning that Congress controls government resources (e.g., taxes and spending) – not the president. So why do so many elected officials insist that the president circumvent his own authority by issuing an executive order? Proponents of student debt relief point out that massive debt forgiveness would help the economy and reduce the racial wealth gap. But there is no widespread support in Congress for student debt forgiveness.
This means that it will be much more difficult (and time-consuming) to produce legislation that satisfies all stakeholders and has a meaningful impact on troubled borrowers. In addition, forgiveness of student debt provides a loophole through which the government does not have to raise taxes or transfer funds from other programs to pay the debt. This is a very controversial point. The Congressional Budget Office has already determined that forgiving $10,000 in student debt for each borrower would cost $250 billion to $300 billion or more. Cancelling student debt by executive order removes one of the biggest obstacles: finding an acceptable, bipartisan way to pay off the debt.
Why some people are against the abolition of student loans through a waiver
Many critics fear that debt relief will disproportionately benefit high-income individuals who have intentionally incurred large debts in order to pursue higher education. Some legal experts and politicians have also argued that revoking student loans through executive action is an abuse of presidential authority. Therefore, any unilateral action by the executive will likely face strong legal objections, all the way to the Supreme Court (which has a 6-3 conservative majority). This is one of the main reasons President Biden threw the ball back to Congress when asked about his position on student debt forgiveness.
Debate on abolition of student loans gains momentum
Student loan forgiveness has been around for a long time, but the issue gained momentum in the last round of elections. Since then, the student loan crisis has remained central to the policy debate on the economic impact of the COVID-19 pandemic. There are many proposals for student debt forgiveness, ranging from $10,000 forgiveness to full forgiveness of private and federal student loans (and everything in between). Some proposals focused on targeted relief for borrowers who had already defaulted, while others targeted specific qualifications, such as. B. be a first responder or key worker during a pandemic.
This approach of throwing everything into the fray and seeing what sticks has helped keep student loan forgiveness in the news. But in the end, widespread elimination of student loans will depend on two key factors: the ability of Congress to come to a solution together and the President’s legal authority to do so himself.
How precedent may affect the president’s ability to waive student loans
The Department of Education is working on a legal memo that analyzes and describes the President’s authority to waive student loans without Congressional approval. While the opinion is not legally binding, it will provide the President with additional guidance and policy issues to consider in his final decision. The previous Trump administration conducted a similar analysis and found that the president did not have the authority to extensively cancel student loan debt. But even this definition was not legally binding.
Proponents of repealing the student loan regulations argue that the Higher Education Act of 1965, specifically section 432(a), gives the Department of Education the authority to repeal student loans. The last time we saw this power in action was during the Biden administration, which repaid $1.3 billion in student loans to borrowers with total and permanent disabilities and $1 billion for students who had already been scammed or whose schools had closed. During the COVID-19 pandemic, the Trump and Biden administrations also used these powers in the form of extending the freeze on payments and interest on student loans.
It is true that the executive has used these powers before, but in a very limited way and with much controversy. Finally, many lawyers and student loan experts still believe that former President Trump did not have the authority to suspend payments and interest. But the decision was not legally challenged because it had broad bipartisan support and benefited tons of borrowers during the national emergency. So it will be interesting to see how these past student loan decisions affect the president’s ability to waive student debt in the future.
How will this student loan proposal affect borrowers?
We don’t yet know what President Biden’s proposal means for student loan borrowers. His proposal could lead to executive action, which would then be challenged at the highest level. On the other hand, we could see Congress address the issue of student debt forgiveness, or we could see nothing happen and the promises of student debt forgiveness remain promises. Still, it looks increasingly likely that he will issue an executive order, given his request to reconsider his legal authority to cancel student debt and the recent appointment of Richard Cordray to head the Education Department’s Office of Federal Student Aid.
Cordray is the former head of the Consumer Financial Protection Bureau (CFPB) and a progressive ally of Senator Warren. If you read between the lines, his appointment likely means that major changes are on the horizon for federal student loans, which could include the elimination of student loans. What does this mean for you as a student loan borrower? Here are some questions to consider when evaluating the results of a general student loan forgiveness and making decisions about your own student debt.
- Why did President Biden ask for clarification on the legality of forgiving $50,000 in student loans? President Biden said in February during a conference call with CNN that he did not support repealing $50,000 per executive order. So why ask the Minister of Education to assess $50,000 in student debt forgiveness? If it turns out that he can write off student loan debt, his offer of $10,000 will seem much more reasonable. This could be useful in gaining more support (or, more importantly, less opposition) when estimating the likelihood of a Republican appeal to the Supreme Court.
- Who would benefit most from the elimination of the $10,000 student loan? The elimination of the $10,000 federal student loan will provide a huge financial boost for many low-income Americans. However, a study by economists at the University of Chicago shows that broad student debt forgiveness would be a regressive policy that would disproportionately help high-income people.
- Should borrowers start refinancing their federal student debt? There’s a good chance the White House is trying to eliminate $10,000 to $50,000 in federal student debt. But it is equally likely to be challenged by the courts, meaning it is unlikely to be passed given the 6-3 conservative majority on the Supreme Court.
If you’re worried about missing out on the potential benefits of loan forgiveness, you can leave some of your federal student debt intact and refinance the rest to get a lower interest rate. Don’t know what to do? Contact us or schedule an appointment with one of our student debt experts for a detailed review and personalized plan for your unique student debt situation. A plan for a student loan Refinance your student loan and receive a bonus in 2021.