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By Kaitlin Mulhere
November 9, 2020
Money; Getty Images; Shutterstock

The chances for major student loan relief likely shrank last week, even as the country elected a president who has promised to address the pervasive problem of debt.

Joe Biden, who on Saturday was declared the president-elect after a long, close tally of votes, ran on a campaign loaded with education platforms, including ideas to reduce the burden of student loans on many of the country’s 45 million borrowers.

But with Biden in the White House down the street from a divided Congress, big campaign proposals like debt forgiveness or free college will have to be scaled back. We won’t know the final makeup of the Senate until January, after two run-off races in Georgia. But if it is a Republican Senate, experts walked back their predictions for what was possible for the widespread relief Biden’s campaign proposed.

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“I have a hard time seeing any major legislation getting through Congress, unless one or two Republicans are willing to break ranks,” says Robert Kelchen, an associate professor of higher education at Seton Hall University in New Jersey.

So does that mean all of Biden’s higher education ideas are dead in the water? Not necessarily. Here’s what you can expect.

Extending the Current Interest-Free, Suspended Payment Period

Since late March, more than 35 million student loan borrowers have not been required to make their loan payments, nor have their loans accrued any interest, thanks to the CARES Act. That relief is scheduled to end on Dec. 31, and borrower advocates have already pushed to extend it.

As president, Biden is all but guaranteed to give those advocates what they’re asking for, experts say. The question is: for whom, and for how long? This week, three major higher education organizations wrote a letter to Secretary of Education Betsy DeVos urging her to quickly extend the no-payment policy until Sept. 30, 2021 or until the unemployment rate falls below 8% for three consecutive months. But it’s also possible that a Biden administration would try to expand eligibility to cover borrowers who weren’t captured the first time, like those with older federal loans or private loans.

Lawmakers originally gave borrowers with federally held student loans a six-month period of 0% interest and no required payments. When Congress failed to come to a consensus on a second relief package, President Trump used his executive powers in September to extend that.

That means Biden doesn’t need congressional support to further extend the policy; he can simply follow the precedent set by Trump.

Widespread Loan Forgiveness

Biden repeatedly told audiences on the campaign trail — especially those with younger voters — that he would cancel a significant chunk of the country’s $1.5 trillion in student debt. Specifically, he said he’d forgive $10,000 for every federal loan borrower as part of a pandemic relief package. For borrowers earning less than $125,000, he also wanted to wipe out all federal student loan debt for undergraduate tuition from public colleges and private colleges that predominantly serve minority students.

But if Republications control the Senate, that drastically reduces the likelihood of significant debt cancellation, says Iris Palmer, a senior advisor for higher education and workforce with the Education Policy program at the think tank New America.

Public opinion polls show that much of the country agrees student debt is a significant problem. And a recent survey from the National Student Legal Defense Network found that 43% of Americans supported some form a widespread forgiveness.

Yet Republican senators will find plenty to dislike about the idea, including its price tag. Critics also say widespread forgiveness is unfair — offering nothing for Americans who didn’t go to college or already who paid off their loans — and that it’s arbitrary, doing nothing to address the reason people borrow loans.

There would be current college students who have $10,000 wiped out, for example, but who would then need to turn around and take out more loans to continue paying for college, says Jason Delisle, a resident fellow at the American Enterprise Institute (AEI).

Palmer also points out that it may be hard to sell forgiveness to Republicans as a necessary stimulus. Since most federal borrowers haven’t been required to pay in nearly nine months, and that’s likely to continue, then discharging a lump sum of debt doesn’t actually free up any money in household budgets right now, she says.

That means debt cancellation would likely have to come through executive rather than congressional action, says Michele Streeter, a senior policy analyst at The Institute for College Access and Success. The details about who would be eligible — for example, all borrowers or only economically distressed borrowers — and how much debt would be forgiven are still very much up in the air, she says.

Whether a president actually has the legal authority to cancel debt is still up for debate. But the idea has gained traction in the past couple years. In September, Democratic Senators Elizabeth Warren and Chuck Schumer called for the next president to cancel up to $50,000 of debt through executive order.

In that sense, President Trump’s move to extend the suspended payment policy through executive order may have opened the doors to further executive action on student debt. Since there was no legal challenge to Trump’s move, that might make it harder for Republicans to mount legal challenges when a Democrat uses the same power, Kelchen says. He says he’d still expect lawsuits, though.

Reduce Monthly Payment Amounts

Biden wants to take the government’s existing income-driven repayment plans and make them more generous for many borrowers.

He said he’ll reduce the amount borrowers have to pay via income-driven repayment plans down from 10% to 5% of their discretionary income. Borrowers with undergraduate debt wouldn’t owe anything until they earned at least $25,000. After 20 years of payments, the remaining debt would be forgiven, tax-free.

The current income-driven repayment system has four different plans with varying rules and qualifications. Altogether, more than one in five borrowers pay back their loans this way, and it’s grown far more common among more recent graduates.

Biden could introduce a new plan through regulatory action, Streeter says. President Obama did the same in 2015 with the Revised Pay as You Earn plan, which grew out of an existing program. That means this is something borrowers could see in a Biden administration even without congressional action, but don’t expect it immediately.

“It’d be very difficult and complicated,” Palmer says. “It’s just logistically hard given the grandfathered issue. You’ve got all these borrowers already in repayment plans.”

One thing that’s unlikely: streamlining all these various plans into one. That’s been a bipartisan goal for years now, though there’s disagreement about the details, Streeter says. That sort of repayment system overhaul would require updating the federal Higher Education Act. It’s long overdue for reauthorization, but that won’t happen with the likely congressional make up, experts say.

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Overhauling Public Service Loan Forgiveness

Of all the debt proposals on the table — extending the forbearance period, forgiving some debt, and changing repayment plans — changing the rules of forgiveness for Public Service Loan Forgiveness is the least likely to go anywhere immediately.

Changes to the program, through which public sector workers and employees of non-profit organizations can have their debt forgiven after 10 years of qualifying payments, would require congressional action. And the changes that Biden’s campaign suggested would “make an already expensive program even more expensive,” says Delisle of AEI.

Instead of requiring workers to pay for 10 years while working in a qualifying job, Biden’s plan called for granting them $10,000 of forgiveness every year for five years. Then they would continue repaying in an income-driven repayment plan for another five years. After that 10 year period, anything left would be forgiven.

That’s just not likely to be a top priority, when there are other expensive education proposals on the table, even if Democrats controlled the House and Senate, Palmer says.

More from Money:

Are Student Loans Still Paused? Here’s What Borrowers Should Know for the Rest of 2020

Biden’s ‘Free College Plan’ Would Pay for Itself Within 10 Years, New Analysis Finds

What Joe Biden’s Tax Proposal Could Mean for Your 401(k)

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Our mission is to help people at any stage of life make smart financial decisions through research, reporting, reviews, recommendations, and tools.

Earning your trust is essential to our success, and we believe transparency is critical to creating that trust. To that end, you should know that many or all of the companies featured here are partners who advertise with us.

Our content is free because our partners pay us a referral fee if you click on links or call any of the phone numbers on our site. If you choose to interact with the content on our site, we will likely receive compensation. If you don't, we will not be compensated. Ultimately the choice is yours.

Opinions are our own and our editors and staff writers are instructed to maintain editorial integrity, but compensation along with in-depth research will determine where, how, and in what order they appear on the page.

To find out more about our editorial process and how we make money, click here.

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