One of the prime issues confronted by the new US president Joe Biden was the overwhelming situation of many Americans due to mounting higher education costs and the Biden student loan debts, when he assumes office in January 2021.
As per an analysis conducted by US news and world report, in the past 20 years, annual tuition fees in private universities has increased by 144%, at public universities for out-of-state students by 165%, and students residing within the state by 212%. In absolute figures, the tuition per year had increased by $5000 in public universities and $13000 in private universities. These figures are exclusive of living expenses, accommodations, books, and other supplies.
As of date, as per Federal Reserve Data, the total student debt loan in the US stands at $1.7 trillion. The student debt crisis was become worsen by the ongoing coronavirus pandemic since March 2020.
Liberals Stand on Student Debt Reliefs
Liberals want President Biden to forgive student loans worth $50,000 per borrower. As per Senate leader Chuck Schumer and Sen. Elizabeth Warren, student debt reliefs will substantially raise the incomes of Latin and Black-American households. From the economic standpoint, progressives believe student debt cancellations during the current COVID-19 are inducing the global recession, will bolster the US economy in the long run by lowering housing costs, higher education dropout rates, and the dissolution of many businesses.
However, Biden is hesitant to bypass the conservatives and grant student loan forgiveness, especially for those who attend top-tier or Ivy-league universities. He also asserts that he does not have the authority to approve loan forgiveness up to $50,000. But, a group of 17 attorneys stated that President Biden is authorized to initiate such an action under the Higher Education Act.
Nevertheless, the US President has taken some concrete steps in this direction.
Steps Taken by Biden Administration to Manage the Student Debt Crisis
President Biden paused student loan repayments till September 30, 2021, on the very first day he assumes office. Thus, interest revisions on existing student loans are not permitted. Moreover, banks or financial institutions granting student loans had to halt their student debt collection activities with immediate effect. Biden also expedites a request to Congress regarding the cancellation of student debt up to $10,000 for every federal borrower.
He has also requested Congress to submit a bill about the suggestion of Liberals to cancel student debts up to $50,000 per borrower. He is open to signing such a bill. Moreover, his team is reviewing if he can approve additional steps to solve the student debt problem through executive action.
On March 11, 2021, the Biden administration approves the American Rescue Plan Act. As per the provisions of this act, the amount of student loan debt forgiven is tax-exempt from December 31, 2020, to December 31, 2025. Biden is also awaiting a memorandum from Education secretary Miguel Cardona to understand his authority to approve student loan forgiveness. He also wishes to understand the policy implications of such a move.
The Biden administration has proposed the extend the Biden student loan forgiveness program to students attending minority institutions or historically Afro-American universities, to students availing education loans for undergraduate studies, and to students coming from households having an annual income of less than $125,000.
Public service providers will be automatically eligible for student loan discounts of $10,000 for five years that may extend up to $50,000 in the future under a proposed new Biden student loan plan.
Things to Know
Besides, public workers will continue to enjoy the privileges granted to them under the PSLF (Public Service Loan Forgiveness) program. Besides, some additional loan repayment options and federal loan schemes are likely to introduce under the PSLF program. Students are also likely to get a waiver of 50% on their balance amount after five years.
President Biden was proposing a new income-based loan repayment plan as well. Only loans procured for undergraduate education will qualify for this program. Students have to pay only 5% as opposing to the current 10% – 20% of discretionary income. Based on annual household income and family size, it would determine if a student is below the federal poverty line. In other words, if the annual income is less than $25,000, then monthly loan installments would be waived.
Besides, Biden’s income-driven plan proposes to make all undergraduate student loan balances 100% tax-free after the completion of 20 years. All the new and existing borrowers will be automatically incorporated under this plan. However, students have the option to opt-out of this program if they wish to.
Biden also plans to expand the eligibility criteria for the existing education grant programs. Currently, students demonstrating financial need can avail of financial aid up to $6345.
He is also speculating on making education tuition-free at some universities. Students do not have to pay any tuition fee for four years if their family income is below $125,000 at public universities. Students who were not previously pursuing a postdoctoral degree can avail themselves of tuition grants for two years at community colleges.
Apart from the above proposals, the Biden administration also seeks to invest heavily in workforce training programs and grant up to $8 billion to community colleges and minority institutions.
Also Read: Student Loans – A Boon In Student’s Life
If Biden can successfully execute the proposed student loan plans and test his presidential power to grant student debt forgiveness up to $50,000 per borrower, then it will be one of the best education policy moves in US history. It will ensure that higher education no longer remains a privilege for the rich but is totally base on student competency rather than social class. Overall, the current Biden student loan plans look attractive with further scope for expansion.
As of April 9, 2021, the US President has excluded the Biden student loan forgiveness plans from the budget proposals. However, he hints towards the expansion of federal funding for higher education. We will get a clearer picture in a few days.
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