Donald Trump’s administration has extended its suspension of federal student loan repayments until the end of January 2021, keeping interest rates at zero per cent, amid the public health crisis and massive economic fallout from the coronavirus pandemic.
President-elect Joe Biden, who will be inaugurated on 20 January, will likely seek to extend relief or cancel certain loans entirely upon taking office.
More than 45 million Americans hold more than $1.6tn in student loan debt, a figure that has surged within the last decade as private university enrollment grew and federal and state governments made steep cuts to higher education funding against growing wealth inequality.
Mr Biden has supported cancelling $10,000 in loan debt through legislation, but he’ll face Republican roadblocks in the Senate if Democrats fail to capture a majority of Congress.
One measure, from senators Chuck Schumer and Elizabeth Warren, proposes that Mr Biden cancel up to $50,000 in debt, along with any tax penalties, and pause future federal loan payments and interest through the duration of the pandemic.
A growing body of progressive lawmakers has urged Mr Biden to cancel billions of dollars in debt through executive order, without having to rely on a GOP-dominated Senate, a move that advocates argue could have sweeping economic and racial justice impacts and deliver a much-needed boost to a lagging economy.
This week, Trump’s Education Secretary Betsy DeVos slammed those calls are “shrill calls to cancel, to forgive, to make it all free.”
In her announcement extending the moratorium, she criticised Congress for failing to reach a deal on coronavirus relief.
“The added time also allows Congress to do its job and determine what measures it believes are necessary and appropriate,” she said in a statement. “The Congress, not the Executive Branch, is in charge of student loan policy.”
The pandemic, its economic fallout and inadequate federal relief have likely exacerbated the student debt crisis. A Pew survey earlier this fall found that 58 per cent of borrowers whose payments had been suspended during the pandemic would have difficulty paying them if they were to return.
Through pandemic relief, interest has been suspended for approximately 41 million borrowers relying on federal student loans; payments for 33 million of those borrowers have paused, and the Education Department has stopped collecting from 8 million others who were in default.
Under the president-elect’s higher education proposals, people who earn $25,000 or less would not owe any payments or accrue interest on their undergraduate loans, and people who make more than $25,000 a year would owe 5 per cent of their discretionary income in repayments. Remaining balances for debt holders who make on-time payments for 20 years would be eliminated.
In 2019, Secretary DeVos proposed handing the federal government’s $1.6tn student loan portfolio to a “stand-alone government corporation,” rather than the department's Office of Federal Student Aid.
That year, the Government Accountability Office found that her Education Department rejected an overwhelming 99 per cent of applications for federal loan forgiveness.
The Trump administration has also been sued for failing to stop all debt collections against defaulted borrowers and mismanaging the federal order to fully freeze loans during the pandemic.