What the Biden-Harris Administration’s Student Loan Debt Announcement Means for You
What is the Biden-Harris Administration’s Student Loan Debt Announcement?
You’ve heard the news, of course. On July 10, 2020, Vice President Biden and Education Secretary Harris announced that they would be putting an end to all student loan debt incurred by students who took out loans between July 1, 2019, and June 30, 2020, in exchange for the creation of a universal basic income program.
Biden-Harris will make this debt forgiveness retroactive, so if you borrowed money from the government between those dates to attend college or trade school, you’ll have your debt erased! Learn more about what this means for you and your family’s financial future below!
The situation
In 2020, all outstanding student loan debt will be forgiven. This means that anyone with student loans will have their loans fully forgiven. The catch? If you want to take advantage of this plan, you have to have at least $30,000 worth of debt and not own any assets (like a house). Those who don’t meet these requirements and/or wish to keep their assets will be able to pay off their loans through monthly payments. This program is called Pledge 40/2020.
This policy was implemented to help alleviate a burden that has been increasingly difficult for millennials. The majority of college students who graduated since 2012 have been unable to find jobs that make use of their degrees. Many have had no choice but to move back home with their parents, as living costs have increased dramatically over time.
As a result, they were forced to resort to taking out student loans, often without even considering whether or not they would be able to find employment after graduating. Unfortunately, what we’re seeing today is much higher levels of debt than previous generations faced at our age.
The announcement
Yesterday, October 15th, 2020, marked the end of the first year of Joe Biden’s presidency. The Vice President has been an advocate for affordable higher education since before he joined the Obama administration in 2009.
Yesterday, at a press conference in Washington DC, he and his new Attorney General Kamala Harris announced that they will be working to repeal what is known as The Bankruptcy Bill on student loans. This bill passed in 2017 under President Trump was meant to get more students out of debt by setting up a bankruptcy option to discharge student loans if they were deemed ‘unmanageable’.
Although many applauded this effort at reducing student loan debt and giving those who had declared bankruptcy a way out, some criticized it as being unfair because not everyone qualifies for bankruptcy protection.
Next steps related to Student Loan Debt
To recap, the Biden–Harris administration proposed legislation that would require student borrowers to make monthly payments of 3% of their discretionary income. They also promised to forgive balances after 25 years and to cap monthly payments at 10% of discretionary income. This plan is a huge relief for struggling college graduates and will help to keep them from being buried in debt.
The proposal also includes new steps to make repaying student loans more manageable. For instance, they plan on increasing loan forbearance periods and expanding income-based repayment plans to include both undergraduate and graduate student loans. Income-based repayment programs are already available but are very limited in terms of eligibility requirements and borrowers often run into issues when applying.
Under a new income-based repayment program, any borrower who is unemployed or underemployed will qualify so long as they are willing to commit to 20% of discretionary income per month until their balances are repaid in full. This expanded program would help ensure that struggling borrowers can get out of debt without undue hardship.
Further research
In July 2020 presidential candidates Joe Biden and Elizabeth Warren unveiled their plan to tackle student loans. This plan will cancel $50 billion of student loan debt over 10 years, bring down interest rates on federal loans, and work to create an automatic income-based repayment system.
The plan also includes a student loan forgiveness program that would forgive up to $10,000 in loans after 20 years of continuous service. This is a big step in the right direction, but there is still more work to be done about students’ ability to afford college without taking on debt.
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