- Since President Joe Biden took office, he has taken a number of actions to address the $1.7 trillion student debt crisis.
- They include cancelling debt for borrowers with disabilities and extending the payment pause on loans.
- Democrats are pushing for Biden to cancel $50,000 in student debt, which he says he is reviewing.
- See more stories on Insider’s business page.
Forty-five million Americans have a $1.7 trillion student debt burden in the country. And many of them, alongside Democrats and advocates, want President Joe Biden to forgive $50,000 of their debt.
He hasn’t done that yet, but the president has taken steps to lessen the burden and provide relief during the pandemic.
As one of his first actions in office, Biden extended the pause on student loan payments through September, coupled with zero growth in interest, to ensure borrowers suffering financially would not have to worry about paying off their loans. And since then, Education Secretary Miguel Cardona has cancelled student debt for borrowers with disabilities and borrowers defrauded by for-profit schools. He’s also started conducting reviews of student loan forgiveness programs that don’t work as they should.
But Democrats want Biden to do more.
They have been keeping the pressure on the president to cancel $50,000 in student debt per person using his executive authority. And while Biden has expressed hesitancy to do so, Democrats remain adamant that he can, and should, cancel student debt immediately with the flick of a pen.
“Student loan cancellation could occur today,” Massachusetts Sen. Elizabeth Warren told Insider. “The president just needs to sign a piece of paper canceling that debt. It doesn’t take any act of Congress or any amendment to the budget.”
Detailed below is everything Biden has done to date to confront the student debt crisis:
On his first day in office, Biden asked the Education Department to extend the pause on federal student loan payments through September 30, following Education Secretary Betsy DeVos’ extension on the pause on loan payments through the end of January.
This was accompanied by a 0% interest rate during that time period.
Director of the National Economic Council Brian Deese said at the time that the extension on loans would to alleviate some of the burdens many households were facing to pay basic expenses, and student debt is often a barrier to putting food on the table.
“In this moment of economic hardship, we want to reduce the burden of these financial trade-offs,” Deese said.
This extension, however did not apply to the more than seven million borrowers with loans held by private companies.
Asked the Justice Department to review his authority to cancel student debt
In February, White House Press Secretary Jen Psaki told reporters that Biden will ask the Justice Department to review his legal authority to cancel $50,000 in student debt.
At a CNN town hall in February, Biden said he doesn’t have the executive authority to cancel up to $50,000 in student debt per person, but said he is prepared to cancel $10,000 — something he campaigned on.
However, Insider reported that he has yet to deliver on that campaign promise, and while Biden said he would support legislation brought to him to cancel $10,000 in student debt, Democrats argue that legislation takes too long, and the president can cancel debt immediately using his executive authority.
“We have a lot on our plate, including moving to infrastructure and all kinds of other things,” Warren said in a February press call. “I have legislation to do it, but to me, that’s just not a reason to hold off. The president can do this, and I very much hope that he will.”
Biden’s administration has not yet commented on the status of Justice Department’s review.
Cancelled student debt for defrauded borrowers
In his first major move as Education Secretary, Cardona on March 18 reversed a Trump-era policy that gave only partial relief to defrauded students.
For-profit institutions that shut down years ago, like Corinthian Colleges and ITT Technical Institutes, were accused of violating federal law by persuading their students to take out loans, and Cardona’s new policy helped approximately 72,000 of those students receive $1 billion in loan cancellation.
“Borrowers deserve a simplified and fair path to relief when they have been harmed by their institution’s misconduct,” Cardona said in a statement. “A close review of these claims and the associated evidence showed these borrowers have been harmed and we will grant them a fresh start from their debt.”
The debt-cancellation methodology, known as the “borrower defense to repayment” — approved by Education Secretary Betsy DeVos — compared the median earnings of graduates with debt-relief claims to the median earnings of graduates in comparable programs. The bigger the difference, the more relief the applicant would receive.
But compared to a 99.2% approval rate for defrauded claims filed under President Barack Obama, DeVos had a 99.4% denial rate for borrowers and ran up a huge backlog of claims from eligible defrauded borrowers seeking student debt forgiveness.
Cardona said that process did not result in appropriate relief determination and needed to be reversed, and a judge recently ruled that DeVos must testify over why so few borrowers were approved for loan forgiveness.
Cancelled student debt for borrowers with disabilities
Two weeks after cancelling some debt for defrauded borrowers, Cardona on March 29 cancelled $1.3 billion of student debt for about 41,000 borrowers with disabilities.
He also waived an Obama-era requirement for those borrowers to submit documentation during a three-year monitoring period to verify that their incomes did not exceed the poverty line.
A 2016 report from the Government Accountability Office found that 98% of reinstated disability discharges occurred because borrowers did not submit the required documentation — not because their incomes were too high.
“Borrowers with total and permanent disabilities should focus on their well-being, not put their health on the line to submit earnings information during the COVID-19 emergency,” Cardona said in a statement. “Waiving these requirements will ensure no borrower who is totally and permanently disabled risks having to repay their loans simply because they could not submit paperwork.”
But experts said this action did not make up for the significant number of borrowers who never received loan forgiveness simply due to paperwork.
“Today’s announcement is not cause for celebration but rather for outrage,” Persis Yu, the director of the Student Loan Borrower Assistance Project at the National Consumer Law Center, said in a statement at the time. “It is scandalous that the Department revoked the loan discharges for 41,000 borrowers with total and permanent disabilities due to paperwork issues during a pandemic.”
Expanded the scope of the student loan payment pause
Biden’s payments pause on student loans initially only applied to borrowers with federal loans, meaning those with privately-held loans had to continue making payments during the pandemic.
But on March 29, Cardona expanded the scope of that pause to apply to loans under the Federal Family Education Loan (FFEL) Program, which are privately-held. This helped 1.14 million additional borrowers.
The FFEL Program ended in 2010, but according to Education Department data, 11.2 million borrowers still have outstanding FFEL loans totaling over $248 billion. And while the department acquired some of the outstanding FFEL loans, many are still privately owned and were not affected by the earlier pause on federally owned student loan payments.
According to a press release, any FFEL borrower who made a payment in the past year will have the option to request a refund.
Asked the Education Department to review his authority to cancel student debt
White House Chief of Staff Ron Klain told Politico in April that Biden had asked Cardona to create a memo on the president’s legal authority to forgive $50,000 in student loans per person.
Biden will “look at that legal authority,” Klain said. “He’ll look at the policy issues around that, and he’ll make a decision. He hasn’t made a decision on that either way, and, in fact, he hasn’t yet gotten the memos that he needs to start to focus on that decision.”
The review appears to be ongoing, and the administration has not announced a timeline for when it will be completed.
Started a review of student loan forgiveness programs
On May 24, the Education Department announced it is beginning the process of issuing new higher education regulations, mainly concerning student debt-forgiveness programs.
The first step of the process will be through holding hearings in June to receive feedback on “regulations that would address gaps in postsecondary outcomes, such as retention, completion, student loan repayment, and loan default,” according to a press release.
The department will also seek comments on rules regarding student loan forgiveness for borrowers in public service and borrowers with disabilities, among other things.
The main topics the department plans to address concern the methods for forgiving debt for defrauded borrowers and borrowers with disabilities, along with looking into the Public Service Loan Forgiveness (PSLF) program, which has rejected 98% of eligible borrowers.
Forbes reported that the process to implement new rules could be lengthy, though. After the hearings in June, there will be “negotiated rulemaking,” during which stakeholders meet with the department to review proposed regulations, and it could take a year or longer until changes are implemented.