On August 31, the current pause on making most federal student loan payments will end. Additionally, President Biden has stated that he would make a final decision by that time on whether to execute the student loan forgiveness program. Vast numbers of student loan debtors are experiencing unprecedented anxiety as they wait for an official announcement with only a few weeks before this crucial deadline.
Although no announcements have been made official yet, there are increasing indications that Biden is planning to extend the student loan suspension and may also be getting ready to sanction a type of widespread student debt cancellation.
The Biden Administration May Implement Student Loan Forgiveness and a Longer Student Loan Suspension
The Education Department has established processes to carry out a large-scale student loan forgiveness program, as was originally reported by POLITICO. For possibly millions of borrowers, these processes include methods to automatically cancel their federal student loans, while enabling everyone else to apply via a shortened, self-certifying application process. If a borrower's student loans aren't forgiven, the Department is ready to re-amortize their lower loan balances.
The implementation of these specific requirements demonstrates how seriously a mass student loan forgiveness scheme is being considered. Biden is willing to forgive $10,000 in federal student debt for those making less than $125,000 annually.
This month, the Education Department has informed its contracted loan servicers not to send payment reminders to borrowers. The directive is a clear indication that the government does not expect to bill borrowers soon, especially considering that top officials have promised borrowers considerable notice before restarting payments, which is why payments are scheduled to resume in just a few weeks.
Incessant Inflation Increases the Chance of Student Loan Pause Extension and Other Relief
A further extension of the student loan suspension will be decided upon in light of economic and pandemic statistics, Biden administration officials have stated throughout the year. Additionally, recent economic indicators on inflation do not bode well; prices are still rising across several industries. Top economists also believe that despite this month's jobs data, the economy may still be burning.
Despite rising inflation, students loan advocates have repeatedly warned that ending the pause on loans could be catastrophic for families. Economic data could justify extending the relief for borrowers and establishing new relief.
The Biden Administration Seems to Support the Legal Justification for Extensive Student Loan Forgiveness
Last month, the Biden administration indicated in court documents that it supports a legal claim that the Secretary of Education has broad discretion to forgive federal student loan debt.
The petition for a delayed Borrower Defense to Repayment was part of the Sweet v. DeVos case, a class action lawsuit brought by student loan borrowers (a program that can cancel federal student loan debt for borrowers defrauded by their school). Attorneys for the administration stated that the compromise authorities under the Higher Education Act provide the government "substantial discretion" to forgive student debt as part of a collaborative settlement plan.
According to the Department, “The Secretary’s ‘compromise and settlement authority’ includes the authority to compromise and release the student loan debts owed to him by federal student loans borrowers on terms determined by the Secretary.”
The Higher Education Act's compromise and settlement language has been cited by advocacy organizations, some student loan legal experts, and progressive members of Congress as a strong justification for Biden's use of executive action to implement widespread student debt cancellation. Other experts have objected to this expansive reading, and the administration's arguments in the filing seemed to be restricted to "claims" made by the class of student loan debtors.
Nevertheless, the petition provides wisdom on the administration's legal defenses that would support Vice President Biden's choice to implement widespread student loan forgiveness.
A Bill Introduced by Republicans Seeks to End the Student Loan Pause As well as Preventing Mass Loans Forgiveness
Republican Reps. Virginia Foxx, Elise Stefanik, and Jim Banks presented legislation last week to anticipate potential student loan measures by Biden.
The Responsible Education Assistance Through Loan (REAL) Reforms Act would halt the current student debt suspension and end new borrowers' eligibility for existing loan forgiveness programs, including Public Service Loan Forgiveness (PSLF) and income-driven repayment plans. Additionally, the legislation would explicitly forbid President Biden from mass-scale cancellation of student loan debt.
Given that Democrats maintain a tenuous majority in both the House and the Senate, the bill has little to no chance of passing. However, the bill's presentation shows that Republicans are serious about the possibility that Biden may pass extra student loan relief for borrowers.
The Political Momentum of Biden
Over the last few months, Biden has had a string of electoral victories. The CHIPS Act, which will enhance semiconductor production to make the United States more competitive with China, and a gun regulation bill are just two of the significant legislation he just signed into law. The Inflation Reduction Act, which the Senate recently passed, is on pace to make a major federal investment in health care and climate change mitigation.
Biden could feel more confident to make a significant push on other issues, such as student loan relief. Given the oncoming midterm elections, which will determine which party controls Congress for the remainder of Biden's tenure, this could be especially true.