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Biden Administration takes Action on Student Loans

At the start of August, the Biden administration took three direct actions on student loan relief. First among these was a Department of Education's announcement of a public hearing schedule to overhaul several federal student loan programs. Starting in October, a number of negotiated rule-making sessions will commence to review and rewrite regulations surrounding Public Student Loan Forgiveness (PSLF), income-driven repayment plans, and other repayment programs in order to make repayment and forgiveness more accessible to borrowers. Furthermore, the Department of Education stated that a number of other topics will be assessed, including extending Pell Grant eligibility for prison education programs, and interest capitalization on federal student loans.

Additionally, the Department of Education announced it would be reversing Trump-era policy guidance surrounding the ability of state governments to challenge loan servicers’ illegal actions. Under the Trump administration, the Department of Education issued guidance for state regulators to reduce oversight of the companies managing over $1 trillion in federal student loans. However, the Biden Administration has reversed this, instead encouraging states to work with the federal government to protect borrowers from predatory practices. This policy reversal comes after the federal Consumer Financial Protection Bureau found “a number of ways that the student loan servicers gave incorrect information to borrowers, resulting in missteps that could cost consumers thousands of dollars,” according to a report released in June.

Most notably, the Biden administration announced its final extension of the pause on federal student loan payments. This extension will last through January 2022, rather than expiring at the end of September 2021 as previously planned. The Department of Education stated that this will allow additional time for borrowers to plan to resume payments and reduce the risk of delinquency and defaults on payments. As with previous extensions, the next several months of suspended payments will count toward federal loan forgiveness programs and loan rehabilitation plans. Multiple surveys indicate that this extension is needed, as a Pew analysis indicated that 67 percent of borrowers surveyed that it would be difficult for them to make their student loan payments if they resumed in October; likewise, the nonprofit organization Student Debt Crisis reported that 90 percent of 23,000 borrowers surveyed indicated that they were unprepared to resume payments this Fall.

The extended pause on federal student loan payments has the most immediate impact for federal student loan holders; that said, the negotiated rulemaking sessions may benefit many borrowers. Secretary of Education Miguel Cardona said in a statement, “This rulemaking committee will do the important work of improving borrowers’ access to benefits that reduce the burden of federal student loans, including targeted discharges.”

In light of these actions, many interest groups and Democratic legislators are pushing Biden to cancel federal student loan debt, encouraging him to cancel as much as $50,000 per borrower. While Biden has noted that he supports cancelling some amount of student loan debt, he still feels this should be capped at $10,000 per borrower. Some—including the Legal Services Center of Harvard Law School—feel that the Secretary of Education may have the “unrestricted authority to create and cancel or modify debt under the federal student loan programs in the Higher Education Act.” In line with this reasoning, Senators Chuck Schumer (D-N.Y.), Elizabeth Warren (D-Mass.) and Rep. Ayanna Pressley (D-Mass.) issued a statement in response to the final extension, saying, “While this temporary relief is welcome, it doesn’t go far enough. Our broken student loan system continues to exacerbate racial wealth gaps and hold back our entire economy.”

Meanwhile, Speaker of the House Nancy Pelosi (D-Calif.) has indicated her opposition toward Biden unilaterally forgiving loans, stating in a press conference in July, “He can postpone, he can delay, but he does not have that power. That would best be an act of Congress.” This is in line with the belief that the Separations of Powers clause of the Constitution requires Congress to authorize the cancellation of debt. Likewise, Congressional Republicans oppose student loan forgiveness, be it by Biden or through federal legislation, so the path forward remains unclear.



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