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Biden ramps up loan forgiveness push as final student debt relief talks commence
This is the latest development on President Joe Biden’s attempt to cancel student loan debt, more than a year after he initially proposed it. The new plan is expected to be revealed this week.
Previously, the Supreme Court had undone Biden’s original plan which aimed at canceling up to $20,000 in loan debt for around 40 million people with federal student loans. Following the ruling, Biden established a committee consisting of stakeholders from higher education, loan servicers, and borrowers to draft a new plan for loan forgiveness.
The committee’s final round of talks began this week and frustrations have already surfaced. Many committee members expressed disappointment with the department’s latest forgiveness proposal, claiming that it falls short of addressing the issues they’ve spent months debating.
The negotiations aim to determine which student loan forgiveness ideas can gain unanimous support from the group, although full agreement has always been unlikely. The Education Department will then use these agreed-upon proposals to shape a final plan that will be open to public reaction.
Meanwhile, Biden faces criticism from both Senate Democrats, who see risks for borrowers in the upcoming loan repayment period, and House and Senate Republicans, who argue that any form of student debt relief is unfair to those who have already paid off their loans or never attended college.
The Education Department is not expected to present a final proposal until mid-2024, just before the presidential election.
Key Takeaways from the Meeting:
During Monday’s meeting, several points stood out:
- Progressives in Congress, such as Sen. Elizabeth Warren and Rep. Ayanna Pressley, urged the department to adopt a bolder approach to debt relief, saying the current proposal falls short of providing the needed relief for low- and middle-income Americans.
- One point of contention is capped forgiveness, with Warren arguing that setting a cap on relief from interest ties the Secretary’s hands unnecessarily.
- There are concerns about the Education Department’s commitment to negotiate “in good faith.” The department has not disclosed how far it is willing to go in addressing the types of hardships that prevent borrowers from repaying their loans.
Biden’s Target for Forgiveness:
In the draft proposal released by the Education Department, it was suggested that borrowers who have been paying their loans for at least two decades may have their outstanding balances entirely forgiven. The proposal also includes forgiveness of up to $20,000 in interest-driven debt for borrowers making less than $125,000 as individuals or $250,000 as households.
Other borrowers who don’t meet these criteria may still be eligible for targeted relief.
Panel’s Focus on Defining “Hardship”:
The committee’s main challenge this week revolves around determining which other types of borrowers should have their debt relieved. This depends on how the Education Department defines “hardship.”
The University of California’s Student Loan Law Initiative will present six indicators of financial stress during Tuesday’s session as a way to represent the challenges borrowers face in repaying their loans.
The Politics of Debt Relief:
Last week illustrated the complex political landscape surrounding student loan forgiveness. House Republicans passed a resolution opposing Biden’s income-driven repayment plan, while the Senate narrowly rejected it thanks to moderates in support of Biden’s agenda.
Biden has prioritized putting money back in the pockets of voters as a strategy for reelection. The Education Department has already provided nearly $5 billion in debt relief, and personalized emails were sent to hundreds of thousands of borrowers who benefited from a reassessment of their loan repayment timelines.
The student loan panel consists of 16 members and 16 alternates, representing various stakeholders in the student loan debate. The final talks will be livestreamed, and the public will have an opportunity to comment during the first day.
The Education Department is expected to finalize a proposal by mid-2024, with the success of student loan forgiveness likely dependent on changes to federal higher education policy.