The crazy year that was 2020 has ended & a lot of the protections that were put in place at the beginning of the pandemic are expiring. One of the biggest protections set to end is the forbearance of a student loan debt that is supposed to allow millions of Americans to postpone paying back their monthly payments on their student loans until they and the economy can get back on their feet.
But from the end of this year December 31st through the beginning of president-elect Biden’s first term on January 20th the student loan protections are set to end and both president trump and president-elect Biden have been very vague about what they can or what they will do to prevent the looming student loan crisis from happening as of the first of this year. So today we are talking about the student loan cliff what president trump may do what congress could do and what we know about what president-elect Biden has said he plans to do.
So let’s make this quick, right now across America, there are around 33 million student loan borrowers whose student loan payments were paused back in march. This was partly because of the passage of the cares act relief bill as well as president trump’s executive order later that summer. But out of the 33 million students who have had their loans paused eight million of them were previously in default already. The concerning problem at the moment is what will happen as of January 1st this is because the cares act and the executive orders only offer protections up until the end of this year.
If the president or congress do not take any action student loan payments will be required again starting January 1st. This is a problem because according to a pew survey nearly 58 percent of student loan borrowers say they would not likely be able to start paying back their loans. Again president trump had previously said as of December 1st he would extend the executive order further but so far there have not been any updates on that promise as of yet. On the flip side president-elect, Biden during his campaign had been very vocal about what he plans to do to help those who struggle to pay their student loans. Although it is likely that the eventual president Biden could pass additional executive orders to extend the student loan forbearance. He will not take office until later in January meaning that it’s possible that all those pause student loans right now will come due before he’s able to extend any protections but once he is in office Biden has said he’s going to have a mildly progressive agenda to deal with student loans.
First, he said he would seek to forgive the first ten thousand dollars in student debt for all borrowers additionally if somebody attended a historically black college or a public college he would forgive the totality of the loan as long as the graduate earns less than 125 thousand dollars a year. These two policies alone would cut the total 1.7 trillion dollars in current student loan debt by one-third but it remains a bit of a question because if the Republicans maintain their control in the senate. It’s not clear how much of this agenda president Biden would be able to get past this leaves congress at the moment aside from a presidential executive order.
Congress is really the only group that could do something about the pending student loan cliff. Of course, I have to emphasize it could but with the current stalemate in congress for almost everything and an increasingly entrenched republican resistance to any sort of progressive agenda. It is a bit of a longshot that such a divided Congress as we have right now would be willing to do anything to alleviate the student loan debt cliff. There is talk from house democrats to include student loan debt forbearance in another stimulus package. If one could be passed and in the heroes act, there is a provision to allow students to defer their student loans until September 2021 but in the republican heels act that was proposed in the Senate, there is no new help for student loans past what was already extended through the end of this year and to think that this situation is going to change before the end of the year or even under a Biden presidency.
I think is very unlikely undoubtedly this looming student loan cliff is something that could potentially affect millions of people who may have to start paying back their student loans at the start of the next year even if there is no economy or no jobs to allow them to do it unfortunately in the grand spectrum of things I think that the bandwidth or the motivation of congress and the white house is just not there to deal with these kinds of issues this on top of the increasing pandemic numbers the slowing improvement of our economy and the lame deck sessions through the end of January it doesn’t look like much is going to get done furthermore with a potentially split congress and a republican senate it’s really going to limit what either the eventual president Biden or a democratic congress could actually get done.