What Joe Biden plans for student loans when he becomes president is important because student debt has already reached $1.6 trillion.
Data shows that there are 45 million student loan borrowers. More than two-thirds of graduates have student loans to pay, compared with less than 50% in the early 1990s. The average balance has been $30,000, from $9,000 back then. Some 28% of borrowers are either in default or delinquency.
“Joe Biden has made several campaign promises,” said Mark Kantrowitz, a higher education expert. Some of his pledges include loan forgiveness, cutting borrowers’ monthly payments, and allowing them to leave their debt in bankruptcy.
A Politico/Morning Consult poll revealed that more than half of Americans believe student debt is “a major problem” for the country.
Joe Biden has previously announced he would forgive $10,000 in student loans for all borrowers. The impact of the proposal will be deemed critical as half of borrowers in default in 2015 owed less than that amount.
“That’s a policy that will deliver some significant relief to everyone,” said James Kvaal, president of the Institute for College Access & Success.
Debt cancellation plan
Moreover, Biden also laid out a more specific debt cancellation plan: As president, he stressed he would forgive undergraduate federal student loan debt rooted in public colleges for those earning less than $125,000 a year.
Based on Kantrowitz' calculations, Biden’s forgiveness plan would slash about a third of the country’s outstanding student loan debt.
The presidential candidate would broaden the aid to borrowers enrolled in income-driven repayment plans, which allow them to afford monthly payments easily by capping them at a share of a borrowers’ income. The regular monthly bill costs about $400.
Biden would cut those bills in half and impose no tax on debt forgiveness. “It’s going to make those plans much more feasible for students,” Kvaal said.
Federal Reserve Chairman Jerome Powell explained that he could not think of a reason why the student loans are perceived differently than other types of debt in bankruptcy.
Student loan borrowers deserve a fresh start, according to Kantrowitz. “Credit cards can be discharged, but not student loans?” he said.
Income-driven payments
According to the analysis by Student Loan Planner, the What You Can Do for Your Country Act, which is on Biden's site, stretch the Public Service Loan Forgiveness Program that forgives student loans for public servants after 10 years of income-driven payments, tax-free.
"JoeBiden.com calls out his desire to “halve student loan payments for undergraduates. He mentions halving the payment because the current PAYE and REPAYE plans require 10% of income," the site says.
"The big question is whether he would make graduate and professional students pay the current income-driven payment rate of 10% of income or if he would include this group in the change to 5% of income."
"The CFPB or other government bodies could put pressure on colleges to limit costs, but regulation would likely be needed not to balloon total student loan debt further."
Biden mentioned at one point that he had more than $280,000 of student loan debt after putting three children through college and graduate school.
