Though Joe Biden has not officially released his student loan plan, the details that have been shared up to this point give a pretty good idea of what his plan is, and what it isn’t.
As more details emerge, this post will be updated.
Biden on Debt Cancellation, Student Loan Forgiveness and Free College
Elizabeth Warren and Bernie Sanders have both released comprehensive plans to forgive most or all existing federal student debt. Warren and Sanders have also proposed free college for students pursuing a four-year degree.
Biden’s plan will not be as generous.
For graduates, Biden isn’t proposing any sort of blanket forgiveness for borrowers. For future students, Biden is supporting free community college for up to two years. However, he won’t be pushing for four years of college, despite previous support for free public college.
In short, Biden’s position on many student debt issues will be far less generous than the ones advocated by Warren and Sanders.
The good news, is that Biden is still proposing some ideas that would help many current borrowers…
Biden Looks to Lower Student Loan Bills
Though Biden is promising to eliminate student loans if he is elected President, he is promising to lower student loan bills.
At present, borrowers on an income-driven repayment plan are expected to pay 10%, 15%, or 20% of their discretionary income towards their student loans. The percentage depends upon which income-driven repayment plan is selected.
A President Biden would lower the percentage of income payment down to 5%. Many borrowers would see their monthly student loan payment cut in half. Others would see an even bigger reduction.
Biden has also said that borrowers earning less than $30,000 per year would not be expected to make any payments. Additionally, these borrowers making less than $30,000 per year would have any interest accumulate on their debt.
How Biden Compares to Other Candidates
Even though we do not yet have the full details on Biden’s student loan plan, there is no doubt that it will not be as generous as the ones offered by Sanders and Warren.
However, one noteworthy aspect of his plan to lower monthly payments is that it can be accomplished via an executive order. This means that he can lower borrower payments without needing any legislation to pass through Congress. This was the method that President Obama used to create the Revised Pay As You Earn (REPAYE) plan.
In order for Warren and Sanders to deliver on their promises, legislation will have to get through Congress for them to sign. We think this could be a huge challenge.
Thus, the Biden plan isn’t the most generous plan, but is has a greater chance of becoming a reality.
The Best News for Borrowers
At this point, most of the leading Democratic candidates have released a plan to address the student loan crisis.
This development is significant for borrowers because it means that addressing student loan debt has become a bigger priority for the Democratic Party. During the Obama Administration, some steps were made to address the student loan issues faced by many Americans such as creation of new income-driven repayment plans and measures to keep for-profit schools in check. However, student debt in the United States has only gotten worse in subsequent years. If the Democratic Party makes addressing student loans a top concern, borrowers are more likely to get some help in the future.
The terms of the debate have made a significant shift for the better. The debate is no longer about whether or not we should help student loan borrowers. Instead, the debate is about the best way of helping borrowers.