With victories in Georgia, Democrats will have the majority in the Senate. What do these wins mean for student loan borrowers? What impact will Democratic control of the House, Senate, and White House have on student debt in the US?
Life for student loan borrowers could get a little easier thanks to the election results.
An ultra-slim Democratic majority moves the needle on student loan forgiveness. It also means borrowers should expect more legislation aimed at making life with student debt more manageable.
Biden Supports Loan Forgiveness but Wants Congressional Approval
President-Elect Joe Biden has made it very clear that he will not test the limits of executive authority to forgive or cancel student loans.
In a recent interview, he said:
“I’m going to get in trouble for saying this … It’s arguable that the president may have the executive power to forgive up to $50,000 in student debt. … Well, I think that’s pretty questionable. I’m unsure of that. I’d be unlikely to do that.”
In other words, Biden won’t be slashing student loan balances unless Congress signs off on the plan.
Democratic control of the Senate probably won’t be enough for the more aggressive $50,000 student loan forgiveness plan supported by Senators Elizabeth Warren and Chuck Schumer.
The idea has not generated any Republican support, and Democratic backing also appears to be limited.
Borrowers should pay close attention to Democratic senators from conservative states like Jon Tester in Montana and Joe Manchin of West Virginia. With a tiny Democratic majority, these two will now wield far more influence. Thus far, neither has signaled any support for the plan to cancel $50,000 of student debt.
The Most Likely Student Debt Cancellation Scenario
If student loan forgiveness happens soon, the most likely amount will be $10,000.
A version of this debt forgiveness has already passed in the House as part of a Covid-19 relief package.
As I noted in my article projecting the odds of student loan forgiveness in 2021, the Senate would be the big obstacle due to nearly uniform Republican opposition to student loan cancellation as a means of economic stimulus. The Senate is now less of an impediment because Mitch McConnell is no longer the majority leader. Democrats are expected to make a quick push for additional economic relief due to the Covid-19 pandemic.
Student loan borrowers should closely watch any economic stimulus legislation as it represents the best chance for mass student loan forgiveness. Debt cancellation on its own probably cannot get through Congress. As part of a broader relief package, it has a chance.
Debate and Votes on Common Sense Legislation
Even if forgiveness doesn’t happen, the Georgia Senate Special Election Results will impact student loan borrowers.
When Mitch McConnell was the majority leader, and Republicans in charge of key committees, proposals to help student loan borrowers rarely saw a floor debate or vote.
Circling back to the now crucial Democrats Jon Tester and Joe Manchin, both have proposed legislation to help borrowers. Tester released a plan to help borrowers chasing student loan forgiveness impacted by a national or public health emergency. Joe Manchin has proposed simplifying student loan repayment and making federal loans easier to understand.
These old proposals are significant for a couple of reasons:
- They show that both senators recognize that student debt is a significant issue.
- The proposals are evidence of Manchin and Tester’s desire to address student loans.
Thus, borrowers can expect a now Democratic Senate to be more active in addressing student debt.
The most likely future legislation will address issues with the current system.
Potential fixes might include:
- Simplifying repayment options,
- Taking steps to make college more affordable,
- More accountability for federal loan servicers, and
- Addressing the high rejection rate for Public Service Loan Forgiveness.
The Student Loan Consequences of Democratic Victories in the Georgia Senate Elections
Jon Osseff and Raphael Warnock won the runoff elections. Republicans no longer control the Senate.
The first and most immediate impact for student loan borrowers will likely come from $2,000 relief checks for most Americans.
In the realm of student debt, there isn’t popular bipartisan legislation that simply needed a vote. An immediate impact on student loans is unlikely.
Looking ahead, the outlook for student loan borrowers is better. Debt cancellation remains unlikely, but a more realistic possibility. More discussion, proposals, and votes on student loan proposals are a certainty.