What does Biden taking office mean for those with student debt?
Outstanding student loan debt in the United States has reached about $1.57 trillion. On average, each borrower has about $37,600 of student loan debt, 54% of college attendees take on debt to pay for their education, and 14% of adults have a student loan. With the job market becoming even more competitive, COVID-19 having a detrimental effect on employment opportunities, and the average tuition and fees at universities increasing by 173% in the last 20 years, many feel that handling the student loan debt crisis should be one of the top priorities for the president.
Recently inaugurated President Joe Biden played an important role in creating the problem itself. Until the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) was introduced in 2005, private student loans could receive bankruptcy protections. When a statistically insignificant amount of people began to abuse this system, the BAPCPA was proposed to reform the United States’s bankruptcy code and essentially make it more difficult to file for bankruptcy.
The Republican-led bill passed with 18 Democratic senators, including Biden, voting in favor of it. The BAPCPA prioritized the credit industry over vulnerable students, resulting in many, especially women, struggling to discharge their debts. Thus, Biden’s strong support for the act is even more problematic, considering he received more than $500,000 from credit card companies, financial services, and banks during the 2003-08 senatorial election cycle.
When it comes to how the Biden administration will deal with the overwhelming amount of student loan debt, the impact of Biden’s vote 16 years ago should be noted. Efforts to reverse the damage of BAPCPA are certainly necessary.
On his first day in office, Biden signed an executive order asking the Department of Education to extend the relief on student loan payments from January 31 to September 30. This initiative will be especially beneficial to those whose financial situation has been exacerbated by the pandemic. But, what will be Biden’s next step in combating this crisis? Will permanent loan forgiveness be established? On the campaign trail, Biden expressed support for legislation that would forgive up to $10,000 of federal student debt per borrower. Some more progressive proposals, which Biden has rejected, are advocating for forgiving as much as $50,000 per borrower. He has also recently toyed with the idea of cancelling interest on student loans, but without any concrete plan or timeline. As student debt becomes a larger and larger barrier for young adults, Biden will have to address this issue in the next four years.
