Biden could face a mess of student loans if Trump allows relief for the COVID-19 pandemic to end

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Student loan borrowers have not had to make payments since March – but this federal pandemic aid expires on December 31, unless President Donald Trump or Congress extends it.

If both don’t postpone the deadline, millions of student loan payments will be due a few weeks before President-elect Joe Biden takes office on January 20th. Even if Biden resumes the hiatus retrospectively, it could create confusion and chaos among borrowers for student loan processors who are not designed to suddenly stop or start payments – as the economic recovery slows and Covid-19 cases rise .

Either way, Biden will have a choice: keep Trump’s policies up or go bigger and cancel the debt entirely, a move some Democrats argue Biden can go without Congress.

Biden dodged a question Monday whether he would use executive power to cancel student debts. Instead, he expressed support for the House Democrats’ stimulus package, which would extend the suspension of payments through September 2021 and remove some student debt.

“Democratic House legislation calls for an immediate $ 10,000 waiver on student loans,” said Biden.

“It stops people. You are in real trouble. You have to decide whether to pay your student loan or pay the rent, such decisions. It should be done immediately, ”he added.

An unprecedented step

Trump originally waived student loan interest in March when large swaths of the economy began to close in response to the coronavirus pandemic.

A more comprehensive version of the student loan relief was included two weeks later in the $ 2 trillion stimulus package, signed two weeks later. Under the program, the US government automatically suspended payments and waived interest on federal student loans through September. Trump later postponed the expiration date to the end of the year by ordinance.

The suspension and interest waiver only applied to federal loans, which covered approximately 85% of federal student loans. These included loans known as federal direct loans, as well as PLUS loans that parents may have taken out on behalf of their children.

It excluded some federal loans guaranteed by the government by not technically holding them. These were usually paid out before 2010.

Suspend payments vs. cancel student debt

The emergency measures came after years of debate among Democrats over how to reduce Americans’ gigantic student loan debt.

Unlike more progressive Democrats, however, Biden initially didn’t include student debt relief in its campaign platform. But he eventually adopted a plan to give away $ 10,000 per borrower to help families through the pandemic, as part of a July report drawn up by a joint task force with Senator Bernie Sanders, his longest-running opponent in the democratic primaries, was released.

Progressive Democrats seem ready to put pressure on Biden to keep that promise, including Massachusetts Senator Elizabeth Warren, who urged Biden to “cancel billions of dollars in student loan debt” on day one. Warren, along with Senate minority leader Chuck Schumer, called on Trump in September to cut student loans of $ 50,000 per borrower.

Warren argues that the Secretary of Education has the power to largely cancel federal student loans, a claim confirmed in a memo from attorneys at Harvard Legal Services Center and its Predatory Student Lending Project.

But Biden may be reluctant to unilaterally get rid of debt, preferring it to come from Congress – which will remain divided unless the Democrats win on Jan.

“The minister does have some power to cancel student debts, but there is both a legal and a practical question of how far the government can go,” said Robert Shireman, who is deputy undersecretary for the Obama administration Education served and is currently a Senior Fellow of the Century Foundation.

Targeted loan waiver is easier

More clearly, the Department of Education can cancel student debts for borrowers who have been defrauded by their colleges.

This has been going on for years, despite Secretary Betsy DeVos pulling back the Obama-era rules that made the process easier for these students to seek relief.

There are thousands of borrowers who say they have been scammed by now defunct for-profit colleges like Corinthian and ITT Tech and have been waiting for the Department of Education to process their claims for years.

The National Student Legal Defense Network, founded by former Education Department officials, is calling on Biden to use executive power on day one to cancel student debts for duped students and those whose colleges have been closed, as well as the debts of permanently disabled people. That could relieve hundreds of thousands of borrowers.

The-CNN-Wire ™ & © 2020 Cable News Network, Inc., a WarnerMedia company. All rights reserved.

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