Biden plans zero payments for low-income graduate borrowers

As administration awaits court action on blanket loan forgiveness, it promises regulatory change to sharply cut average costs for undergraduate borrowers

January 10, 2023
Scoreboard showing zero
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The Biden administration has promised changes to federal student aid that will cut average borrowing costs for undergraduates in half, through terms that include the full forgiveness of the debts of low-income former students without any required monthly payment.

The plan would offer the zero monthly payments for any borrower earning less than about $30,600 (£25,100) a year as an individual or less than $62,400 if in a family of four.

The administration announced the planned revisions – through regulatory processes that do not require congressional approval – as it awaits US Supreme Court consideration of a separate action it outlined in August that aimed through executive order to give all student loan borrowers up to $20,000 per person in debt relief.

Joe Biden’s secretary of education, Miguel Cardona, said both initiatives were part of the president’s ongoing determination to overhaul a system of financing US higher education that has left more than 45 million Americans struggling with $1.6 trillion in student loan debt.

“The bottom line is this: we’re fixing a broken student loan system, we’re changing the culture that higher education is unaffordable in America, especially for black and brown and other underserved students,” Dr Cardona told a news briefing. Among other problems, the secretary said of the nation’s massive accumulation of college loan debt, “it threatens America's ability to compete globally”.

About 8 million people are currently in federal programmes that limit their loan repayments on formulas based on income. The Trump administration took steps that hindered enrolment in such programmes, and Biden officials have promised to greatly expand their use.

Biden administration officials said they expected that their planned new regulations would create a 40 per cent drop in lifetime payments among eligible borrowers. The average decline would reach 50 per cent among black, Hispanic, and indigenous borrowers; and 83 per cent among borrowers in the bottom 30 per cent of earnings, officials said.

The Biden plan also would bar any growth in outstanding student loan balances due to interest accumulation for those making their scheduled monthly payments.

Biden officials said that later this year they also plan to draft new regulations concerning so-called gainful employment, that would end federal financial aid at institutions – generally in the for-profit sector – found to be charging students more money for job-specific training than they will ultimately realise in future salary gains.

The federal regulatory process gives presidential administrations broad powers to craft language that defines and redefines the terms of laws already passed by Congress, although through a process that can take a year or more to allow for mandatory collections of public comments and formal discussions.

Administration officials also reiterated their plans to meet Mr Biden’s promise to start publishing lists of programmes at all types of institutions that provide students with low financial value. That effort, Dr Cardona said, was “a warning to colleges and to postsecondary programmes that says we’re going to strengthen accountability”.

The development of policy through regulatory provisions – which can be just as easily reversed by future administrations – has become prevalent in recent administrations as US presidents cope with an atmosphere in Congress increasingly defined by Republican efforts to hinder legislative action.

That reality was reinforced just ahead of the new Biden administration announcement when Virginia Foxx of North Carolina was chosen by her fellow Republicans – now back in control of the House of Representatives – to resume chairmanship of the House education committee. Ms Foxx has been a harsh critic of Mr Biden’s attempts to reduce student loan costs, and she announced her return as chairman with a promise to persist in that pursuit. “We must stop this administration’s reckless and destructive regulatory agenda,” she said.

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