Will you pay your student loans in 2021? Possible actions by Biden

• Author: William Asher
• Posted: 2024-05-27

On January 21, 2021, President-Elect Biden will become President Biden. The transition from one administration to another will, of course, have massive impacts on public policy and finances in America. One such example are student loans, and it appears increasingly likely that President-Elect Biden may engage in some major, fundamental changes to the way that Americans pay their student loans.

The Current Student Loan Situation

The debt incurred by America when it comes to student loans is absolutely massive and growing. Consider the following:

• Nearly 45 million Americans owe some sort of student debt, with the average debt loan accumulating to almost $38,000.


• The percentage of student loan debt - even controlling for inflation - has been on the rise for decades. This trend has accelerated as states have reduced funding for higher education. Indeed, even students attending public universities must borrow about $30,000 in order to get their degrees.


• Much of this debt is held by the federal government, though a small percentage is held by private lenders. 

Student loan debt is, unquestionably, setting back Americans - and particularly young Americans. It has been cited repeatedly as one of the chief reasons that young adults are forced to live at home or delay major payments, like on a mortgage or car. It is also considered to be a major stressor in the lives of millennials. Furthermore, it is estimated that student loan forgiveness, if enacted, could result in a serious economic boost, as millions of adults would suddenly be free to make a variety of purchases, large and small. 

COVID-19 and Loans

While student loans and college affordability has been an issue for decades, it was the COVID-19 pandemic that forced the hands of the Trump administration. As a result of the economic turmoil caused by the pandemic, the Trump administration announced a forbearance on all federally-held student loan payments. This meant that anyone who owed student loans did not have to pay them, as long as the loan was held by the federal government. It did not impact private loan payments. During this time, loan holders could continue to make payments, but they could also choose not to do so and not face any additional interest or penalties. As such, most people stopped making these loan payments.

The order was originally expected to expire in December, but the Trump administration extended it twice, once into January and again into February. These actions did not require the approval of Congress. It will now be up to the Biden administration to decide what to do next. 

Possible Actions by President-Elect Biden

The Biden administration has many options when it comes to what to do with student loans.

The first - and, probably the easiest - would be to continue to extend the student loan forbearance on federally-backed loans. These actions can be undertaken by Biden's Secretary of Education and will continue to not require the approval of Congress.

Some - including Senator Minority Leader Chuck Schumer (D-NY) and other progressives - have argued that Biden has the ability to unilaterally, via Executive Order, forgive certain levels of debt. Specifically, he has said that he believes Biden can issue an Executive Order to automatically forgive $50,000 in student loan debt. Of course, like most legal interpretations, this one is not universally held, and some believe that an act of Congress is required in order to forgive student debt on a permeant basis. Biden did not commit to this action, instead saying that he preferred a more targeted reduction of $10,000 and forgiveness for certain families who made less than $125,000 or attended other schools. He has also supported free college tuition for certain colleges and families. However, it does seem apparent that the Biden administration could stop collecting these loans or continue to extend forbearance.

Alternatively, the Biden administration could work with Congress on a long-term forgiveness package. However, this will unquestionably be the most difficult of all of these moves, as many Republican members of Congress have indicated that they will not support a massive loan forgiveness plan like this. 

It is clear that the area of student loans is the source of a great deal of controversy and economic pain. The Biden administration has many options, and they have committed to action when it comes to student loan reform. What sort of form that action will take remains to be seen.