Here’s how your student loans could change under Biden’s presidency
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Since President Biden’s inauguration, his administration has forgiven billions of dollars in student loan debt by overhauling several federal programs. While widespread student loan forgiveness doesn’t look likely, some of Biden’s outstanding proposals include increasing the value of Pell Grants, providing more funding to historically Black colleges and universities and adding a new income-driven repayment plan.
Here’s who should be paying attention to the remaining proposed plans and what it could mean for your student loan debt.
New income-driven repayment plan
If you currently have or are expecting to have undergraduate student loan debt, the proposals about a new income-driven repayment plan made by the Biden team could impact you. Referred to as the Expanded Income-Contingent Repayment (EICR) plan, here’s how the plan would work:
- Borrowers are charged a marginal rate: 0 percent on income below 200 percent of the federal poverty limit, 5 percent on income between 200 and 300 percent of the federal poverty limit and 10 percent on income above 300 percent of the federal poverty limit.
- After 20 years of responsible EICR payments, the remaining balance would be forgiven.
- Borrowers would not have to pay interest when the calculated monthly EICR payment totals $0.
- Only loans for undergraduate study would qualify.
Currently, income-driven repayment plans are based on 10 to 20 percent of your discretionary income, with forgiveness after 20 to 25 years.
Increased program funding
In April 2021, the proposed Build Back Better Act opened the door for higher education reform, including free or reduced college tuition. However, First Lady Jill Biden recently confirmed that free community college is off the table if the bill does pass.
Here are Biden’s proposals that are still on the table:
- Investing in historically Black colleges and universities (HBCUs), tribal college and universities (TCUs) and minority-serving institutions (MSIs) to provide more financial aid to low-income students and improve the research facilities at these schools.
- Investing in degree-completion programs and low-cost job training at community colleges and universities to better prepare students for the job force after graduation.
While Biden campaigned on broad student loan forgiveness, it’s unlikely that we’ll see mass student loan forgiveness in the near future. Funding for widespread forgiveness was not included in the 2022 budget proposal, and Biden has expressed doubts in his ability to forgive debt through executive action.
With that said, progressive Democrats have continued to advocate for loan forgiveness, and Biden could continue to face pressure from his party to consider student loan forgiveness options. Major student loan forgiveness is likely off the table, but we could see reforms for student loan discharge through bankruptcy, borrower defense to repayment or Public Service Loan Forgiveness.
Pell Grant increase
Biden has proposed a few increases in Education Department funding for federal Pell Grants. His White House budget includes a request to increase the maximum value by $400, and the Build Back Better Act proposes an additional $550 bump for the 2022-23 school year.
He also plans on making the grants available to DACA recipients, who currently don’t have access to federal aid.
The bottom line
Your student loan debt has the potential to look different with Biden as president. However, keep in mind that these are just proposals — they are not guaranteed. For now, you can take advantage of the relief measures that Biden has enacted, like the Public Service Loan Forgiveness (PSLF) overhaul and the federal forbearance period, which Biden has extended through May 2022.