Op-Ed: Canceling Biden’s debt will help millions, but it won’t end the student loan crisis

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In a remarkable move, the Biden administration announced on Wednesday that it would cancel millions of dollars in federal student loans, giving struggling student borrowers some concrete good news. This mini debt jubilee, along with a further extension of repayment obligations and a new income-driven repayment plan, is a crucial step in addressing the slow-running student debt crisis.

The new administration policy will erase up to $10,000 in federal student debt for individual borrowers earning less than $125,000 per year (or $250,000 per household) and up to an additional $10,000 for borrowers who received Pell grants as than undergraduate students. And the payment pause, initiated under the previous administration, will now expire at the end of the year.

The White House estimates that this policy will completely erase the debt of 20 million borrowers. These low balance borrowers are more likely to have a default or defaultthis new policy will therefore greatly help those most likely to encounter difficulties when payment obligations resume on January 1. Student Loan Law Initiative analysis estimates that up to 41 million of the 45 million student borrowers will benefit from some form of forgiveness; the remaining 4 million are not eligible based on income.

Cancellation will also help narrow the wealth gap between black and white borrowers, as Black borrowers are more likely to have to borrow. The SLLI analysis also estimates that this new policy will erase the debts of 3.8 million black borrowers, or nearly half of all black people with federal student loan debt.

Important details remain unclear. The administration also announced that it will be able to automatically process cancellation for about 8 million borrowers for whom it has recent income data. Unfortunately, the remaining 33 million eligible borrowers will have to go through an application process to be revealed to prove their income eligibility. This virtually guarantees that when student loan repayments resume in January, some borrowers will start repaying on the bad balance.

There’s a lot to celebrate, and then there’s the bigger picture, which remains bleak. This massive cancellation – politically unimaginable just five years ago – is not the end of the student loan crisis. Congressional action is still needed to reform the way the government funds higher education. Canceling payment obligations for those with balances today does little for those who have started borrowing to start school now or will do so in the future. As one first-year law student asked, “What about us? »

The cost of higher education remains an obstacle for millions of people. College costs money and someone has to pay. But if federal loans — meant to make college possible — are deterring future students from going to college, then they’re not the right tools for the job.

States can and the federal government must create new programs and strategies to reduce the share of costs borne by students. New Mexico, for example, is establishing a new free education policy. Left unaddressed, the rising cost of a college education and the need to borrow will continue to perpetuate inequality, contribute to the racial wealth gap and undermine the promise of education.

Current borrower repayment assistance programs remain complex and difficult to use. Conspicuously absent from the announcement of the cancellation of the debt, the mention of the impending expiration of waiver it made it easier for borrowers to take advantage of the civil service loan forgiveness program; this derogation expires at the end of October.

Some have criticized student loan forgiveness as unfair because it only affects those with current balances, not those who have already repaid. But that makes no sense. It’s like complaining about having been able to benefit from a government program that did not exist before.

The administration’s plan could lead to a legal challenge, challenging the president’s power to write off debts en masse. There may be legal arguments to be made – we think they are thin – but the suspension of payment obligations in place since the start of the COVID-19 pandemic rested on the same legal authority, so a successful challenge could have disastrous consequences for borrowers who have enjoyed a respite from monthly payments and accrued interest.

The pandemic has only heightened the challenges posed by student debt, and cancellation is a momentous step in reducing the immediate pain felt by millions of Americans. Yet, at the same time, this decision constitutes a tacit recognition of the need for broader and permanent reform of the financing of higher education. There is still a lot to do.

Jonathan D. Glater is a professor at UC Berkeley School of Law. Dalié Jiménez is a professor at UC Irvine School of Law. They are co-founders of the Student Loan Law Initiative.

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