Student Loan Debt to be Forgiven and Payment Pause to be Extended

The Biden Administration has announced an executive action to forgive $20,000 of student loan debt for Pell Grant recipients and $10,000 of student loan debt for borrowers who make up to $125,000 a year. Families making up to $250,000 a year will also be able to benefit from the loan forgiveness. 

The executive action also extends the pandemic pause on student loan payments through the end of the year. Loan payments were set to resume for millions of borrowers after August 31. Debt relief will not be treated as taxable income for federal income tax purposes. 

NAICU President Barbara K. Mistick issued a statement regarding the proposal. 

The loan forgiveness will apply to undergraduate, graduate or parent loans. For 8 million borrowers whose income information is already available to the Department of Education because of income based repayment plans, the forgiveness should happen automatically. For others the Department is in the process of creating a streamlined application form. Details on how to proceed for all borrowers will be available in the coming weeks.

While a number of democratic Members of Congress have called on the Administration to use executive action to forgive student loan debt, this announcement comes after much debate and advocacy largely led by Senate Majority Leader Charles Schumer (D-NY) and Senator Elizabeth Warren (D-MA) to forgive $50,000 of student loan debt for all borrowers. The desire to take such action began to brew in Congress with the introduction of the Student Loan Debt Relief Act in 2019. Since then, the proposal gained traction in policy circles and even President Biden adopted aspects of the proposal to forgive student loan debt on the 2020 campaign trail. 

The executive action outlines a three-step approach to address the student loan debt crisis. 

• Forgive $20,000 of student loan debt for Pell Grant recipients and $10,000 of student loan debt for borrowers who make up to $125,000 and for families making $250,000. 
• Create a new student loan repayment plan that allows borrowers with undergraduate loans to cap their monthly payments at five percent of their discretionary income and receive forgiveness after 10 years. Also, amends the Public Service Loan Forgiveness program to make it easier for borrowers to receive loan forgiveness. 
• Address college accountability by requiring the Department to publish an annual watch list of programs with the worst debt levels in the country and requires institutions with programs that top the list to develop improvement plans. This is in addition to efforts already underway to re-establish the enforcement unit in the Office of Federal Student Aid; the termination of recognition for the Accrediting Council for Independent Colleges and Schools (ACICS) that oversaw proprietary institutions; and issuing a Notice of Proposed Rulemaking regarding topics such as gainful employment, financial responsibility, and administrative capability.

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Emmanual Guillory