43.5 million Americans currently have some form of federal or private student loan debt. As of recent reports, the total student loan debt in the United States has amounted to $1.766 trillion. This makes the average debt per borrower around $37,000 for federal student loans and $55,000 for private loans. These statistics are even worse for minorities. Black graduates owe, on average, $25,000 more than White graduates. More specifically, Black women have the largest amount of student loan debt compared to any other demographic.Â
Throughout contemporary American history, legislation on student loans has been subpar at best. Though many policymakers agree that rising tuition costs along with the increasing amount of student loan debt are problems that deserve addressing, there is much debate around whether student loan debt should be universally eliminated or targeted only to specific demographics. In this article, I will explain everything you need to know about the current legislative debate around student loan forgiveness.
What has the Biden-Harris Administration Done for Student Loans?
Since the start of their administration, Joe Biden and Kamala Harris have spoken about eliminating student loan debt completely. A reasonable person may think: Well, they’ve been in power for three years; why has so little been done? That is a great question, reader, and one that will be answered in the What Happened in the Supreme Court and Why? section. For now, I will break down some of their proposed plans for reducing student loan debt.
The administration drafted a revision to the income-driven repayment plan, which would make its impact more far-reaching. This new plan (SAVE) includes the following conditions:
- Borrowers will pay no more than 5% (previously 10%) of their discretionary income* a month on undergraduate loans.
- Raise the threshold for non-discretionary income, guaranteeing that no borrower making less than (approximately) $15/hour will have to pay monthly payments.
- Eliminate the remainder of loans after 10 years of payments (previously 20) for borrowers who owe less than $12,000.
- Cover the borrower’s unpaid monthly interest, ensuring that their balance will not grow as long as they continue to make their monthly payments.
*discretionary income: the extra money you have after paying for basic necessities (taxes, bills, food, rent, etc)
The Biden-Harris administration is also trying to increase the scope of the Public Service Loan Forgiveness Plan that was established in 2007. This is a program that will cancel all student loan debt for individuals who have worked for the government, the military, or any qualifying non-profit for 10 years.
Finally, the Biden-Harris administration drafted their own student loan forgiveness plan, which has been the most controversial so far. It has been brought to multiple federal courts and has yet to be legally approved. The conditions of this plan include the following:
- For individuals: your annual income must fall below $125,000 to be eligible
- For married couples: your annual combined income must fall below $250,000 to be eligible
- Pell Grant* recipients: the plan will eliminate up to $20,000 of your student loan debt
- Non-Pell Grant recipients: the plan will eliminate up to $10,000 of your student loan debt
- “Up to” just means that the total amount of money you receive will be capped at the amount of your debt if it is lower than what is offered
- I.e. if you only have $6,000 of debt, you will only receive $6,000 of relief rather than $10,000 or $20,000
*Pell Grant: money awarded only to students who display exceptional financial need.
What happened in the Supreme Court and Why?
As I said before, this plan has been so controversial that it was eventually brought to the Supreme Court. The Supreme Court ultimately decided not to side in favor of the administration and struck down the student loan forgiveness plan. Many of you may have seen this headline in the news, but you may not know exactly how it unfolded.
The program was originally on hold because it was being fought in federal courts in Missouri and Texas. Missouri argued that if the program gets approved, it could cost MOHELA, a federally-owned loan service, $44 million per year. This loss would limit their ability to contribute funds to Missouri’s higher education programs. Most of the states and companies that tried to fight the plan in court had a similar argument: the approval of the plan would cause them to lose money. In many of the cases, the courts ruled in favor of the states. The Biden-Harris administration appealed this all the way up to the Supreme Court.
The main argument used by the states was the HEROES Act. In short, this law was made after the 2001 terrorist attacks (and was later expanded during COVID) with the purpose of giving the secretary of education the power to “waive or modify any statutory or regulatory provision” to protect borrowers (read more about the HEROES Act here). Chief Justice Roberts, who wrote the majority opinion, wrote that “modify” does not mean completely transform. The Biden-Harris administration argued the complete opposite, claiming that the HEROES Act gives them explicit authority to pass the plan.
In the end, the Biden-Harris administration lost the battle in a 6-3 decision. Elena Kagan, Sonia Sotomayor, and Ketanji Brown Jackson voted in favor of the administration. John Roberts, Clarence Thomas, Samuel Alito, Neil. Gorsuch, Brett Kavanaugh, and Amy Coney Barrett voted against the administration.
Is Anything Still Being Done to Tackle Student Loans?
The Biden-Harris administration has made it clear that they will not give up on their student loan plans. As of October 4, 2023, the Biden-Harris administration approved an additional $9 billion of debt relief for 125,000 Americans. More specifically, this includes:
- $5.2 billion in additional debt relief for 53,000 borrowers under the Public Service Loan Forgiveness program.
- $2.8 billion in new debt relief for 51,000 borrowers through changes to the income-driven repayment plan.
- $1.2 billion for 22,000 borrowers who have a disability and have been identified and approved for discharge.
So many people are struggling to pay back their debts, and, at the end of the day, the future of student loan forgiveness is in the hands of our policymakers. Here’s my suggestion: vote, vote, then vote again. Encourage your friends and family to vote. Research the people who are running for office and use your voice. Our politicians are only as strong as the people who vote for them, so use your strength to bring change to you and your community.