President Joe Biden proposes a student loan forgiveness program
March 29, 2023
College tuition debt restricts graduates’ abilities to immediately bring in substantial income when entering their post-college career. After years of study to earn a degree, students are left in deep financial holes, working to pay back the money they borrowed for their education. College tuition debt damages students’ goals and education paths: many college students are not able to finish college due to the cost, causing them to drop out while still having to pay off their original debt from their first semesters.
Biden’s presidential campaign promoted the relief of college fund debts. The proposal seemed timely as the pandemic temporarily delayed students from their repayments. Biden and other debt forgiveness activists saw the discrepancies in the current college tuition system. According to a Department of Education analysis, the typical undergraduate student that received loans now graduates with nearly $25,000 in debt.
As the cost of tuition has substantially increased over the past four years, the maximum Pell Grant value has held relatively constant causing a large disparity between what students have to pay and what the Pell Grants cover. Pell Grants is money given to students by the federal government that does not need to be repaid. While Biden has continuously extended the pause on student loan payments during his presidency, more radical action was needed to address the growing student debt issue.
While Biden has advocated for free community college and doubling the maximum Pell Grant, he started his financial policies a little less rigorously: Biden proposed a three-part plan.
First, Biden recognized that Pell Grant recipients have a harder time repaying their debt. Those who received Pell Grants would be given up to $20,000 if their loans are from the Department of Education. Those who did not receive Pell Grants could receive up to $10,000. These debt relief benefits would only be available to those with an individual income of less than $125,000 or $250,000 for married couples.
Who qualifies for Pell Grants? According to whitehouse.gov, “Federal Pell Grants usually are awarded only to undergraduate students who display exceptional financial need and have not earned a bachelor’s, graduate, or professional degree”. Almost all students that apply come from families with an income of $60,000 or less. Students apply through the Free Application for Free Student Aid (FAFSA). The maximum Federal Pell Grant award for July 2023 to June 2024 will be only $7,395. Multiple variables affect the grant’s value including the cost of the school and family contribution. With the United State’s average yearly tuition around $40,000, the maximum Pell Grant value only covers around 18.5% of this value. For these Pell Grant recipients, the other 81.5% of tuition will be covered largely by loans.
The second part of Biden’s proposal creates a more manageable student loan system by lowering monthly student debt repayments and granting certain borrowers forgiveness based on their profession or volunteer work. Currently, graduates pay 10% of their discretionary income towards repayment; however, under this plan, the Department of Education will lower this rate to only 5%, helping to relieve the financial burden on low-income recipients. Furthermore, a new rule will be proposed to provide extra forgiveness to those who have worked in the government, military, or at a nonprofit.
In the last part of the plan, the Department of Education will hold colleges accountable for keeping their prices reasonable.
While many saw the proposal as a major benefit, it received backlash. On September 29, 2022, six states, Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina, filed a lawsuit against the program. The states believed that the program exceeded the powers of the President as it was not approved by Congress. While the Secretary of Education can make changes to the federal student loan system during national emergencies, a power granted by the Heroes Act of 2003, the authority to enact the program was questioned as it did not seem within the modifications allowed in the act. The states also made the point that the country entered a national emergency over 2 years before due to Covid-19, so Biden was just using this as a way to pass his program.
The Supreme Court heard arguments on Biden v. Nebraska and U.S. Department of Education v. Brown on February 28th, 2023 regarding the legality of the case. The decision is estimated to be made this June. So far, the program has been strongly questioned due to the many factors that play a role in the program. Large-scale federal forgiveness has not been done before so there are many questions regarding the constitutionality of the Secretary of Education to forgive debt.