Over the past few decades, student loan debt has been rising at an alarming rate. Today, the average college student has $25,000 in student loan debt. Since the 1980s, tuition at four-year colleges has skyrocketed, while Pell Grant relief from the federal government remains stagnant. It is rare that student debt borrowers graduate college with the ability to pay off that debt, and as many as one third of student borrowers fail to even graduate due to the financial burden of college tuition. On August 24th, President Biden followed through on his 2020 campaign promise to release a comprehensive plan to relieve student loan borrowers of some or all of their debt. The plan will strengthen and support the middle class.
The Nuts and Bolts
The online student loan debt relief application is simple, only requiring the applicant’s name, contact information, and Social Security Number. The application is open until December 31, 2022. The government estimates that about 40 million Americans will be eligible for student loan debt relief, and most people will receive it in four to six weeks after their application is processed. As a result, applicants are encouraged to submit applications by mid-November to be processed before repayments begin in January. However, about 8 million debt holders will get automatic relief from recent FAFSA documents or a certified income-driven payment plan (IDP). Between 1 and 5 million applicants will need to verify their income information. Let’s break it down:
Reasons for Relief:
FAFSA: FAFSA is the Free Application for Federal Student Aid, which students fill out when applying for financial aid.
IDP: According to the Department of Education (ED), an IDP “sets your monthly student loan payment at an amount that is intended to be affordable based on your income and family size.”
Verification: You will hear from the ED if you are a dependent, and about 5% of applicants will need to verify information as a check on potential applicant fraud.
Eligibility:
Former students whose adjusted growth income was under $125,000.
Former students who file taxes with a partner whose cumulative AGI was under $250,000.
The ED will forgive Pell Grant borrowers $20,000 and non-Pell Grant borrowers $10,000.
Types of loans accepted:
Federal loans, also known as direct loans (All loans, as of 2010, are direct loans).
Loans from the Federal Family Education Loan (FFEL) that were transferred to the ED (some remain with banks).
Parent PLUS loans that helped a student go to college.
The Backlash
The student loan debt relief plan has received some backlash from disgruntled Americans. Senate Minority Leader Kevin McCarthy and his Republican colleagues are criticizing Biden for adding to the federal debt, pointing out that the relief will cost the government 400 billion dollars over the next 30 years. McCarthy announced that he will attempt to eliminate the program if the Republicans win the senate majority in the upcoming midterms.
Biden responded to anti-relief arguments by pointing out that proposed Republican tax cuts would increase the federal debt by even more — three trillion dollars. Debt relief, Biden maintains, allows middle-class families to spend more money, advertently bolstering the American economy.
The Lawsuits
Both organizations and individuals are taking Biden’s program to court. The Wisconsin Brown County Taxpayers Association is challenging the debt relief in the Supreme Court, arguing that the program would cost taxpayers one trillion dollars and that Congress must pass federal spending. The Association addressed its emergency application to Justice Amy Coney Barrett, who can come to a verdict herself or consult the other justices.
Additionally, lawyers in six Republican states have sued President Biden to prevent the implementation of the student debt relief program. Biden responded to litigation that could potentially halt his plan, saying, “Our legal judgment is that it won’t, but they are trying to stop it.”
The case against student debt relief is in full force. On October 21, the Eighth Circuit Court of Appeals temporarily blocked Biden’s relief plan to consider the Republican lawyers’ argument. White House Press Secretary Karine Jean-Pierre explained that “[the Biden Administration] will continue to move full speed ahead in our preparations in compliance with this order,” and encouraged debt borrowers to continue applying for debt relief. Democratic officials and debt relief applicants are concerned because the lawsuit must be dropped or lost before mid-November for borrowers to avoid the upcoming debt payment in January.
What’s Next?
The future of Biden’s student loan debt relief program is uncertain, and there is a clear partisan divide in support for the plan. Americans crushed with student loan debt are desperate for government relief but will have to wait for courts to decide if the program is legal. Time is of the essence for those supporting the program, while dragging out the court case benefits people concerned about the federal debt. Regardless of your stance on loan relief, implementing or removing the program will seriously impact government spending priorities and the health of the middle class.
Resources
Below are resources for those who would like to apply for student loan debt relief: