Biden Announces Student Loan Forgiveness Plan
Student Loan Forgiveness
On Wednesday, August 24, President Joe Biden announced an unprecedented student loan forgiveness plan that would be implemented through executive action and provide up to $20,000 in federal student loan cancellation for up to 20 million borrowers. President Biden said he would cancel up to $10,000 in federal student loan debt for borrowers who earn less than $125,000 per year, or under $250,000 for married couples who file jointly. Individuals who receive Pell grants could obtain as much as $20,000 in loan forgiveness. The move was criticized by many conservatives but Biden defended the policy saying it is designed to help the neediest borrowers – the White House estimates that nearly 90 percent of relief will go to people earning less than $75,000 and that roughly 20 million borrowers could have their debt completely canceled. The debt forgiveness applies to loans that originated on or before June 30, which could offer relief to some current college students — if their household income was under $250,000 during the last federal student aid award year — as well as borrowers with much older debt.
The executive order could face legal opposition and on Wednesday, August 24, the Biden administration released a legal opinion asserting that the Higher Education Relief Opportunities for Students Act gives the education secretary the “authority to reduce or eliminate the obligation to repay the principal balance of federal student loan debt.” President Biden is also extending the pandemic-era pause on federal student loan payments through December 31 and proposed creating a new income-based repayment plan to lower monthly bills for undergraduate borrowers. This month, Congresswoman Virginia Foxx (NC) led a group of congressional Republicans in releasing an alternative to Biden’s blanket debt-forgiveness plans that would establish new borrowing limits, reduce interest and simplify repayment options while ending popular loan-cancellation programs. It also calls for an end to the suspension of federal student loan payments. Click here to access the White House fact sheet on the student debt relief.
Click here to read more about the Republican student debt forgiveness plan.
On Monday, August 22, Senator Rick Scott (FL) introduced the legislation Changing Our Learning, Loans, Endowments, and Graduation Expectations (COLLEGE) Act that aims to increase accountability among colleges by making schools responsible for paying back some of their students’ loans if they default. The legislation includes several other proposals such as requiring the Education Department to post “common sense” data for public colleges and universities such as 6-year graduation rates, cost to graduate, and job or advanced degree placement. It attempts to put higher education institutions on the hook for student debt by tying schools to the debt of their students. Under the bill, a school would be responsible for paying 1 percent of the loan balance of any students in default within the first three years when their loans have entered repayment. That rate jumps to 2 percent in year two and raises to 10 percent of the balance after a decade. Senator Scott hopes forcing universities to have accountability for student debt provides incentive to actually prepare students for careers. It also calls on schools to create new federal cost-match financial aid awards based on the size and growth of their endowment funds. It would require the Department of Education to collect and report a host of metrics on how schools and their students perform. Scott says that keeping track of this data would bolster accountability in higher education and ensure that college leaders are doing their jobs.
Click here to read more on the legislation.
Initial Jobless Claims
In the week ending August 20, the advance figure for seasonally adjusted initial claims was 243,000, a decrease of 2,000 from the previous week's revised level. The previous week's level was revised down by 5,000 from 250,000 to 245,000. The 4-week moving average was 247,000, an increase of 1,500 from the previous week's revised average. The previous week's average was revised down by 1,250 from 246,750 to 245,500. The advance seasonally adjusted insured unemployment rate was 1.0 percent for the week ending August 13, unchanged from the previous week's unrevised rate.
Click here to access the report.