Biden to Announce Extension of Student Loan Forbearance

Following through on campaign promises to help ease the burden of student debt, President-elect Joe Biden plans to sign an executive order on Jan. 20 extending federal student loan forbearance past Jan. 31, when it was set to expire. That’s according to a memo from Biden’s chief of staff, Ron Klain, obtained by The New York Times. Here is how the forbearance plan will work, along with a round-up of the incoming president’s other higher-ed proposals, which his campaign website refers to as “The Biden Plan for Education Beyond High School.” 

How Student Loan Forbearance Will Work

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), passed by Congress in March 2020 provided for a suspension of loan payments on Education Department-held federal student loans through Sept. 30, 2020. (That applies to most federal student loans, with the exception of certain FFEL Program and HEAL loans that are held by commercial lenders and some Perkins Loans that are held by the colleges and universities themselves.)

The deadline was subsequently extended by the Trump administration to Dec. 31, 2020, and then to Jan. 31, 2021. Had the January deadline remained in place, payments would have become due starting on Feb. 22, 2021.

While the Biden administration has committed to extending that deadline, it has not announced how long the special forbearance program will continue.

Biden’s Other Student Debt Proposals

The extension of student loan forbearance is the first, but unlikely to be the last, initiative by the incoming administration to address the cost of higher education and the availability of financial aid to help pay for it. The Biden campaign website lists 10 major initiatives, some of which will require the approval of Congress.

1. “Make public colleges and universities tuition-free for all families with incomes below $125,000. Biden credits this proposal to Sen. Bernie Sanders, who, with Rep. Pramila Jayapal, introduced the College for All Act in 2017. Biden’s plan would also make up to two years of community college tuition-free, apparently regardless of income.

2. “Target additional financial support to low-income and middle-class individuals.” Biden proposes to double the maximum value of Pell Grants and significantly increase the number of Americans who qualify for them. Unlike student loans, Pell Grants never need to be repaid, except in rare instances. The current maximum Pell Grant is $6,345 per school year. Biden’s plan would also make Dreamers eligible for financial aid, if they meet other requirements for that aid, and restore financial aid eligibility to people who were formerly incarcerated. 

3. “More than halve payments on undergraduate federal student loans by simplifying and increasing the generosity of today’s income-based repayment program.” Borrowers who make $25,000 or less a year wouldn’t have to make payments on their undergraduate federal student loans, and those loans wouldn’t accrue interest. Others would pay 5% of their discretionary income over $25,000 toward their loans. After 20 years of regular payments, the remaining balance on the loan would be forgiven. Biden’s plan would also change the tax code to make debt that’s forgiven through an income-based repayment plan nontaxable.

4. “Make loan forgiveness work for public servants.” Biden proposes to revamp the Public Service Loan Forgiveness Program, launched in 2007, which has failed to deliver relief for many applicants. He would also create a new program to provide $10,000 of undergraduate or graduate student debt relief for every year of national or community service the applicant performs, up to five years.

5. “Create a ‘Title I for postsecondary education’ to help students at under-resourced four-year schools complete their degrees.” This initiative would provide federal grant money to help support schools that serve a large population of Pell Grant–eligible students. 

6. “Create seamless pathways between high school, job training, community college, and four-year programs to help students get their degrees and credentials faster.” Biden’s plan would provide money to states for programs that, for example, better align high school, community college, and four-year college courses or provide college credits for on-the-job training and internships.

7. “Prioritize the use of work-study funds for job-related and public service roles.” The Biden plan would refocus federal work-study programs, so that students would develop career-related skills or perform a public service by mentoring K–12 students.

8. “Stop for-profit education programs from profiteering off of students.” This initiative would, for example, require for-profit schools to “prove their value to the U.S. Department of Education” before they’d be eligible for federal aid. Biden would also restore the former borrower defense to repayment rules, which made it possible for students who were deceived by for-profit colleges to have their loan debt forgiven.

9. “Crack down on private lenders profiteering off of students and allow individuals holding private loans to discharge them in bankruptcy.” At present, private student loan debt is one of the few types of debt that generally cannot be discharged in bankruptcy. The Biden plan would change that.

10. “Support and protect post-9/11 GI benefits for veterans and qualified family members.” Biden’s plan would tighten rules to protect veterans and their family members from predatory lenders and schools.

Biden’s Other Higher Education Proposals

President-elect Biden’s other proposals for higher education focus primarily on two areas: (1) community colleges and workforce training programs and (2) minority serving institutions (MSIs). Some specifics: 

Community College and Workforce Training Programs

Biden’s plan would pay for up to two years of tuition at community colleges as well as make funds available to cover the cost of training programs that “have a track record of participants completing their programs and securing good jobs.” In addition to recent high school graduates, these programs would be open to older adults who didn’t go beyond high school or need to learn new skills.

The plan would make $50 billion available for workforce training programs, which it broadly defines as “partnerships between community colleges, businesses, unions, state, local, and tribal governments, universities, and high schools to identify in-demand knowledge and skills in a community and develop or modernize training programs.” The goal of those programs would be to provide students with “a relevant, high-demand industry-recognized credential.”

The plan would also invest $8 billion in community colleges to improve their facilities and upgrade their technology.

Minority Serving Institutions (MSIs)

Biden’s plan would provide $18 billion in grants to minority serving institutions (MSIs), including historically Black colleges and universities (HBCUs), tribal colleges and universities (TCUs), Hispanic-serving institutions (HSIs), and Asian American– and Native American Pacific Islander–serving institutions (AANAPISIs).

It would also provide additional funds to private, nonprofit MSIs, so that they are not put at a competitive disadvantage with four-year public colleges and universities once those become tuition-free for many families under another Biden initiative (see number one above).

 On top of that, Biden’s plan would make further investments in MSIs, including:

• $10 billion to create at least 200 new “centers of excellence” to “serve as research incubators and connect students underrepresented in fields critical to our nation’s future”
• $20 billion to upgrade and modernize their research and lab facilities
• $10 billion to fund programs to increase the enrollment, retention, completion, and employment rates of MSI students

More details on these and other proposals are available on the Biden campaign website.