Yahoo Finance What to expect from the early Biden administration on student loans
With Democrats holding a majority in the House and Senate, one expert believes the Biden administration to take bold action on the nearly $1.7 trillion in student loan debt held by roughly 43 million Americans.
“There are really three buckets of action we should expect,” Isaac Boltansky, director of policy research at Compass Point Research & Trading, told Yahoo Finance Live.
Boltansky expects the Biden administration to push for raising tuition funding, amend bankruptcy laws, and offer a low level of student loan cancellation through legislation passed in Congress.
From Tuition relief to debt forgiveness
President-elect Joe Biden recently said that he wasn’t intending to cancel $50,000 in student loan debt through executive order, a move repeatedly urged by many of his Democratic colleagues. Consequently, Boltansky’s predictions are based on what could be done through legislation.
The first, he said, “is a real, pronounced push to increase tuition relief for certain borrowers.”
Biden promised to double the maximum value of the federal Pell Grant, which is the largest source of grants for low- and middle-income families to afford a college education.
The second move would be that “they’re gonna revisit the dischargeability of student loan debt” in bankruptcy, Boltansky said.
Noting the strict laws in place that present huge hurdles for borrowers who seek a bankruptcy discharge, House Judiciary Committee Chairman Jerry Nadler (D-NY) and Senator Elizabeth Warren (D-MA) recently introduced the ‘Consumer Bankruptcy Reform Act of 2020’ which proposes make the process easier for student debtors by amending the bankruptcy code and creating a new chapter for personal bankruptcy.
If the bill were to pass, both private and federal student loans would be eligible for discharge through bankruptcy, just like credit card debt. Boltansky added that it would be “intriguing” for a Biden administration to consider such a proposal, given his history with the bill when he was in the Senate.
And lastly, while Biden has said he won’t do it via executive action, Boltansky expects some cancellation of student debt through legislation.
“I don’t think that it’s going to be a huge number because of the budgetary realities around it,” he said, but “I do think we can see a bill where we have [$5,000 to] $10,000 in cancellation for federal student loans.”
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Aarthi is a reporter for Yahoo Finance. She can be reached at aarthi@yahoofinance.com. Follow her on Twitter @aarthiswami.
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