How the Biden White House Manages Student Loan Payments

Sep 2, 2022 Others

In spite of the recent inflationary increases in the United States, the Biden White House has proposed that the government can eliminate the majority of student loan debt. The plan, however, raises serious constitutional questions, and it is inflationary. If implemented, the plan would erase $380 billion in federal student loan debt, costing taxpayers $250 billion. Although this money won’t directly impact the economy, it would increase income expectations.

Biden’s commitment to racial equity

The Biden administration has announced bold new investments that will lower college costs and increase retention of low-income students. In addition, Biden will commit additional funding streams at federal agencies to address equity and diversity. As a result, he has called for federal research grants with an endowment over $1 billion to form meaningful partnerships with HBCUs, and he has required such partnerships to include a minimum of 10% Black-owned firms as subcontractors.

The proposed legislation would also make community colleges free for up to two years and increase state funding to support apprenticeships and training programs. It would also provide free training for recent high school graduates and adults who need new skills and education to improve their current jobs. Biden’s proposed legislation would make these programs available to every student regardless of race or economic status, thereby promoting economic and racial equity.

Biden’s authority to cancel student loan debt

In recent days, Senator Elizabeth Warren has renewed her call to President Biden to use his authority to cancel student loan debt in spite of increasing inflation. A student loan debt cancellation would wipe out the burden of tens of millions of borrowers and increase Democratic Party’s chances of capturing a majority in November. As of now, the White House has already canceled debt for certain borrowers and those who entered public service. But does this action actually increase the chances of a Democratic victory in November?

The Biden Administration has acknowledged that it is considering a rushed restart of payments for federal student loans, but it has yet to announce an exact date. There have been mixed signals from Biden’s office about when he plans to announce the cancellation, but so far, he’s deferred the announcement until July or August. The next payday is Sept. 1, when repayment will resume. As of now, Biden’s authority to cancel student loan debt in spite of inflation has been extended five times during the public health crisis.

Impact of student loan payment pause on national debt

The Biden administration has been considering the impact of a student loan payment pause. could announce the cancellation of billions of dollars in debt, at the same time it extends the payment pause. That would create a massive mess for lenders and borrowers alike. While the pause has been extended three times, this latest extension was only made through May 1. Nevertheless, it is clear that a student loan payment pause could have a profound effect on the national debt.

The paused payments will contribute to public service loan forgiveness and the income-driven repayment plan. The pause won’t hurt the economy, but it will hurt borrowers’ lives. It is also unfair to push low-income people, women and Black and brown borrowers into financial hardship. These groups suffer the highest rate of delinquency and default than other demographics. If the pause is ended, borrowers will be forced to choose between paying student loan debt and basic necessities.

Impact of student loan cancellation on racial wealth disparities

There is considerable evidence to suggest that a progressive policy of student loan cancellation reduces racial wealth disparities. However, the effects of loan reductions are greatest among households earning lower incomes. For example, eliminating student debt for low-income households reduces the black-white wealth gap by nearly three-quarters and for those making less than $25k, the gap decreases by more than half.

A recent report commissioned by the National Consumer Law Center and the Center for Law and Social Policy highlights the disproportionate impact of student debt on Black borrowers. It found that only 32 people in the United States had a student loan balance cancelled. But there are many other ways to reduce this disparity. Creating a government program to eliminate student debt has multiple benefits, including reducing racial wealth disparities.

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