On a call with reporters Tuesday, Brian Deese, the incoming director of the National Economic Council, spoke of the struggles of many households, particularly Black and Latino families, to pay basic expenses and said that student loan debt is often weighed against the costs of food and housing.
“In this moment of economic hardship, we want to reduce the burden of these financial trade-offs,” Deese said.
To that end, consumer advocates and liberal lawmakers had hoped Biden would use executive authority to cancel some portion of the $1.6 trillion in outstanding student debt. Deese said the administration supports forgiving up to $10,000 in debt per person through congressional action.
The Democratic-controlled House passed legislation last year affording cancellation to borrowers through a stimulus package shelved by Senate Majority Leader Mitch McConnell (R-Ky.).
Sen. Charles E. Schumer (D-N.Y.), the incoming majority leader, has been unwavering in his support for debt cancellation and could clear a path forward. That would be a formidable challenge given the slim majority Democrats will have in the Senate, but advocates say it’s not impossible.
In the meantime, about 41 million Americans will continue to benefit from the federal government’s pause of student loan payments.
If the Education Department approves Biden’s request, all borrowers with student loans held by the Education Department will see their payments automatically suspended until Sept. 30 without penalty or accrual of interest. Each month until then will still count toward loan forgiveness for borrowers in public-service jobs. It will also count toward student loan rehabilitation, a federal program that erases a default from a person’s credit report after nine consecutive payments.
Collections on defaulted, federally held loans are still halted, and any borrower with defaulted federal loans whose wages are being garnished will receive a refund. However, the directive still excludes more than 7 million borrowers whose federal loans are held by private companies or universities.
The Trump administration in March gave borrowers the option of postponing payments for at least 60 days as the coronavirus pandemic battered the economy. Congress later codified the reprieve in the stimulus package, known as the Cares Act, and made it automatic. The Trump administration twice extended the moratorium before leaving office.
Laura Meckler contributed to this report.