US ECONOMY
Third stimulus relief bill: will there be student loan forgiveness?
Following his inauguration ceremony, new US president Joe Biden was quickly back at work, and millions of students, past and present, are keen to know his plans.
Wednesday 20 January 2021 was a momentous day for so many reasons as Joe Biden and Kamala Harris were sworn into office. Following the formalities of the event, and the obligatory celebrations, the 46th US president and his administration were quickly into action, making true on the promises made to improve the lives of the majority of citizens and begin to repair some of the damage down at home and abroad over the last four years.
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Student loan forgiveness
According to officials in the new administration, Biden remains steadfast with his plan to forgive $10,000 in debt for each borrowing student. That said, this was not specifically stated in his new stimulus plan, which is costed at $1.9 trillion.
There are around 42 million Americans with federal student loan debt and payment forbearance has been extended until September 2021, following on from the provisions of the CARES Act introduced last March as the coronavirus pandemic began to take hold in the US.
And after the inauguration, Biden headed straight to the Oval Office to sign some already planned executive orders. As part of that immediate action he also advised the US Education Department to maintain the aforementioned suspension of payments and interest accrued until at least 1 October 2021. Any loans that have defaulted will also be left alone for the time being. This comes as a massive relief to many, especially given that around a fifth of take-home pay is reported to be the average amount put by American borrowers towards student debt.
Before reaching the highest office in the land, Biden was a clear advocate for wiping ‘at least’ $10,000 of federal student loans, something that had been proposed by fellow-Democrat, Senator Warren. He pointed to the fact that it was young people who were hit hardest in the financial crisis of 2008 and that he didn’t want them to bear the brunt of another one. It’s worth noting that both Warren, along with colleague Chuck Schumer, have been pushing for anything up to $50,000 to be written off.
What is clear is that Biden has a desire for this type of legislation to be agreed upon through Congress rather than by a potentially problematic executive order.
A full list of Biden’s covid-19 plan
As well as seeking a $1.9 trillion spending proposal aimed at accelerating the distribution of coronavirus vaccines while providing economic relief to millions of Americans hurt by the pandemic, other measures are also being taken.
- Impose a mask-wearing requirement on all federal property, planes and buses.
- Extend relief on federal student loan payments and extend an eviction moratorium.
- Sign an executive order that helps schools and businesses reopen safely, expands coronavirus testing and establishes clearer public health standards.
- Direct federal agencies to take immediate action to deliver economic relief to working families bearing the brunt of the crisis, including by extending a moratorium on evictions.
- Return the United States to the World Health Organization. Trump withdrew from the agency, saying it failed to properly oversee the COVID-19 pandemic.
All of this has become particular relevant as we find out that the Trump administration did not leave a comprehensive plan in place.
Does student debt matter?
As well as the stress and hardship that lingering student debt can have on the individual and their family, it has also been shown to have a detrimental effect on the economy.
It has been linked to a drop in consumer spending as well as a reduction in home ownership and the creation of small businesses. There is also a clear correlation between student debt and the racial wealth gap.