The Ever-Changing Student Loan Landscape

| January 25, 2021

Based on quick action taken to extend the pause on student loan payments on his first day in office, President Joe Biden made it clear that student loans are on his radar. Speculation remains about what education and student loan-related changes will be proposed by the Biden administration and passed through Congress. If his efforts are successful, the 2021 student loan landscape will be changing.

Return to Repayment Postponed Again

Starting February 1, 2021, 37 million borrowers were set to have their first federal student loan payments due since March 27, 2020. In one of his first actions after he took office on January 20, 2021, President Joe Biden issued an executive order to direct the U.S. Department of Education to use a forbearance extension to continue to pause federal student loan payments through September 30, 2021.

With so many borrowers now on the same repayment schedule, experts are concerned education loan servicers will be inundated with requests for assistance by borrowers who apply for relief—hardship forbearances, unemployment deferment, or enrollment in income-driven repayment plans—when payments finally resume. But again, with the latest executive order, that concern has been pushed off until September 30, 2021.

Student Loans Under a Biden Administration

What Joe Biden proposed during his campaign and what he succeeds in getting through Congress may be two different things, but here are some proposals we can expect to see in 2021.

  • Cancellation of Up to $10,000 per Borrower
    While Democrats proposed this as part of the CARES Act, it was not included, but it may be included as part of a future stimulus package.
  • Private Student Loan Discharge
    The Obama-Biden administration passed legislation to allow the discharge of private student loans in bankruptcy, and Biden is expected to take this up again in an attempt to make this
    path an easier one for borrowers in distress.
  • Changes to Income-Driven Repayment
    Biden would limit monthly payments to 5% of income over $25,000 rather than the current 10%–20% of income over the federal poverty line for borrowers in income-driven repayment (IDR)
    plans. Individuals making less than $25,000 would have no interest accrual and no monthly payments required. Balances remaining after 20 years of payments would be forgiven with no
    income tax due on the forgiveness. Plus, new student loans would automatically be enrolled in IDR with an option to decline the plan.
  • Changes to Public Service Loan Forgiveness
    Instead of unlimited forgiveness allowed under current rules, there would be $10,000 forgiven, tax-free, for every year of qualifying service, including prior service up to five years
    for a maximum total of $50,000.
  • Tuition-Free Public Colleges and Universities
    Biden would try to reduce the need for student debt, making public colleges and universities, as well as private historically black colleges and universities and minority-serving
    institutions, tuition-free to all families with incomes below $125,000. Students and families would still be responsible for room, board, and other expenses unrelated to tuition.

How You Can Help

With students set to face repayment again—and the five-year extension of tax-free student loan benefits—2021 is a perfect time for employers to provide a valuable benefit to their
employees. The changing repayment landscape can be confusing, but you can help employees navigate repayment, and help them pay down their loans faster, by offering student loan

To learn more about student loan benefits, contact BenefitEd.