President Trump and Joe Biden disagree on how much of $1.5 trillion in federal student debt owed by 43 million Americans should be forgiven—and how to finance college going forward.
The Republican Trump administration has sought to limit opportunities for Americans to have their debt forgiven. Education Secretary Betsy DeVos has said that the government must address borrowers’ needs while guarding against taxpayer waste. But the administration has improved access to data showing how much students can expect to pay in tuition and how much they are likely to earn after graduation, treating higher education as a marketplace driven by consumer choice. Students and their families would continue to pay the cost of a college education, though low-income students have been given more flexibility on the use of so-called Pell Grants.
Mr. Biden, the Democratic challenger, proposes having the government forgive hundreds of billions of dollars in student debt owed by poor and middle-income households. He says that would help to reduce income and wealth inequality. And he says students from low and moderate-income households shouldn’t have to pay for a public college education.
Mr. Trump signed an executive action last year that directed his administration to publish, for the first time, detailed data on how much each college’s students earn after graduation, broken down by major. Previously the College Scorecard website created by the Obama administration only published schoolwide averages.
The Trump administration says the move will allow students to choose schools and fields of study more wisely and avoid excessive debt. “Student loan debt. I’m going to work to fix it,” Mr. Trump said as he signed the executive action in March 2019. “Because it’s outrageous what’s happening. You’re not given that fair start.”
The administration has tightened rules, known as “borrower defense to repayment,” that allow borrowers who attended for-profit colleges and public trade schools to have debt forgiven if they can prove a school defrauded them, such as through misleading advertisements.
Mr. Trump has also proposed modifying programs that link borrowers’ monthly payments to their incomes. He would have borrowers pay 12.5% of their discretionary income—defined as adjusted gross income minus 150 percent of the federal poverty level—for 15 years and then have any debt forgiven. Currently, borrowers who opt for income-driven repayment pay 10% of their income for up to 20 years—for undergraduate debt—and 25 years for graduate-school debt. Under Mr. Trump’s plan, some borrowers would have more debt forgiven and others less.
And Mr. Trump has used executive action to extend a provision under the stimulus legislation known as the Cares Act that permits every federal borrower to suspend payments, without any interest accruing, through Dec. 31.
Mr. Biden’s debt-forgiveness plan is more generous. He proposes canceling $10,000 of every federal borrower’s loan balance to help families during the coronavirus pandemic.
In addition, for households earning less than $125,000, he would wipe away undergraduate debt for tuition at public colleges and private colleges that predominantly serve minority students. Those families would still have to pay money borrowed to pay for living expenses, however. (His campaign hasn’t specified how a Biden administration would calculate the totals for each category.) He would also use the borrower defense law more aggressively to forgive debt incurred by borrowers lured by illegal recruiting tactics at for-profit colleges.
Mr. Biden would also sweeten the terms of the Public Service Loan Forgiveness program for workers employed by government agencies at all levels and many nonprofits. Those borrowers would have $10,000 a year forgiven for each of the first five years in their jobs. They would pay any remaining debt on an income-driven repayment plan for another five years before having any remaining balance forgiven, tax-free. Under existing law, borrowers make payments under income-based repayment for 10 years and then have any balance forgiven tax-free.
For debt that isn’t forgiven, Mr. Biden proposes slashing monthly payments. Individuals earning less than $25,000 a year and couples earning less than $50,000 would pay nothing toward their loans until their incomes rose above those levels. Other borrowers would pay 5% of their discretionary income a month, down from 10% currently.
“For too many, earning a degree or other credential after high school is unaffordable today,” the Biden campaign says on its website. “For others, their education saddles them with so much debt it prevents them from buying a home or saving for retirement.”
A Trump campaign spokeswoman said: “Joe Biden has proposed a socialist student debt plan that will burden all taxpayers.”
Paying for college
Mr. Trump has promoted vocational programs as an alternative to four-year degrees, earlier this year proposing a $900 million increase in funding for career and technical education. And he has told his administration to put in place rules designed to punish schools financially if too many of their students default on loans. The administration says that such rules, along with families’ greater access to earnings data, will put downward pressure on tuition.
Mr. Trump signed a law in 2017 that allowed students to use Pell Grants for summer sessions, in addition to the spring and fall. The grants of up to $6,345 a year help students from low- and moderate-income families pay tuition and living expenses.
Mr. Biden proposes making four years of public college tuition-free for students from households earning less than $125,000 a year. To help cover living expenses, Mr. Biden also wants to double the maximum yearly Pell Grant to more than $12,000. The Biden campaign says the combination of tuition-free college and bigger grants would make college entirely cost-free for a significant share of households.
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