Biden Administration Still Grappling With Student Loan Debt Relief Amid Legal Hurdles

The Biden administration is being scrutinized over the potential impact of its student loan debt relief on Black borrowers.

President Joe Biden’s campaign promise of canceling student loan debt outright was thwarted by a June 2023 Supreme Court ruling, and while the administration has been successful at finding alternative routes, the 3.7 million student loan borrowers who have had their student loans forgiven represent only a small fraction of the 44.5 million who currently hold debt.

According to the White House, the administration is still trying to find a way to cancel student loan debt. But there has been resistance from various circles, sparking a debate over which demographics would benefit most from the cancellation.

In 2022, a CNBC article challenged the notion that the administration’s original promise of $10,000 in debt relief would adequately address the needs of Black borrowers. Andre Perry, a scholar-in-residence at American University, stressed to CNBC the necessity of reevaluating the connection between education and wealth to effectively address the specific debt burdens faced by Black borrowers.

“People believe that education predicts for wealth, when it’s actually wealth that predicts for education,” Perry said. “We’re still dealing with the symptoms of discrimination instead of the root causes, and at some point we will have to eliminate it at a structural level for Black borrowers to even start building wealth.”

In December 2023, Education Data analyzed statistics of student loan debt by race and ethnicity. While the report showed differing opinions among legislators regarding the impact of eliminating student loan debt on the wealth gap, the research findings were unequivocal. According to the research, forgiveness of student loans for Black borrowers would lead to a 40% increase in wealth among Black individuals with outstanding student loans. Surveys conducted by The Education Trust in 2021 revealed that Black borrowers on Income-Driven Repayment (IDR) plans perceived these plans as a perpetual burden.

Despite the Biden administration’s utilization of IDR plans to navigate expected challenges to student loan forgiveness efforts, borrowers interviewed by The Education Trust described such an approach as a “trap” or a “scam” due to the insurmountable nature of their ever-growing balances.

The report noted that the majority of respondents enrolled in IDR plans estimated it would take them 16 years or more to repay their debt, with many expressing doubts about their ability to ever fully repay it. That timeline significantly exceeds the standard student loan repayment period of 10 years. Many interviewees expressed concern over making seemingly endless minimum payments that fail to cover principal and interest, resulting in their overall balance continuing to grow.

It appears that the Biden administration was cognizant of the limitations of PSLF (Public Service Loan Forgiveness) and IDR plans, greenlighting $1.7 billion in student loan forgiveness to those enrolled in those plans who had paid for 20 years but had yet to receive any student loan forgiveness. Overall, the administration has forgiven $56.7 billion covering 793,400 PSLF borrowers and $45.7 billion in IDR loans incurred by 930,500 borrowers.

The administration is trying to establish a new process for student debt relief through the Higher Education Act (HEA). That process is expected to be less broad than previous attempts by the administration, in part to avoid legal challenges to the bill. According to The Hill, the focus has been placed on borrowers who entered repayment decades ago; borrowers whose balances are currently greater than the amount they originally owed; borrowers who are eligible for relief under other programs but failed to apply; borrowers under financial hardship; and borrowers who were in programs that didn’t give them financial value. This program was announced in September 2023 and has yet to be finalized.