Student debt & the Biden presidency

Now that it’s clear that Joe Biden will be our next president, the question that many are asking is: what does this mean for student debt. The short answer is – it’s complicated.

What a Biden victory doesn’t mean:

First, let’s get the easiest stuff out of the way – Joe Biden doesn’t support a plan to cancel all student debt. That was the Bernie plan, and although it was popular with supporters – and many non-supporters – it is unlikely to happen under a Biden administration. If it’s any consolation,  “The Biden emergency action plan to save the economy” plan does propose to cancel up to $10,000 in federal student loan debt. Unfortunately, this won’t mean a lot for most veterinarians. 

What is the Biden plan?

Much of what’s in “The Biden plan for education beyond high school” actually focuses on community colleges, and undergraduate programs at state universities. His goal is to make  public colleges and universities tuition-free for all families with incomes below $125,000; however, this is only for undergraduate degrees. Likewise, he has proposed wiping out the debt of any borrower who attended an undergraduate public college or university, providing they earn less than $125k.  Additionally, Biden proposes offering support for historically black colleges / universities and other institutions that play unique roles in their communities. All important stuff for sure, but most veterinary debt tends to be associated with graduate school and none of that is covered.

The good news on student debt ……

Really, there are 2 items of interest that might apply to veterinarians – and one of them is troubling. First, the good news. Biden’s new income driven plan would limit student loan repayment for federal student loans to no more than 5% of discretionary income. This is a significant improvement from the current 10% of DI we currently have. Furthermore, loan forgiveness would still occur after 20 years, but the borrower would no longer pay tax on the amount forgiven! Another big win. The only problem is that the Biden plan specifically addresses undergraduate debt, although it seems like this was an oversight. Several sources report that the new plan would be the one repayment plan to rule them all, graduate or undergraduate.

The bad news on student debt….

If you are counting on Public Service Loan Forgiveness – hold on for a bumpy ride. The proposed changes would limit forgiveness to a maximum of $50k which would accrue over 5 years. The current plan which spans 10 years, has no maximum forgiveness. Biden isn’t the first to try to tackle this program. Four years ago, President Trump vowed to eliminate it entirely. Why so much PSLF hate?  By far the biggest users of the program are MDs. They spend up to eight-years training at not-for-profit hospitals and then work in a hospital setting for a few more. Then, they walk away from hundreds of thousands of debt and start earning a mid-six figure salary. Of course, this is all at the taxpayers expense. No wonder the hate. 

How much will Biden achieve?

Like so many other things – it’s difficult to know. Much will depend on who controls the senate. Even if republicans keep control, it seems likely that change is inevitable. The current situation is simply unsustainable. One possibility that would not require congressional approval is to extend the current interest-free forbearance into 2021. Beyond this, it remains to be seen how much latitude Biden has.  

The one thing I would absolutely NOT do right now is consolidate federal loans into private ones. Any new income based plans will almost certainly apply only to federal loans. I would wait and see what the new options will be. As always, we will update our readers as information becomes available.