The Biden administration has enacted billions of dollars in student loan forgiveness, cancellation, and other relief during the course of the last several months. But one particular type of student loan has been consistently left out: private student loans.
Federal Student Loans vs. Private student loans
By most estimates, there is approximately $1.8 trillion in outstanding student loan debt in the United States. The vast majority of that debt consists of federal student loans, which are loans either issued directly or guaranteed by the federal government. But a sizable portion of outstanding student loan debt consists of purely private student loans — approximately $136 billion, according to NerdWallet and MeasureOne.
As a general rule, federal student loans have many more options for repayment, default resolution, and loan forgiveness. For example, income-driven repayment programs, loan rehabilitation programs, Public Service Loan Forgiveness, and school-based administrative discharges are generally only available for federal student loans, as provided by federal law. Private student loans are typically governed only by the terms and conditions of the underlying loan promissory note, which usually does not provide many options to the borrower.
Biden’s Student Loan Forgiveness and Relief Initiatives
In the course of the last few months, the Biden administration has used executive action to provide both widespread and targeted relief to student loan borrowers:
- In June, Biden expanded relief for borrowers who had been granted only partial loan forgiveness through the Borrower Defense to Repayment program, which was established to cancel federal student loan debt for borrowers defrauded by their schools. That relief will result in $500 million in student debt cancellation for 18,000 borrowers.
- On August 6, the Biden administration announced an extension of the current pause on federal student loan payments, interest, and collections to January 31, 2022. That relief had originally been scheduled to expire in September.
- On August 9, the Department of Education announced a series of public hearings that mark the initial phase of a process to overhaul key federal student loan forgiveness and repayment programs.
- On August 19, the Biden administration announced it would be automatically discharging $5.8 billion in federal student loan debt for over 300,000 disabled borrowers through the Total and Permanent Disability (TPD) discharge program.
- On August 20, The Department of Education announced that it would be retroactively waiving interest for 47,000 current and former active-duty military service members who were entitled to, but not granted, an interest waiver due to serving in dangerous combat zones.
These initiatives will bring relief to millions of student loan borrowers. But importantly, this relief is limited to federal student loan borrowers only. Borrowers with purely private student loans that were issued by a private lender and are not guaranteed by the government are excluded from all of this relief.
Why Are Private Student Loans Excluded From Biden’s Relief Programs?
The answer is simple: Biden’s legal authority is limited to federal law, and he must act under existing federal statutes and accompanying regulations. Federal student loan programs are governed by statutes such as the Higher Education Act and the HEROES Act of 2003, as well as the CARES Act that was enacted last year. But these statutes do not empower Biden to provide any relief to private student loan borrowers.
Even widespread student loan cancellation — which student loan borrower activists and advocacy organizations have been urging President Biden to enact — would have similar limitations. Legal scholars advocating on behalf of borrowers have argued that the President has legal authority to enact broad student loan forgiveness. Biden himself has expressed reluctance and skepticism about doing so. But scholars have specifically pointed to authority provided by the Higher Education Act and the HEROES Act; thus, even if Biden were to decide to wipe out student loan debt on a mass scale, it would almost certainly have to be limited to federal student loans only.
What Does This Mean For Private Student Loan Borrowers?
It ultimately would require an act of Congress to meaningfully change the landscape for private student loan borrowers. Members of Congress have proposed some private student loan relief bills in the past. For example, a proposed stimulus bill in 2020 would have canceled up to $10,000 in private student loan debt for borrowers experiencing economic distress. This year, Democrats in Congress have filed bills that would provide private student loan disability discharges and a private student loan rehabilitation program, similar to programs offered for federal student loan borrowers.
But so far, these bills have gone nowhere. And even a bipartisan initiative to make it easier to discharge student loan debt in bankruptcy, which could actually pass Congress given its bipartisan support, limits bankruptcy reform to federal student loans only.
Absent meaningful action by Congress, private student loan borrowers will continue to be left out of relief programs designed to alleviate the burdens of student debt.
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