The federal government is the primary lender for students who borrow money for college and graduate studies, and the Department of Education directly holds more than $ 1.4 trillion in student debt. President-elect Joseph R. Biden Jr.’s administration will have the capacity to make changes that can directly affect the monthly bills of millions of borrowers.

Here’s what you need to know.

Student loan break

Some 22 million federal student loan borrowers have had their monthly payments temporarily on break and interest has been waived until the end of the year due to the pandemic – a suspension of payments on debt totaling more than $ 900 billion – and they are eager to see if the relief will continue into 2021 .

President Trump, through a executive action, has already extended the so-called administrative tolerance until December 31. (It was due to expire on September 30 as part of an emergency legislative package.) January. A spokesperson for the Ministry of Education declined to comment. Mr Biden’s transition team also declined to comment on his plans.

Congress could feel pressure to act before the end of the year, political experts said, and it could include an extension in new stimulus package or other legislation.

“For millions of borrowers, the fallout from the pandemic still rages,” said Seth Frotman, executive director of the Student Borrower Protection Center, an advocacy group. “The idea that their student loan payments will be reactivated and they will get money from their account through direct debit, or have their wages foreclosed again – the results will be cataclysmic for their finances.”

Cancellation of student debt

The higher education platform Mr Biden campaigned on a proposal that progressives say is ripe for executive action: the outright cancellation of some student debt.

The Higher Education Act of 1965, which created the federal student loan program, authorizes the secretary of education to “compromise, waive or release” federal student loan debts. Some key jurists and legislators believe that the language gives the president the power to use an executive order order the Ministry of Education to pay off the debts of all or part of the student borrowers. Others disagree and believe that such action would face legal challenges.

Senators Elizabeth Warren of Massachusetts and Chuck Schumer of New York, both Democrats, have asked the next president to cancel up to $ 50,000 in debt by borrower. But Mr Biden never publicly endorsed the idea, and two people involved in his discussions of transition planning said his perspective had not changed. Without congressional legislative action – which is unlikely if Republicans retain control of the Senate – large-scale student debt cancellation seems unlikely.

Mr. Biden sparked excitement among student borrowers with a tweet in March who approved a rescue proposal in the event of a pandemic from Ms. Warren and other lawmakers calling for the forgiveness of at least $ 10,000 in federal student loan debt per person. However, that proposal asked Congress to allow such relief – and so far it has not. Without legislative action, Mr Biden may be reluctant to pass a measure costing around $ 420 billion.

Income-based repayment plans

About 8.5 million federal loan borrowers are enrolled in income-based repayment plans, who try to help troubled debtors by linking their monthly loan payment to the amount they earn. There are four planes choice, but advocates say they are not always affordable for the most vulnerable borrowers.

Mr. Biden proposed a more generous option: People earning $ 25,000 or less per year will not owe any payments on their federal undergraduate loans and will not earn interest. All other borrowers will pay 5% of their discretionary income – what’s left of their paychecks after factoring in basics like food and shelter – over $ 25,000. That’s compared to the 10-15% discretionary income required by plans today. (One plan demands 20 percent.) Under Mr. Biden’s plan, any remaining balance would be forfeited.

Mr Biden also pledged to go one step further: written off debts are usually taxed as income, but he said he plans to change that. Making a permanent change to the tax code would require legislation, but tax experts say there are other ways to eliminate the tax penalty.

Cancellation of public service loan

The huge problems associate with federal public service loan forgiveness program are well documented. The program was created in 2007 to attract workers to low-paying government and non-profit jobs in exchange for debt relief; after a decade of one-time monthly payments, any remaining debt is written off. But borrowers need to be in the right kind of repayment plan and have the right kind of federal loan, while working in an eligible position – and only 2.2% of applications have been deemed eligible since the program began.

Mr Biden said he would address the problems plaguing the program “by securing the passage” of a bill this would simplify the application and certification processes, including making all loans and repayment plans eligible, while providing partial forgiveness after five years. Legislation was introduced in both lodge and Senate, but with only Democratic support.

Beyond bolstering the existing program, Biden said he would create another forgiveness plan for workers in schools, government and other nonprofits. For each year of service, workers would be eligible for $ 10,000 in undergraduate or graduate debt forgiveness for up to five years (for a total of $ 50,000).

Relief for defrauded students

A rule known as the “loan repayment defense” allows students who have been seriously misled by the schools they attended to apply for federal student loan relief. After the collapse of several notorious for-profit chains, including Corinthian Colleges and ITT Technical Institute, hundreds of thousands of people flooded the education department with complaints.

Education Secretary Betsy DeVos fought them every moment and let many apps languish for years, until federal judges ordered him in several cases to speed things up. Ms. DeVos’ department has responded with massive denials of claims, sending more than 83,000 in the past year. However, a California federal judge challenged these denials in a decision last month, calling them “lip service” and “potentially illegal”. The former students represented in the class action have asked the court to overturn Ms. DeVos’ refusals.

Eileen Connor, legal director of Project on Predatory Student Lending, which represents borrowers in the California case, said she hopes the Biden administration will rekindle the spirit of the borrower advocacy agenda and provide aid to hundreds. thousands of students who have been defrauded. A new education secretary has the power to overturn previous refusals, said Ms Connor, and create new standards to adjudicate the 80,000 applications still pending.

Mr. Biden pledged during his campaign to write off the debt of borrowers who “have been cheated by the worst profiteers of for-profit universities or careers.” He also said he would reinstate more permissive rules for the program that were passed under the Obama administration and eliminated by Mrs. DeVos.

Private student loans

Federal loans and private student loans can be discharged in bankruptcy, but they do not erase so easily like credit card and other consumer debt. Borrowers must initiate separate legal proceedings, and lawmakers have toughened the rules in recent decades. In fact, Mr Biden backed a 2005 law that made private student loans more difficult to dump, but he pledged to overturn that rule as president.

This can prove difficult because few Republicans have supported any changes to bankruptcy laws. A House bill has a Republican co-sponsor, but the Senate version, led by Senator Richard J. Durbin of Illinois, has only the support of Democrats.

Student loan service

The Department of Education outsources the management of its $ 42 million federal student loans, and government auditors and watchdogs have repeatedly criticized contractors for their poor work. Building a better system is a bipartisan agency goal that dates back to the Obama administration, but in reality it’s complicated.

Ms DeVos’ department has repeatedly changed its plans and canceled tenders, which has led him to the brink of crisis: Most of the agency’s maintenance contracts expire in December 2021 and cannot be extended.

The agency’s latest effort to avert disaster was a new solicitation it released last month looking for two contractors to run an interim system. But this deadline is extremely tight, and if this latest solicitation fails, it faces two bad choices: paying its existing suppliers at significantly higher rates to keep working, or transferring millions of borrowers to new providers, a a process that has been chaotic in the past.

“We are at the point of the entire student loan services saga where the urgency is greater than ever,” said Clare McCann, deputy director of federal higher education policy at New America, a left-wing thinker . “It affects tens of millions of borrowers, and it’s an issue that must be near the top of the list.”