As one of his first actions in office, President Joe Biden extended the pause on student-loan payments through September to give borrowers financial relief during the pandemic. Education Secretary Miguel Cardona on Wednesday hinted at the possibility of extending the pause even further.
“We are continuing conversations about if that’s the best time,” Cardona told the Senate Appropriations Committee. “No announcements today, but we continue to have those conversations.”
Cardona testified before the Senate committee on Wednesday morning regarding the education components in Biden’s budget proposal, during which he acknowledged the relief that borrowers have received under the student loan payment pause during the pandemic. New Hampshire Sen. Jeanne Shaheen said that payments restarting in October is “a huge concern for borrowers” and stressed the need to provide certainty for them regarding whether the pause will be extended.
The conversations Cardona mentioned have been ongoing since at least May. At an Education Writers Association conference last month, he said extending the payment pause is “not out of the question.”
“Obviously, we’re going to always take the lead from what the data is telling us and where we are as a country with regards to the recovery of the pandemic,” Cardona said. “It’s not out of the question, but at this point it’s September 30.”
He added that with the repayment process, the department would have to work with borrowers “to make sure that we ramp up the communication and the clarity so that it’s smooth as possible.”
“We know that that’s something we’re going to be focusing on as it gets closer,” he said.
Insider recently reported that the Education Department is planning to improve experiences for student-loan borrowers, but it’s currently unclear what such improvements would entail. An Education Department spokesperson told Insider there is not yet a timeline for when improvements will be implemented.
“We recognize for many families that the recovery from this pandemic will come around the same time,” Cardona said during the hearing. “Students are going to be returning to schools, mortgages will have to start being paid, loans will have to start getting paid, so we want to make sure we are sensitive to the needs of the borrowers and aware of the other challenges that they have. We’re going to continue to do as much as we can with our authorities.”
As one of his first actions as Education Secretary, Miguel Cardona cancelled student debt for about 72,000 borrowers defrauded by for-profit schools. On Wednesday, 18,000 more got student-debt relief.
The Education Department announced in a press release that it had approved 18,000 borrower defense to repayment claims for borrowers who attended ITT Technical Institutes – a for-profit school that shut down in 2016 amid accusations of false advertising that persuaded borrowers to take out student loans. Those borrowers will get 100% of their student debt forgiven, totaling approximately $500 million in relief.
“Our action today will give thousands of borrowers a fresh start and the relief they deserve after ITT repeatedly lied to them,” Cardona said in a statement.
He continued: “Today’s action is part of the Biden-Harris Administration’s continued commitment to stand up for borrowers when their institutions take advantage of them. Many of these borrowers have waited a long time for relief, and we need to work swiftly to render decisions for those whose claims are still pending. This work also emphasizes the need for ongoing accountability so that institutions will never be able to commit this kind of widespread deception again.”
The department will begin notifying borrowers of their approvals for loan forgiveness in the coming weeks and will work quickly to discharge those borrowers’ loan balances.
Issues with borrower defense claims
Former Education Secretary Betsy DeVos approved a debt-cancellation methodology during the Trump administration known as the “borrower defense to repayment” to give defrauded borrowers student debt relief. It compared the median earnings of graduates with debt-relief claims to the median earnings of graduates in comparable programs, and the bigger the difference, the more relief the applicant would receive.
But compared to a 99.2% approval rate for defrauded claims filed under former President Barack Obama, DeVos oversaw a 99.4% denial rate for borrowers and ran up a huge backlog of claims from eligible defrauded borrowers seeking student-debt forgiveness. A judge recently ruled that DeVos must testify over why so few borrowers were approved for loan forgiveness.
The press release said that Wednesday’s actions bring total student loan cancellation under borrower defense by the Biden administration t0 $1.5 million for around 90,000 borrowers.
The Securities and Exchange Commission had taken ITT to court in 2015 for deceiving investors about high rates of late payment and defaults on student loans, and in 2016, the government cut off ITT’s access to millions of dollars in federal loans and grants. The institution shut down shortly afterward, ending its 50-year history.
The Education Department’s recently released regulatory agenda includes amending the borrower defense to repayment, but a department spokesperson told Insider it does not yet have a timeline for when those amendments will be implemented.
The spokesperson said: “The Administration is committed to ensuring borrowers are able to access the loan relief to which they are entitled, and we look forward to working with the field to design and implement much-needed improvements.”
From fighting the climate crisis to strengthening protections against racial discrimination, President Joe Biden’s regulatory agenda released on Friday covers a lot of ground. Significantly, unlike his budget, it even mentions student-loan forgiveness. But for borrowers waiting for clarity on what will happen to their debt loads, the details are scanty.
The list of regulatory actions, typically released twice a year, outlines how Biden plans to advance his agenda through each federal agency.
According to the Education Department’s page, Biden’s agenda includes “improving student loan cancellation authorities” in which Education Secretary Miguel Cardona will “amend regulations to improve borrower eligibility, application requirements and processes” for borrowers who meet loan cancellation criteria like being totally and permanently disabled, or attending a recently closed school.
The department also said it would review the Public Service Loan Forgiveness (PSLF) program and “plans to look at these regulations for improvements,” along with amending the “borrower defense to repayment,” which forgives loans for students who were defrauded by for-profit schools.
The department plans to finalize the rules by April 2022.
“The last four years offered a clear lesson on what happens when the executive branch fails to uphold its responsibility to protect the American people,” Sharon Block, acting administrator of the White House regulations office, said in a statement. “Our first regulatory agenda demonstrates our commitment to reversing this trend.”
At the end of May, the Education Department announced it was beginning the process of issuing new higher-education regulations, and the Friday list affirmed those plans. But no further detail was provided on what the mentioned improvements would look like.
When reached for further clarification on these regulatory actions, a department spokesperson told Insider that the agency is currently seeking stakeholder feedback on both its initial list of topics and other matters. After it conducts public hearings, it will determine a path forward on rulemaking. It did not disclose a timeline for that rulemaking, or what the additional topics entailed.
“The Administration is committed to ensuring borrowers are able to access the loan relief to which they are entitled, and we look forward to working with the field to design and implement much-needed improvements,” the spokesperson said.
But borrowers and lawmakers are growing frustrated with the timeline for giving eligible borrowers student-loan forgiveness.
Biden campaigned on reforming PSLF, which allows government and nonprofit employees with federally backed student loans to apply for loan forgiveness after proof of 120 monthly payments under a qualifying repayment plan.
However, flaws in the program have been ongoing for years. 98% of borrowers have been rejected from the program, prompting 56 Democrats to urge Cardona to fix the program in early May, and Education Secretary Betsy DeVos was sued multiple times over the program’s high denial rate.
Borrowers had similar issues with the borrower defense to repayment. Over the past decade, several for-profit schools have shut down over investigations claiming the schools engaged in fraudulent behavior related to federal loans, leading President Barack Obama to establish the program to forgive student debt for eligible defrauded borrowers.
Under Obama, the program had a 99.2% approval rate, but when DeVos took over, 99.4% of eligible borrowers were denied from the program, and she will soon testify over why that happened.
So while the department’s plans to review those programs are promising for borrowers, specific details are unclear. That’s why Massachusetts Sen. Elizabeth Warren and other Democrats are calling on Biden to cancel $50,000 in student debt per borrower to provide immediate relief.
“The time is now,” Warren told Insider on Tuesday. “We know what the problem is: student loan debt is holding back tens of millions of people across this country. People who can’t buy homes, people who can’t buy cars, people who can’t start small businesses. We need to cancel that student loan debt, not only for those people individually, but for our whole economy.”
President Joe Biden campaigned on reforming the Public Service Loan Forgiveness (PSLF) program, which has been under fire for years for rejecting the vast majority of applicants.
New Education Department data found that 98% of borrowers are still being rejected from the program.
PSLF allows government and nonprofit employees with federally backed student loans to apply for loan forgiveness after proof of 120 monthly payments under a qualifying repayment plan, but it has an extremely high denial rate. Biden campaigned on fixing it. His campaign website said “Biden will see to it that the existing Public Service Loan Forgiveness Program is fixed, simplified, and actually helps teachers.”
But newly released Education Department data found that 97.9% of borrowers had been rejected from the program as of April of this year for failing to meet the program’s requirements. In 2018, 99% of applicants were rejected. The reasoning the department gave for the high denial rate comes down to borrowers not meeting the 120 qualifying payments, but experts say the program itself is to blame – not borrowers.
“Washington has had almost 14 years to get PSLF right,” Seth Frotman, executive director of the Student Borrower Protection Center, which advocates an end to the student-debt crisis, wrote on Twitter on Monday. “Enough excuses. Enough deflecting. Enough of industry cashing in while borrowers struggle and @usedgov sits at the sidelines. It’s time to restore the promise of PSLF,” he added.
Last month, 56 Democrats sent a letter urging Education Secretary Miguel Cardona to fix the loan forgiveness program to get rid of the “extraordinary confusion” the program has caused borrowers, prompting the high rejection rate.
“After the first round of forgiveness initially became available to PSLF borrowers more than three years ago, approval rates for the program have remained below 2.5%,” the letter said. “The program has been beset by numerous ‘donut holes’ that disqualify certain types of loans, repayment plans and the payments themselves, leading to extraordinary confusion and distrust of the PSLF program and, by extension, the federal government.”
A Government Accountability Office report also found that 287 Dept. of Defense personnel had received loan forgiveness as of January 2020, while 5,180, or 94% of DOD borrowers, were denied. Sen. Elizabeth Warren released a statement calling the findings, and PSLF, “nothing short of a disaster.”
Education Secretary Betsy DeVos was even sued multiple times over the program’s high denial rate.
Biden’s Education Department has announced plans to begin working on improving the program. Insider reported last week that Biden’s regulatory agenda includes reviewing PSLF and “plans to look at these regulations for improvements.”
That followed the Education Department’s announcement that it was beginning the process of issuing new higher-education regulations, but no further detail was provided on what the mentioned improvements would look like.
Frotman called on the Education Department to cancel student debt for eligible borrowers who have been rejected form PSLF, writing on Twitter that “it’s time for @usedgov to cancel the debt of public service workers who have paid for 10+ years.”
Forty-five million Americans have a $1.7 trillion student debt burden in the country. And many of them, alongside Democrats and advocates, want President Joe Biden to forgive $50,000 of their debt.
He hasn’t done that yet, but the president has taken steps to lessen the burden and provide relief during the pandemic.
As one of his first actions in office, Biden extended the pause on student loan payments through September, coupled with zero growth in interest, to ensure borrowers suffering financially would not have to worry about paying off their loans. And since then, Education Secretary Miguel Cardona has cancelled student debt for borrowers with disabilities and borrowers defrauded by for-profit schools. He’s also started conducting reviews of student loan forgiveness programs that don’t work as they should.
But Democrats want Biden to do more.
They have been keeping the pressure on the president to cancel $50,000 in student debt per person using his executive authority. And while Biden has expressed hesitancy to do so, Democrats remain adamant that he can, and should, cancel student debt immediately with the flick of a pen.
“Student loan cancellation could occur today,” Massachusetts Sen. Elizabeth Warren told Insider. “The president just needs to sign a piece of paper canceling that debt. It doesn’t take any act of Congress or any amendment to the budget.”
Detailed below is everything Biden has done to date to confront the student debt crisis:
Extended the pause on student loan payments through September
On his first day in office, Biden asked the Education Department to extend the pause on federal student loan payments through September 30, following Education Secretary Betsy DeVos’ extension on the pause on loan payments through the end of January.
This was accompanied by a 0% interest rate during that time period.
Director of the National Economic Council Brian Deese said at the time that the extension on loans would to alleviate some of the burdens many households were facing to pay basic expenses, and student debt is often a barrier to putting food on the table.
“In this moment of economic hardship, we want to reduce the burden of these financial trade-offs,” Deese said.
This extension, however did not apply to the more than seven million borrowers with loans held by private companies.
Asked the Justice Department to review his authority to cancel student debt
In February, White House Press Secretary Jen Psaki told reporters that Biden will ask the Justice Department to review his legal authority to cancel $50,000 in student debt.
At a CNN town hall in February, Biden said he doesn’t have the executive authority to cancel up to $50,000 in student debt per person, but said he is prepared to cancel $10,000 — something he campaigned on.
However, Insider reported that he has yet to deliver on that campaign promise, and while Biden said he would support legislation brought to him to cancel $10,000 in student debt, Democrats argue that legislation takes too long, and the president can cancel debt immediately using his executive authority.
“We have a lot on our plate, including moving to infrastructure and all kinds of other things,” Warren said in a February press call. “I have legislation to do it, but to me, that’s just not a reason to hold off. The president can do this, and I very much hope that he will.”
Biden’s administration has not yet commented on the status of Justice Department’s review.
Cancelled student debt for defrauded borrowers
In his first major move as Education Secretary, Cardona on March 18 reversed a Trump-era policy that gave only partial relief to defrauded students.
For-profit institutions that shut down years ago, like Corinthian Colleges and ITT Technical Institutes, were accused of violating federal law by persuading their students to take out loans, and Cardona’s new policy helped approximately 72,000 of those students receive $1 billion in loan cancellation.
“Borrowers deserve a simplified and fair path to relief when they have been harmed by their institution’s misconduct,” Cardona said in a statement. “A close review of these claims and the associated evidence showed these borrowers have been harmed and we will grant them a fresh start from their debt.”
The debt-cancellation methodology, known as the “borrower defense to repayment” — approved by Education Secretary Betsy DeVos — compared the median earnings of graduates with debt-relief claims to the median earnings of graduates in comparable programs. The bigger the difference, the more relief the applicant would receive.
But compared to a 99.2% approval rate for defrauded claims filed under President Barack Obama, DeVos had a 99.4% denial rate for borrowers and ran up a huge backlog of claims from eligible defrauded borrowers seeking student debt forgiveness.
Cardona said that process did not result in appropriate relief determination and needed to be reversed, and a judge recently ruled that DeVos must testify over why so few borrowers were approved for loan forgiveness.
Cancelled student debt for borrowers with disabilities
Two weeks after cancelling some debt for defrauded borrowers, Cardona on March 29 cancelled $1.3 billion of student debt for about 41,000 borrowers with disabilities.
He also waived an Obama-era requirement for those borrowers to submit documentation during a three-year monitoring period to verify that their incomes did not exceed the poverty line.
A 2016 report from the Government Accountability Office found that 98% of reinstated disability discharges occurred because borrowers did not submit the required documentation — not because their incomes were too high.
“Borrowers with total and permanent disabilities should focus on their well-being, not put their health on the line to submit earnings information during the COVID-19 emergency,” Cardona said in a statement. “Waiving these requirements will ensure no borrower who is totally and permanently disabled risks having to repay their loans simply because they could not submit paperwork.”
But experts said this action did not make up for the significant number of borrowers who never received loan forgiveness simply due to paperwork.
“Today’s announcement is not cause for celebration but rather for outrage,” Persis Yu, the director of the Student Loan Borrower Assistance Project at the National Consumer Law Center, said in a statement at the time. “It is scandalous that the Department revoked the loan discharges for 41,000 borrowers with total and permanent disabilities due to paperwork issues during a pandemic.”
Expanded the scope of the student loan payment pause
Biden’s payments pause on student loans initially only applied to borrowers with federal loans, meaning those with privately-held loans had to continue making payments during the pandemic.
But on March 29, Cardona expanded the scope of that pause to apply to loans under the Federal Family Education Loan (FFEL) Program, which are privately-held. This helped 1.14 million additional borrowers.
The FFEL Program ended in 2010, but according to Education Department data, 11.2 million borrowers still have outstanding FFEL loans totaling over $248 billion. And while the department acquired some of the outstanding FFEL loans, many are still privately owned and were not affected by the earlier pause on federally owned student loan payments.
According to a press release, any FFEL borrower who made a payment in the past year will have the option to request a refund.
Asked the Education Department to review his authority to cancel student debt
White House Chief of Staff Ron Klain told Politico in April that Biden had asked Cardona to create a memo on the president’s legal authority to forgive $50,000 in student loans per person.
Biden will “look at that legal authority,” Klain said. “He’ll look at the policy issues around that, and he’ll make a decision. He hasn’t made a decision on that either way, and, in fact, he hasn’t yet gotten the memos that he needs to start to focus on that decision.”
The review appears to be ongoing, and the administration has not announced a timeline for when it will be completed.
Started a review of student loan forgiveness programs
On May 24, the Education Department announced it is beginning the process of issuing new higher education regulations, mainly concerning student debt-forgiveness programs.
The first step of the process will be through holding hearings in June to receive feedback on “regulations that would address gaps in postsecondary outcomes, such as retention, completion, student loan repayment, and loan default,” according to a press release.
The department will also seek comments on rules regarding student loan forgiveness for borrowers in public service and borrowers with disabilities, among other things.
The main topics the department plans to address concern the methods for forgiving debt for defrauded borrowers and borrowers with disabilities, along with looking into the Public Service Loan Forgiveness (PSLF) program, which has rejected 98% of eligible borrowers.
Forbes reported that the process to implement new rules could be lengthy, though. After the hearings in June, there will be “negotiated rulemaking,” during which stakeholders meet with the department to review proposed regulations, and it could take a year or longer until changes are implemented.
Richard Cordray, the head the Education Department’s Office of Federal Student Aid (FSA), is remaining committed to helping student loan borrowers through new issued guidance that would enhance oversight of student loan servicers.
On Friday, Cordray – former head of the Consumer Financial Protection Bureau (CFPB) and an ally of Sen. Elizabeth Warren – issued guidance that would expedite the process for states to receive data from student loan servicers, increasing oversight to protect student loan borrowers from potential violations of the law.
Cordray wrote in a blog post that, as former head of the CFPB, he “saw the importance of state regulation and oversight to identify problems and deliver relief when companies take advantage of people.” He also said the new guidance will make the information FSA holds more accessible to regulators.
“States and regulators need information when they think a loan servicing company might be violating a law or regulation,” Cordray wrote. “To know for sure, they need to look at the companies’ policies and procedures, their handbooks, complaints made by customers, and anything else that shows how the company operates. Getting information from us helps state officials better enforce their laws that protect [borrowers].”
In 2017, under President Donald Trump, the FSA published a memo that told loan servicers that if states came to them for information, they had to send a request to the FSA first before releasing anything. But Cordray wrote that the FSA usually rejected the requests, forcing states to file lawsuits that dragged out the process.
Cordray is rescinding that memo and replacing it with a new one that would make it easier for the FSA to work with states to quickly review requests and approve them whenever possible.
Insider reported last month that Cordray’s appointment could be game-changing for the student debt system given his former role at CFPB, which Warren – a leading advocate for student-debt cancelation – helped create.
During her time in the Senate, Warren worked with Cordray’s bureau to conduct investigations into predatory lending practices, and at the CFPB during the Obama years, Cordray made oversight of student loan servicers his priority.
The agency has returned more than $750 million to student loan borrowers since 2011 over debt collection complaints. Then, in early 2017, the bureau sued Navient – the largest student loan servicer in the US – in a lawsuit that is still ongoing, arguing that Navient misled students into taking on loans they cannot pay off.
And while Warren is pushing for Biden to cancel $50,000 in student debt per borrower, Cordray has not yet commented on doing so. But he said after his appointment to FSA that he was looking forward to creating “more pathways for students to graduate and get ahead, not be burdened by insurmountable debt.”
Cordray’s new guidance was not welcomed by some Republican lawmakers, however. Virginia Foxx, the top Republican on the House Education and Labor Committee, said in a statement it “bows to the whims of state-based Democrat politicians who are more interested in putting companies out of business than helping struggling student loan borrowers.”
But Cordray remains committed to reforming the federal student aid system to work for borrowers and hold loan servicers accountable.
“This is only a start,” he wrote. “As we move ahead, FSA has more work to do to establish strong relationships with state officials. We believe federal and state officials should be partners rather than adversaries.”
He concluded: “By working together more productively, we can build a stronger system of federal student aid to help people all over this country gain easier access to the American dream.”
Since she was elected to the Senate almost a decade ago, Elizabeth Warren has been fighting to cancel student debt and hold loan servicers accountable. Now one of her closest allies is in charge of the federal student debt pile, and that could be a big deal.
Richard Cordray, the former head of the Consumer Financial Protection Bureau (CFPB), was selected to head the Education Department’s Office of Federal Student Aid (FSA) on Monday. Few people in Washington DC are better placed to carry out Warren’s vision of mass student-debt relief. That’s because Cordray took the job Democrats wanted Warren to have.
When Warren was a Harvard professor (and occasional blogger), she frequently cited problems within the student-loan system and the need to create something like the CFPB, which would protect consumers financially and ensures they are being treated fairly. That turned into a new federal agency created under President Barack Obama, who wanted Warren to lead it, but in 2011, Senate Republicans blocked her appointment. She ran for Senate instead, becoming a national figure, while Cordray became a close ally as the first head of the CFPB.
During her time in the Senate, Warren worked with Cordray’s bureau to conduct investigations into predatory lending practices. Now as head of the FSA, Cordray will be tasked with overseeing the government’s $1.5 trillion student loan portfolio through disbursing loans and grants, along with monitoring student-loan servicers and implementing relief and repayment programs.
“@RichCordray was a fearless @CFPB leader who forced big financial institutions to return $12 billion to people they cheated,” Warren wrote on Twitter on Monday. “I’m very glad he’ll be protecting student borrowers and bringing much-needed accountability to the federal student loan program.”
What Cordray could do on student debt
In a statement after his appointment was announced, Cordray said he was looking forward to creating “more pathways for students to graduate and get ahead, not be burdened by insurmountable debt.”
He will be tasked with sorting through claims from thousands of defrauded borrowers who filed for debt relief, along with ensuring the smooth implementation of loan collections once the pause on student loan payments through September is lifted – although Cardona said on Monday that extending the payment pause is “not out of the question.“
While Cordray has not yet commented on wiping out $50,000 in student debt for each borrower, which Democrats continue to call for, he told MarketWatch last year that under the Biden administration, he expected the CFPB and the Education Department to work more closely on student-loan issues.
At the CFPB during the Obama years, Cordray made oversight of student loan servicers his priority. The agency has returned more than $75o million to student loan borrowers since 2011 over debt collection complaints, and in early 2017, the bureau sued Navient, the largest student loan servicer in the US, in a lawsuit that is still ongoing, arguing that Navient misled students into taking on loans they cannot pay off.
At a late April hearing, Warren called for the government to fire Navient, and for Navient to fire its chief executive officer, after accusing Navient for over a decade of abusing the student loan system.
In 2019, Cordray wrote a guest essay in The Plain Dealer, an Ohio newspaper, speaking out against for-profit colleges. “I hate how these hollowed-out businesses and subpar colleges are cheating consumers, employees and whole communities,” Cordray wrote.
Education Secretary Miguel Cardona has already canceled some debt for borrowers defrauded by for-profit schools, and Warren has conducted numerous investigations into the failures of the for-profits Corinthian Colleges and ITT Technical Institutes.
The FSA head’s seat has been vacant since March, when Mark Brown, former head of the office appointed by Education Secretary Betsy DeVos in 2019, resigned amid pressure from labor groups and lawmakers. Warren wrote in a tweet that his resignation was “good for student borrowers.”
Cordray told Marketwatch in November that, as CFPB head, his approach with the Education Department had been one of “close cooperation” but “that was all nixed when Betsy DeVos came into office.” Speaking of the outlook for a Biden administration, he said he thought the CFPB and Education Department would likely go back to working closely together.
Nearly 45 million people in the US have outstanding student-loan debt. That adds up to a $1.7 trillion problem.
President Joe Biden, who promised during his campaign to immediately tackle the crisis, has moved to do so via the Department of Education, clearing billions of dollars in debt in just a few months.
Biden’s education secretary, Miguel Cardona, has canceled debt for about 72,000 borrowers defrauded by for-profit schools – about $1 billion worth – and moved to shake up how defrauded students go about loan forgiveness.
Cardona also waived a paperwork requirement to relieve loans for borrowers with disabilities. This affected 230,000 borrowers and canceled debt for 41,000 of them, providing $1.3 billion in student-loan relief.
But Biden hasn’t taken the actions he promised as a presidential candidate, which include canceling $10,000 in student debt per person. And while Cardona’s $2.3 billion in cumulative relief over three months might seem impressive, it comes to less than 0.2% of the outstanding student loans swimming through the system.
Finally, even if you qualify for debt relief, there’s no guarantee you’ll get it. Insider talked to borrowers directly affected by Cardona’s actions, and they’re not out of the woods yet. Experts say the student-debt crisis isn’t close to being seriously tackled.
The Education Department did not respond to Insider’s request for comment.
Defrauded borrowers still can’t get relief
After about five years of waiting, Alexander Cockerham was approved for student-loan forgiveness.
From 2007 to 2009, Cockerham, now 38, attended the for-profit ITT Technical Institute, where he got an associate’s degree. In 2015, the Securities and Exchange Commission sued ITT, accusing it of deceiving investors about late-payment rates and student-loan defaults, and the federal government cut off its access to federal loans and grants. The institution shut down shortly afterward.
Cockerham told Insider that he took out about $42,000 in private and federal loans to attend the school. He’s paid off his private loans but still has about $26,000 in federal loans outstanding.
So he applied for student-loan forgiveness in late 2015 through the Department of Education’s “borrower defense to loan repayment” program. Cockerham got his verdict in 2020.
“I was told I was approved for student-loan forgiveness but at only at a certain rate, because they said they felt that I did receive some benefit from my education there and that I wasn’t completely defrauded,” he said.
His forgiveness rate was 0%. “So absolutely nothing was forgiven at all,” he said.
In September, 48 state attorneys general and the Consumer Financial Protection Bureau secured more than $330 million in private student-loan forgiveness for 35,000 former ITT Tech students.
If the full amount of his federal loans were relieved, Cockerham said, he’d try to finally buy a house. He’s been married for nearly a decade and just had his first child. He said he’d tried looking at homes in the past, “but that student-loan debt just hung heavy over my head.” It turned away financial servicers, who told him he needed to pay down more debt.
How the government can decide on a 0% forgiveness rate
The Trump administration would compare a defrauded borrower’s income level to that of people in similar programs, alongside other factors, to determine how much of the loan to discharge. Betsy Mayotte, the president and founder of the Institute of Student Loan Advisors, said that led to some people being approved for the program but having 0% of their loans discharged, just like what happened to Cockerham.
Mayotte told Insider that the Trump administration “was very much opposed to the whole idea of borrower defense in the first place.” She said she’d worked with people who’ve been waiting three or four years for their applications to even be processed.
“To tell somebody, ‘Yup, we agree, you were defrauded by your school, and you still have to repay all of your debt’ is insane,” she said. “I mean, there’s no other industry where they do that.”
She said the recent action from the Biden administration made her “so happy,” as it would be going back and discharging the full amount of partial discharges. People who are still pending won’t be affected though, Mayotte said.
Cockerham, who might be affected by this latest discharge, said: “I’ve only seen what I’ve heard in the news. I haven’t heard anything from the newest secretary of [education] or the Biden administration.”
‘I wish that they would have someone that would go over this a little more in depth’
Joshua Kronemeyer, 27, still has student debt from spending a semester and a half at the Art Institute of Phoenix at 16 years old.
Just getting relief from those loans – racked up at a now defunct for-profit member of the Art Institutes – would cut his student-loan debt by a fifth, he told Insider.
“Honestly, I wish that they would have someone that would go over this a little more in depth, as far as the hole you’re digging yourself,” Kronemeyer said.
Kronemeyer may be eligible to get his loans discharged; some former Art Institute students are eligible to get their loans canceled as the result of a lawsuit against the for-profit school and the Education Department. That suit argued that the department had illegally provided loans to Art Institute schools that weren’t accredited at the time, so borrowers shouldn’t have to pay them back.
Kronemeyer said that he was planning to look into debt relief soon but that he anticipated his application would be denied the first time around, since he’d heard of that happening to others in the same position.
Borrowers with disabilities who are eligible for relief struggle to access it
Cardona’s action to relieve the burden for borrowers with disabilities shook up a three-year monitoring program in which borrowers had to submit income information every year to show that they didn’t exceed a certain threshold.
Laura Speake, 26, might qualify for the program. They told Insider that they had about $30,000 in debt in both federal and private loans. They left college after three years but hope to return and finish a degree. She hopes to someday go to grad school and work in the book industry, perhaps as a small-town librarian.
But she has a concern with getting the loans discharged under the program: It’s a disincentive for continuing education.
The Federal Student Aid website says that “if you are approved for TPD discharge based on SSA documentation or a physician’s certification, and you request a new Direct Loan, Perkins Loan, or TEACH Grant during your 3-year post-discharge monitoring period, you must resume repayment on the previously discharged loans.”
“I’m not lazy. I’m not looking for an easy way out,” Speake said. “You know, I want to work. I want to learn. I want to make a difference in the world. I want to do my part. I want to pull my weight.”
Experts told Insider that while Cardona’s action on the program was worthwhile, it shouldn’t have been necessary in the first place.
Bethany Lilly, the director of income policy at The Arc, an organization advocating for people with disabilities, told Insider that the Social Security Administration already has information verifying people’s incomes, so there’s no reason the Education Department should have required that information.
The department has “some very confusing and illogical standards that really hurt the beneficiaries,” Lilly said.
To improve the process for forgiving student debt for borrowers with disabilities, Lilly said, the department should make it “as automatic as possible” and work with the SSA to permanently remove the requirement to provide income documentation.
Persis Yu, a staff attorney at the National Consumer Law Center and the director of its Student Loan Borrower Assistance Project, told Insider that Cardona was correcting something that shouldn’t have occurred in the first place.
“I think it’s disappointing that when the suspension period was put in place in the first place that these borrowers weren’t captured,” Yu said, referring to the 41,000 borrowers who had missed their paperwork. “I’m not sure how that happened, but it seems pretty obvious in retrospect, right?”
Yu also said that the design of the program was flawed from the start. “The monitoring period itself is a huge problem and a huge barrier for people with disabilities that qualify for the program actually accessing the program,” she said. “So that is certainly again exacerbated by the pandemic, as so many things have been. But it is in itself just a feature that doesn’t work.”
A ‘massively unimpressive’ amount of canceled debt
Alan Collinge, the founder of Student Loan Justice, told Insider that compared with the scale of the student-debt crisis, canceling debt for defrauded borrowers and borrowers with disabilities is “massively unimpressive.”
“We’re in a pandemic, and we’ve lost tens of millions of jobs,” Collinge said. “The people who are hurt the worst tend to be the people who have student-loan debt.”
Democratic lawmakers have been keeping the pressure on Biden to cancel up to $50,000 in student debt per person. Sen. Elizabeth Warren of Massachusetts, who campaigned on the $50,000 figure, said in a press call last month that executive action was the quickest way to get it done.
Insider polling from February asked how much debt respondents would want canceled. The most popular option among the 1,154 respondents wasn’t Biden’s $10,000 proposal (19% supported that amount) or Warren’s $50,000 (13%), or no forgiveness at all (22%) – a quarter of the respondents said they supported forgiving all student loans.
As for Cockerham, he’s working in a job he landed while attending community college to study computer science, a program he turned to after his ITT degree didn’t bring him any job offers. His unpaid loans are still on his portal at Navient, the private entity the government has hired to manage some federally backed loans.
“We’re hard-working Americans, like everyone else. We were taken advantage of. And we feel that what was done to us was just completely unfair,” he said. “We need some help, and that forgiveness, for a lot of us, would just be a lifeline.”
On Tuesday, when Warren, as the chair of the Senate Subcommittee on Economic Policy, held her first hearing on student-debt relief, she invited Navient CEO John Remondi.
Citing a decade of allegations of abusive and misleading practices, she said, “The federal government should absolutely fire Navient, and because this happened under your leadership, Navient should fire you.”
Democratic lawmakers are continuing to push for President Joe Biden to cancel $50,000 in student debt per person, and new data from the Department of Education may have helped them make their case to the president.
A DOE analysis obtained by Yahoo Finance on Monday found that $50,000 in student-loan forgiveness per person would erase the entire debt for 36 million – or 84% – of the roughly 43 million borrowers in the US with federal loans, while $10,000 in forgiveness would erase the entire debt for 15 million – or 35% – of those borrowers.
The data also showed that 9.4 million of the 36 million borrowers who would benefit from a $50,000 loan cancelation are at risk of default, meaning they could fail to repay the loans. Also, 4.4 million borrowers, each holding an average of $48,000 in student debt, have had loans for more than two decades since graduation. Another 10.7 million borrowers have held their loans for over a decade.
Sen. Elizabeth Warren of Massachusetts and Senate Majority Leader Chuck Schumer have led efforts in calling on Biden to cancel $50,000 in student debt per person using executive powers, but the president has argued he does not have the authority to cancel $50,000, and he said he would welcome legislation to cancel $10,000 per person.
In response to Biden’s comments, Warren said in a press call last month: “We have a lot on our plate, including moving to infrastructure and all kinds of other things. I have legislation to do it, but to me, that’s just not a reason to hold off. The president can do this, and I very much hope that he will.”
“I graduated from a state school that cost $50 a semester,” Warren said on Twitter on Monday. “That opportunity is simply not out there today. Two out of every three people who go to a state school today have to borrow money to graduate. That is not how we build a future. #CancelStudentDebt.”