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.”
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.
Education Secretary Miguel Cardona issued guidance in March allowing colleges and universities to use funds from President Joe Biden’s $1.9 trillion stimulus plan for a variety of student needs, including grants and scholarships.
Delaware State University (DSU) has decided to use those funds to cancel student debt.
On Wednesday, DSU officials announced they would be canceling up to $730,655 in student debt for recently graduated students who faced financial hardships during the pandemic. Antonio Boyle, Vice President for Strategic Enrollment Management, estimated that the average eligible student would qualify for about $3,276 in student debt relief.
“Too many graduates across the country will leave their schools burdened by debt, making it difficult for them to rent an apartment, cover moving costs, or otherwise prepare for their new careers or graduate school,” Boyle said in a statement. “While we know our efforts won’t help with all of their obligations, we all felt it was essential to do our part.”
The university’s president, Tony Allen, noted in the announcement that DSU hasn’t raised its tuition in over six years, it gives every incoming student an iPad or a Macbook, and it’s transitioning its textbooks to less expensive online versions, showing how debt cancelation aligns with the university’s efforts to keep college affordable.
Cardona’s March guidance said that higher education institutions can use stimulus funding for “financial aid grants to dual enrollment, continuing education, non-degree seeking, or non-credit students, as well as to a broad range of students with exceptional needs, such as certain refugees or persons granted asylum,” along with discharging unpaid institutional student debt.
“Many students have had their postsecondary careers turned upside down as they manage their schoolwork while also protecting themselves from this virus,” Cardona said in a statement. “We hope every eligible student takes advantage of these benefits while continuing to focus on their studies.”
While DSU is exercising its authority to forgive institutional debt – debt owed directly to the university, rather than to the government or a private lender – federal student loan debt currently amounts to $1.7 trillion in the US. The Education and Justice Departments are reviewing Biden’s authority to cancel federal debt, but the president has not yet announced a timeline for doing so.
President Joe Biden’s $1.9 trillion stimulus package included nearly $36 billion in emergency funding for struggling students, but international and undocumented students were ineligible to receive that aid – until now.
Secretary of Education Miguel Cardona just eliminated that rule.
“The pandemic didn’t discriminate on students,” Cardona said in a press call on Monday. “We know that the final rule will include all students, and we want to make sure that all students have an opportunity to have access to funds to help get them back on track.”
On Tuesday, the Biden administration issued a final rule that revised a Trump-era policy barring international and undocumented students from accessing emergency aid. In June, Trump’s Education Secretary Betsy DeVos had issued a rule stating only those who participate in federal student aid programs can receive stimulus money that shut out undocumented and international students, including those protected under the Deferred Action for Childhood Arrival program, also known as “Dreamers.”
DeVos’ rule also initially barred students who defaulted on student loans and those convicted of minor drug crimes from receiving aid, but that was lifted in January.
Cardona said during the call that the final rule will apply to all three rounds of stimulus funding and will ensure every student who needs it can access aid.
“What this does is really simplify the definition of a student,” Cardona said. “It makes it easier for colleges to administer the program and get the money in the hands of students sooner.”
DeVos’ policy met a number of legal challenges, including an ongoing lawsuit initiated by California Community Colleges that said they have kept millions of dollars received for grants because of DeVos’ limits on who is eligible to receive them.
Rep. Virginia Foxx – the top Republican on the House Education Committee – called it “an insult to every American.”
“President Biden is fueling an immigration crisis, and this final rule exacerbates the emergency at the southern border,” Foxx said in a statement. “I call on elected Democrats to stop swindling law-abiding citizens, put Americans first, and respect the sacrifice of hardworking taxpayers.”
But Chair of the Senate Education Committee Patty Murray said in a statement she was “relieved” Cardona took this step to give every struggling student needed aid.
Separately, the Education Department said in a Tuesday press release that it is now making available $36 billion in grants that will help over 5,000 institutions, including Historically Black Colleges and Universities (HBCUs), Tribally Controlled College or University, and Hispanic Serving Institutions.
“These funds are critical to ensuring that all of our nation’s students – particularly those disproportionately impacted by the COVID-19 pandemic – have the opportunity to enroll, continue their education, graduate, and pursue their careers,” Cardona said in a statement. “With this action, thousands of institutions will be able to provide direct relief to students who need it most, so we can make sure that we not only recover from the pandemic, but also build back even stronger than before.”
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.”
Student-debt cancelation was a major theme of the 2020 presidential campaign, and the issue is only gaining momentum. On Thursday, 15 of the largest labor unions in the country called on Education Secretary Miguel Cardona to fully erase debt for borrowers who have worked in public service for more than a decade.
According to a letter obtained by Politico, the National Education Association, the nation’s largest teachers’ union, led 14 other unions representing more than 10 million public service workers in calling for full student debt cancelation. The letter said the Public Service Loan Forgiveness program has been so mismanaged that 98% of applicants for the program were rejected.
“The COVID-19 pandemic underscores the need for immediate action,” the letter said. “Public service workers who should have already benefited from the Department of Education’s Public Service Loan Forgiveness (PSLF) program are serving on the front lines of our pandemic response – caring for patients, teaching our students, and delivering essential services in communities across the country.”
The letter, which was also signed by the Service Employees International Union and the American Federation of Government Employees, said the federal government has “fundamentally failed” public service workers because of difficulties in navigating the PSLF program.
To qualify for PSLF, a borrower must be employed by a federal, state, local, or nonprofit organization, work full-time, and have direct loans. However, a 2020 report from The American Federation of Teachers and the Student Borrower Protection Center found that due to poor communication from the DOE, only 1% of eligible borrowers were approved for loan forgiveness.
Democratic lawmakers have criticized Education Secretary Betsy DeVos’ oversight of the program, and in 2019, Sen. Elizabeth Warren of Massachusetts, along with other Democratic senators, wrote a letter to the Consumer Financial Protection Bureau requesting further information on PSLF oversight.
“Though one of the primary functions of the CFPB is to regulate the student loan industry, they have failed to adequately address these claims,” the letter said. “In particular, we are concerned that CFPB leadership has rolled back its supervision and enforcement activities related to federal student loan servicers. This suggests a shocking disregard for the financial wellbeing of our nation’s public servants, including teachers, first responders, and members of the military.”
Biden vowed to fix the PSLF program during his campaign, but given its mismanagement, unions want the DOE to use its emergency powers during the pandemic to carry out the loan forgiveness.
In terms of using executive authority, White House Chief of Staff Ron Klain said on Thursday that Biden asked Cardona to prepare a memo looking into his authority to cancel $50,000 in student debt through executive action, which follows Biden’s request to the Justice Department to review his authority to do so. Warren campaigned on the issue of canceling $50,000 per person, while Biden set a $10,000 figure and he has since been repeatedly pressured to revise that upward.
President Joe Biden has started to act on the $1.7 trillion student debt crisis in the country.
His Department of Education has already canceled student debt for about 72,000 defrauded borrowers, and for over 41,000 borrowers with disabilities. That means more than 113,000 people in the country are getting $2.3 billion of debt relief.
Another 44 million Americans still have student-loan debt and wonder if their turn will ever come.
During his presidential campaign, Biden said he was willing to cancel $10,000 in student debt per person, but he did not believe he had the authority to cancel up to $50,000 in student debt per person, a key progressive lawmaker’s agenda item.
While White House Press Secretary Jen Psaki said in a press briefing that the Justice Department will review Biden’s ability to cancel student debt through executive action, and while Biden asked the Education Department to compile a memo on the subject, Senate Majority Leader Chuck Schumer said there’s no reason it cannot be done.
“If it’s OK legally to do a small amount, it’s OK legally to do a larger amount,” Schumer said in a press call following Psaki’s remarks.
Here’s what the Biden administration has done so far to help Americans with student debt:
(1) Canceled debt for defrauded borrowers
On March 18, Education Secretary Miguel Cardona canceled student debt for about 72,000 borrowers who were defrauded by for-profit schools, such as Corinthian Colleges and ITT Technical Institutes.
Under the new regulations, borrowers eligible for relief would receive a 100% discharge of federal student loans, a reimbursement of any amounts paid on loans, requests to remove any negative credit report, and if applicable, a reinstatement of federal student aid eligibility.
Insider previously reported on five of the biggest colleges that were accused of defrauding their students through deceptive advertising and persuading students to take out loans knowing they would likely default. Of those, the University of Phoenix is the only one still open and which hasn’t admitted to any wrongdoing. Last week, the Federal Trade Commission sent $50 million in refunds to more than 147,000 former Phoenix students “who may have been lured by allegedly deceptive advertisements.”
(2) Canceled debt for borrowers with disabilities
In his second move on student-debt cancelation, Cardona on Monday canceled student debt for over 41,000 borrowers with permanent and total disabilities, and removed a requirement to submit income documentation for over 230,000 eligible borrowers.
A previous rule established under President Barack Obama required borrowers with disabilities who wished to receive debt cancelation to submit documentation verifying that their incomes did not exceed the poverty line, but Cardona waived that requirement, given that 98% of reinstated disability discharges occurred because borrowers did not submit the required paperwork.
(3) Expanded the scope of the debt payment pause
On Tuesday, Cardona expanded the pause on student-debt collections to 1.14 million borrowers with private loans. In January, Biden had extended a pause on student loan payments through September, but that didn’t apply to borrowers under the Federal Family Education Loan (FFEL) Program, whose loans were held by private lenders. Cardona’s new rule also applies a 0% interest rate on borrowers’ student debts.
The FFEL Program ended in 2010, but recent data from the Education Department showed that 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 pause on federal student loan payments.