If the Public Service Loan Forgiveness (PSLF) program worked as it should, then every qualifying public servant would be able to receive student debt relief after 120 qualifying monthly payments. But complicated paperwork and eligibility requirements have made it so that 98% of applicants have been denied relief, even if they qualify.
That’s why, on Friday, the Education Department launched a public inquiry to fix the program.
“Unfortunately, for too many public service workers, the program has not functioned the way they hoped it would,” Julie Margetta Morgan, senior advisor and acting under secretary for the Office of the Under Secretary of Education, wrote in a blog post.
“Fixing the PSLF Program has been a priority for the Biden-Harris Administration since day one,” she added. “While we have identified many opportunities for improvement by talking to experts and borrowers and reviewing our procedures, we want to hear from you as well.”
President Joe Biden campaigned on reforming PSLF following its high denial rate under President Donald Trump, and fixing the program was even included in the Education Department’s regulatory agenda that was released last month. But implementing changes to the program could take at least a year, and the public inquiry would help the department more easily identify the problems it needs to fix.
Starting next week, anyone can submit comments to the department regarding PSLF, and the department specifically wants to know:
What features of PSLF are most difficult to navigate?
What barriers are preventing public servants from receiving student loan forgiveness under PSLF?
For borrowers who have had loans other than from the Direct Loan program, what have your experiences been trying to access or participate in PSLF?
Many Democratic lawmakers have stressed the need to reform the program to give public service workers the student debt relief they deserve. In May, 56 Democrats sent a letter to Biden urging him to quickly reform the program and eliminate the “extraordinary confusion” it places on borrowers.
They wrote: “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.”
Seth Frotman, executive director of the Student Borrower Protection Center – which advocates for borrowers’ rights – said in a statement that the move by the Education Department to launch a public inquiry “offers hope for public service workers who have been let down and cheated out of promised debt forgiveness.”
“For the first time, the federal government is asking those who depend on the program to help decide what comes next,” he said.
The resumption of student-loan payments on October 1 is quickly approaching as borrowers, lawmakers, and advocates continue to sound the alarm on the risks with restarting payments too early.
As it turns out, the companies that collect the payments aren’t ready, either.
Last month, Sens. Elizabeth Warren of Massachusetts, Ed Markey of Massachusetts, and Tina Smith of Minnesota sent a letter to the CEOs of all student-loan servicers, requesting information on how each of them were preparing to transition borrowers back into repayment.
On Tuesday, the senators released the responses from those servicers, and the overarching theme was that servicers, along with borrowers, have concerns with restarting student-debt payments in just three months.
“The responses to our inquiry indicate that neither student loan borrowers nor student loan servicers are prepared for payments to resume, and servicers will need significant time to ensure that staffing and procedures are ready to provide borrowers with a high level of support,” the senators wrote in a letter to President Joe Biden.
One servicer even noted in its response that attempting to move over 43 million borrowers back into repayment at once is “unprecedented.”
Other main findings from the responses include:
The payment pause has provided significant relief to borrowers, with 2.5 million borrowers having fully repaid their loans during the pandemic;
Most borrowers had very little contact with their servicers during the pandemic, suggesting they will not be adequately prepared to restart payments;
Servicers need more time to ensure staffing is sufficient to support borrowers;
And transitioning borrowers from FedLoan Servicing, which recently announced it is not extending its contract, will require additional time to ensure borrowers are not harmed in the process.
Last week, the Pennsylvania Higher Education Assistance Agency (PHEAA) notified the Education Department that it would not extend its 12-year-old contract for FedLoan Servicing – which handles the loans of 8.5 million borrowers – beyond December 14. The senators wrote in their letter that attempting to restart payments only weeks after transferring servicers would “overwhelm an already broken student loan system.”
The fight to extend the payment pause continues to grow. On June 21, 64 Democrats, led by Senate Majority Leader Chuck Schumer and Warren, urged Biden in a letter to extend the payment pause until March 31, 2022, or until the economy returns to pre-pandemic employment levels, whichever is longer.
A few days later, 128 organizations, including the American Civil Liberties Union (ACLU) and Service Employees International Union (SEIU), sent a letter to the president, urging him to extend the payment pause until the administration has followed through on its promises to fix the student-loan system and cancel federal student debt.
And on June 30, Patty Murray and Bobby Scott, chairs of the Senate and House Education Committees, respectively, sent a letter to Biden urging him to extend the payment pause until early 2022 to ensure borrowers have the information they need to restart payments.
Education Department officials have also reportedly urged Biden to extend the payment pause, and while Education Secretary Miguel Cardona has not confirmed or denied whether such an extension will happen, he has hinted at the possibility of doing so.
“As the economy recovers from this unprecedented crisis, borrowers should not be faced with an administrative and financial catastrophe just as they are beginning to regain their footing,” the senators wrote. “We strongly urge you to extend the pause on student loan interest and payments in order to allow time to begin to repair the broken student loan system.”
Debt is all-American, Astra Taylor says. And she doesn’t mean that in a good way.
Taylor, who founded the Debt Collective, which calls for the cancellation of all forms of debt, namechecks Thomas Jefferson as a founding father of how we understand debt today.
In the early 1880s, he wrote in a letter that debt should be used as a tool to control Indigenous people “because we observe that when these debts get beyond what the individuals can pay, they become willing to lop them off by a cession of lands.” This idea has “carried over through the 20th century,” Taylor said, and she’s made it her mission to end in the 21st. Our relationship with debt can be all-American in a different – and better – way, she said in an interview with Insider.
Her organization is the country’s first membership-based union for debtors and allies, and she said it’s a necessary step for true democracy to finally emerge in the US. She’s offering her help to President Joe Biden, even drafting an executive order she wants President Joe Biden to sign to cancel student debt for all borrowers.
Even if he can cancel all student debt by simply signing a piece of paper, Taylor said it wouldn’t be enough – all debt in the country has to be erased so borrowers are no longer controlled by money they will never be able to pay off.
“I think it’s really important to understand that relationships of credit and debt are always political,” Taylor said. “It’s a power relationship masquerading as a relationship of equality,” adding that it’s time for Americans to move beyond that dynamic.
Many Americans who hold student debt fear they will never be able to pay it off before dying, as Insider previously reported, and given that multiple left-leaning studies have shown that debt cancellation would stimulate the economy by freeing up money for borrowers to spend elsewhere, Taylor said there’s no reason why Biden should not act on the opportunity.
The roots of debt and democracy
As Taylor explained in an opinion piece for The New York Times last week, the Reconstruction era that followed the Civil War had another name among formerly enslaved people: the Jubilee. But although slavery was abolished, debt quickly took its place in the form of “sharecropping,” which served as a tool to control marginalized communities and allow white landlords “generations of exploitable labor.”
This kind of coercion through debt mutated but never went away, Taylor said, citing predatory lending and redlining, or the practice of housing discrimination based on race which the Consumer Financial Protection Bureau (CFPB) found evidence of this year. Lawmakers like Sen. Elizabeth Warren argue that student-loan servicers are currently taking advantage of borrowers in a similar way.
Taylor said the economic recovery Biden touts does not reflect the disproportionate debt burden on minority communities. For example, upon graduation, Black student debt borrowers typically owe 50% more than white borrowers. Four years later, Black borrowers owe 100% more, according to 36 civil rights organizations.
The Debt Collective’s work to ensure debtor’s remain politically independent will help eliminate the disproportionate burden of debt, and, as Taylor put it, “revive the Jubilee.” Taylor’s ideas are intersecting more and more with the mainstream. For example, this week Bloomberg’s Odd Lots podcast interviewed “independent renegade economist” Steve Keen, who called for a “modern Jubilee.”
Biden is ‘playing with fire’ on debt cancellation
During his campaign, Biden promised to immediately cancel $10,000 in student debt for all borrowers, but he has not yet fulfilled that promise and has not commented on if, or when, he will follow through. Taylor told Insider that there are “tremendous risks” accompanied with not delivering on debt cancellation.
“They’re playing with fire,” Taylor said. “To break this promise they fully have the ability legally to do is just so dangerous.”
Taylor argues that instead of investing in debt collection, Biden should invest in free education. Plus, she says, eliminating debt would allow people to invest in other things, like housing.
The Education Department has so far cancelled some debt for certain groups of people, but Americans continue to hold $1.7 billion in student debt.
Biden promised he would cancel student debt, Taylor said. “Why would you risk all of the disappointment and bad faith that will result from not meeting the moment?”
President Joe Biden’s Education Department on Friday made progress in its promise to reform the student-debt system by canceling student debt for three more groups of defrauded borrowers.
The Education Department announced on Friday that it had approved borrower defense claims from 1,800 borrowers who attended the for-profits Westwood College, Marinello Schools of Beauty, and the Court Reporting Institute, resulting in approximately $55.6 million in relief.
“Today’s announcement continues the U.S. Department of Education’s commitment to standing up for students whose colleges took advantage of them,” Education Secretary Miguel Cardona said in a statement. “The Department will continue doing its part to review and approve borrower defense claims quickly and fairly so that borrowers receive the relief that they need and deserve.”
According to the press release, this is the first time the department has announced approved borrower defense claims for students who attended for-profit institutions other than ITT Technical Institutes, Corinthian Colleges, and American Career Institute since 2017.
The debt-cancellation methodology created under Education Secretary Betsy DeVos, known as the “borrower defense to repayment, compares 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.
While President Barack Obama’s Administration approved 99.2% of claims by defrauded borrowers, President Trump’s Education Secretary Betsy DeVos denied 99.4% of those filed during her tenure. DeVos’ method 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.
With regards to Westwood College, the department found that from 2002 to the college’s closure in 2015, the school misrepresented students’ abilities to transfer credits and misled students in finding appropriate career choices, leaving students “worse off” after attending the school. 1,600 of those students are receiving $53 million in debt relief.
The department also found that Marinello Schools of Beauty “made widespread, substantial misrepresentations” on the type of education they offered, and 200 of those students will receive $2.2 million debt relief, and it found that the Court Reporting Institute misrepresented how long it would take students to complete the program, resulting in 18 of those students receiving $340,000 in debt relief.
This brings total loan cancellation based on borrower defense under Biden to over $1.5 billion for nearly 92,000 borrowers.
A new hire at the Education Department is another in the growing number of experts who have fought alongside Massachusetts Sen. Elizabeth Warren to reform the student-loan debt system.
Toby Merrill, founder of the Project of Predatory Student Lending at the Legal Services Center of Harvard Law School, was hired as the Education Department’s Deputy General Counsel in the Office of the General Counsel on Tuesday, according to a press release.
The Project represents low-income student-loan borrowers in predatory lending cases against for-profit schools, and according to its website, Merrill has represented borrowers in cases that resulted in almost $1 billion in student-debt cancellation. Notably, her work has caught the eye of Warren, a prominent Democrat pushing for President Joe Biden to cancel more student debt.
Another Warren ally – Richard Cordray – joined in May as the head of the Federal Student Aid office, and while he has not publicly commented on cancelling student debt, he has, like Merrill, shared much of Warren’s agenda throughout his career.
During her presidential campaign, Warren proposed to direct the Secretary of Education to cancel $50,000 in student debt per person, and Merrill, along with Eileen Connor and Deanne Loonin from the Project, wrote a letter to Warren in 2020 affirming her legal ability to cancel student debt using executive action.
“In assessing your proposal, we have consulted the statutory and regulatory framework governing federal student loan programs administered by the Department of Education, as well as the framework and controlling interpretations of the budgetary structure of these programs,” Merrill, Connor and Loonin write. “We conclude that your proposal calls for a lawful and permissible exercise of the Secretary’s authority under existing law.”
They added that “the power to create debt is generally understood to include the power to cancel it.”
Under the Higher Education Act, as Merrill, Connor, and Loonin explained, Congress gave the Education Secretary the unrestricted authority to create and cancel or modify federal student debt, and although Warren did not win the presidency, she has been urging Biden to follow through on her proposal and provide borrowers with $50,000 of student debt relief.
Whether Biden will use the authority Warren and Merrill believe he has is unclear. Although he campaigned on cancelling $10,000 in student debt, he has said he does not think he has the authority to cancel $50,000 of it, but he has asked the Education and Justice Departments to review his ability to do so.
“It’s time for President Biden to #CancelStudentDebt,” Warren wrote on Twitter. “People need this. Our country needs this. And one of the best ways to create a 21st-century economy is by investing in people who have invested in their own education.”
Do you have a story about trying to cancel student debt? Reach out to Ayelet Sheffey at firstname.lastname@example.org.
President Joe Biden promised to lessen the $1.7 trillion student-debt crisis during his campaign, promising debt cancellation and reforms of key student-loan programs.
While it’s admittedly early, Biden hasn’t fulfilled any of those promises yet. The most that can be said is that his is starting to consider working on them, and it’s going to take a while to see progress.
One of the president’s first actions in office was an extension of the student-loan payment pause during the pandemic, providing relief to the 43 million borrowers. But the pause is lifting come October, and borrowers, experts, and lawmakers worry the Biden administration is not doing enough to protect borrowers when that happens.
On Thursday, the Student Borrower Protection Center (SBPC), which advocates for borrowers’ rights, led 128 organizations in calling for the pause to be extended until Biden follows through on reforming loan forgiveness programs and cancelling student debt.
“There is a very long way to go to deliver on the promises for student loan borrowers, between what was promised and where we are,” Seth Frotman, executive director of the SBPC, told Insider. “A lot of that is obviously because of how broken the system is and how many of the problems we’re facing are decades in the making.”
Here’s what Biden promised on student debt during his campaign, and where those promises currently stand:
Cancelling $10,000 in student debt per borrower
Biden promised to cancel $10,000 in student debt per person. In a speech on November 16, he said student loans are holding borrowers up, and forgiving $10,000 “should be done immediately.”
His campaign website said he’d work with Democrats to “authorize up to $10,000 in student debt relief per borrower” as part of COVID-19 relief, but the $1.9 trillion stimulus package he signed in March didn’t include that.
Once he took office, he said at a CNN town hall in February that he was “prepared to write off the $10,000 debt but not $50 [thousand], because I don’t think I have the authority to do it.”
The Justice and Education Departments are reviewing Biden’s executive authority to cancel $50,000 in debt, but he has yet to cancel even $10,000.
Cancelling debt for students at public colleges and HBCUs
Biden also campaigned on forgiving all undergraduate tuition-related federal student loan debt for borrowers from public colleges and universities earning up to $125,000 per year, and from private Historically Black Colleges and Universities (HBCUs) and minority-serving institutions.
Biden dedicated funding to HBCUs in both his stimulus and infrastructure proposals, but not the wider forgiveness.
Some HBCUs have used Biden’s stimulus money to cancel debt for their own students. But given student debt’s disproportionate burden on Black borrowers, organizations continue to call for the president to cancel their debt.
Reforming student-loan programs
The Public Service Loan Forgiveness (PSLF) program is supposed to forgive student debt for public service workers after 120 qualifying monthly payments, but it is notoriously flawed, continuing to reject 98% of applications. Biden promised to fix the program, and those fixes are currently in the works.
Biden’s regulatory agenda, released earlier this month, included plans to reform PSLF, along with amending the “borrower defense to repayment,” which forgives loans for students who were defrauded by for-profit schools.
The process for implementing these improvements could be lengthy, though, with the department planning to finalize the new rules by April 2022. It held public hearings this week to gather feedback on the loan system, and it will soon determine a path forward for rulemaking.
Borrowers with student loans haven’t had to pay them back through the pandemic, but that pause on payments is set to lift at the end of September. Although Education Secretary Miguel Cardona has hinted at a futher extension of the pause, no details have yet been released.
Sixty-four Democrats want to give borrowers certainty – and an additional six months, at least, free of student-loan payments.
Senate Majority Leader Chuck Schumer, Massachusetts Sen. Elizabeth Warren, Massachusetts Rep. Ayanna Pressley, and Connecticut Rep. Joe Courtney led 60 other Democratic colleagues in sending a letter to President Joe Biden on Wednesday, urging him to extend the student-loan payment pause until March 31, 2022, or until the economy returns to pre-pandemic employment levels, whichever is longer.
The Democrats wrote in the letter, obtained by Insider, that the pause on student-loan payments and interest have provided “essential relief” to borrowers during the pandemic.
“Borrowers have reaped significant benefits from the ongoing payment pause, taking the opportunity to pay down other debt, relieve financial pressures from lost jobs or decreased earnings, and support their families’ need,” the letter said.
But the lawmakers added that the “scheduled resumption of student loan payments in October could create a significant drag on our economic recovery.”
The letter noted that even as the economy is recovering from the pandemic, it is not reaching women and people of color equally. It cited research from Brandeis University that found the median Black borrower owes 95% of their debt twenty years after starting college, compared to only 6% for the median white borrower.
Insider reported last week that women can expect to earn a $35,000 salary right after graduation – not much more than the average female student-debt load, according to the American Association of University Women.
Warren was one of the Democrats that sent a letter to the CEOs of all student-loan servicers on Monday, requesting information on how they are best preparing borrowers to restart loan payments, warning of the “disastrous” consequences of dropping borrowers back into repayment without proper assistance.
Cardona said during a Senate hearing last week that he is continuing to have conversations on extending the payment pause past September, but the Education Department declined to provide further details on those conversations.
This letter is the latest of Democrats’ efforts to protect borrowers. Warren and Schumer are leading the effort to call on Biden to cancel $50,000 in student debt per borrower using his executive powers – that of which the Education and Justice Departments are currently reviewing.
The Democrats also acknowledged those reviews in their letter to Biden and urged their quick completion, but given the fast-approaching expiration of the payment pause, they want Biden to act on extending that first.
“President Biden can and must cancel student debt with the stroke of a pen. We urgently call on him to act,” Pressley said in a statement. “In the interim, extending this payment pause will provide a crucial additional layer of relief for millions of borrowers. We can’t turn our backs on these families as we work toward an equitable economic recovery.”
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.”
Millions of Americans have enjoyed a reprieve from the squeeze of student debt during the pandemic. But, come fall, the student-debt crisis could pick up where it left off – or snowball into an even bigger problem.
The pause on student-loan payments and zero interest accrual that have been in place since March 2020 will lift at the end of September. When it does, borrowers will be paying 1% more in interest than they did in 2019. Although rates are still relatively low compared to previous years, Forbes reported that the new interest rates will cost borrowers as much as an additional $590 per $10,000 borrowed on a 10-year repayment term.
The impending lift on the payment pause, coupled with rising interest rates, doesn’t bode well for millions of borrowers, who have been able to stay financially afloat during the pandemic without the burden of paying off their student-loan debt. That’s especially true for millennials, for which student-loan debt has been one of many balls in a long-time juggling act of financial challenges.
Many have been hoping they wouldn’t have any student-loan debt at all come fall – or at least, a much lighter load.
Joe Biden campaigned on supporting $10,000 in student debt cancelation per person, but since becoming president, he’s given no clear timeline for doing so. He hasn’t included his campaign promise in his stimulus plan, infrastructure plan, or his budget, and has resisted calls from Democratic lawmakers to cancel up to $50,000 per person using his executive powers. While he released a regulatory agenda on Friday that plans to improve student-loan forgiveness programs by 2022, it’s not the immediate relief Democrats are looking for, and its details are vague.
And the generation has dealt with all of this while shouldering the lion’s share of student-loan debt. If Biden continues not to act on debt relief, the student-loan crisis has the potential to intensify, adding to the pile of millennial economic challenges.
Student debt has left a stain on millennials’ adulthood
Forty-three million borrowers currently share the $1.7 trillion of national student-loan debt. As of 2019, the 15.1 million borrowers ages 25 to 34 – a large chunk of the millennial population – owed an average of $33,000.
“I still haven’t been able to save enough to put a down payment on a house and commit to another 30-year loan,” Daniela Capparelli, who graduated with $150,000 debt, told Insider in the beginning of 2020, when she was 35. “I often feel like I already have a mortgage without the house.”
For the millennials who have found themselves at the bottom of the intragenerational millennial wealth gap that the pandemic has exacerbated, student debt is especially painful. This group was more likely to already have lower earnings pre-pandemic, and to burn through savings when hit by unemployment or pay cuts.
The pause in payments has been a temporary solution to the nation’s debt burden. Borrowers have saved $2,000 on average in interest during this time, per a report by travel research group Upgraded Points which also noted, “while those couple thousand dollars could have been imperative in keeping borrowers in the black during pandemic-related hardships, these borrowers are still far from climbing out of the holes they dug in college.”
When the pause lifts, it has the potential to leave struggling millennials feeling more slammed with student debt than before, after a year spent falling further financially behind on other areas.
Biden has canceled billions of student loans that are only 0.2% of the total
Now, Biden has taken some steps toward student-loan debt assistance. He extended the payment pause, which was set to end in January, through September 30. And, through the Department of Education, he cleared up billions of dollars in debt in just a few months for borrowers defrauded by for-profit schools and borrowers with disabilities.
But, as Insider’s Ayelet Sheffey reported, this still left trillions of outstanding debt. Alan Collinge, the founder of Student Loan Justice, told her 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,” he said. “The people who are hurt the worst tend to be the people who have student-loan debt.”
So far, $2.3 billion in student debt has been cancelled – only 0.2% of student loans swimming through the system.
In February, he effectively rejected a plan put forward by Sens. Elizabeth Warren and Chuck Schumer to wipe out $50,000 in student-loan debt per borrower.
“I will not make that happen,” he had said to a CNN town-hall audience, adding that he believed loan forgiveness depends on whether borrowers attended a private or public college. “I’m prepared to write off $10,000 in debt, but not 50. I don’t think I have the authority to do it.”
Both Democrats and cities have urged Biden to cancel $50,000 in student debt per borrower, arguing that it would provide immediate relief to borrowers if Biden used his executive authority to do so. But there’s a discrepancy among Biden and lawmakers on whether he can actually use his executive powers to cancel debt.
He told The Washington Post that it is “arguable” the president can use executive powers to cancel student debt, and he would be unlikely to do so. That means the status of the cancelation of a minimum of $10,000 of debt remains in Congress’ hands.
Student-loan forgiveness would be a ‘lifeline’ for millennials
Student-loan relief would benefit millions.
A Department of Education (DOE) analysis obtained by Yahoo Finance found that $50,000 in student-loan forgiveness per person would erase the entire debt for 84% of borrowers in the US with federal loans, while $10,000 in forgiveness would erase the entire debt for 35% of these borrowers.
That includes everyone from Gen Z to those over the age of 50. But millennials, facing one economic conundrum after another, have adopted new social norms to suit the times, hitting milestones like marriage and homeownership later than their parents, if they happen at all. The pandemic has created a whole new slew of crises for them that have exacerbated existing ones, student debt chief among them.
Student-loan forgiveness was a top priority for voters in the election. If Biden doesn’t fulfill his campaign promise to relieve $10,000 in student debt, he’d be leaving the generation, many of whom were banking on him to absolve at least a portion of their biggest burdens, screwed yet again.
“We need some help, and that forgiveness, for a lot of us, would just be a lifeline,” Alexander Cockerham, 38, who took out $42,000 in federal in private loans to attend school, previously told Insider.
But the resumption of student loan payments is drawing near, with little to no action in sight. In early April, Biden’s chief of staff, Ron Klain, told Politico that the White House was “looking into” its legal authority to cancel $50,000 per person. Shortly afterward, the White House press secretary, Jen Psaki, said that option wasn’t being ruled out.
An Education Dept. spokesperson told Insider that the agency remains “committed to delivering” targeted relief to borrowers and helping all of them manage repayment, and continues to closely review data related to return to repayment. It is also working with the Department of Justice and White House “as quickly as possible” to review all student debt cancellation options. (The White House did not respond to a request for comment).
While cancellation doesn’t exactly need to happen before the pause lifts, it would be even more beneficial to borrowers if it did, helping them lower the amount they would pay interest on or even preventing them from ever having to pay again altogether. Education Secretary Miguel Cardona said in May he has not ruled out further extending the pause, but, again, no action has been taken yet to do so.
If Biden fails to cancel student debt, he’s sacrificing opportunities to help narrow the racial wealth gap, assist low-income borrowers, and boost the economy. For millennials, specifically, it would just be the latest way they can’t catch a break.