15 major labor unions want Biden to cancel all student debt for public service workers, report says

joe biden
President Joe Biden.

  • 15 labor unions called on the DOE to fully cancel student debt for public service workers through executive action.
  • They cited problems with the Public Service Loan Forgiveness program, in which 98% of applicants were rejected.
  • This follows Biden’s request for the DOE to prepare a memo on his authority to cancel up to $50,000 in debt per person.
  • See more stories on Insider’s business page.

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.

Cardona has already acted to cancel debt for about 72,000 borrowers defrauded by for-profit schools, along with over 41,000 borrowers with disabilities. He also expanded the scope of the pause on loan payments to apply to 1.14 million borrowers with private loans under the Federal Family Education Loan (FFEL) Program.

The DOE has not yet commented on the unions’ request.

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3 things Biden’s Department of Education has done so far to tackle the $1.7 trillion student-debt crisis

Kingston University graduation
Kingston University students prepare to graduate.

  • Progressives want Biden to cancel up to $50,000 of student debt per person, and he’s resisting.
  • But his DOE has already canceled billions in debt for defrauded borrowers and those with disabilities.
  • The DOE also expanded the pause on debt collection to those with privately held loans under the FFEL Program.
  • See more stories on Insider’s business page.

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.

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Gen Z is paying double what boomers paid for college – and the gap will only widen in the future

college students
Gen Z is staring down a pricey college experience.

  • College costs are more than double what they were in the 1970s, according to a GoBankingRates report.
  • Boomers paid $39,780 in today’s dollars for a four-year public university. Gen Z is paying $90,875.
  • It’s a bad sign for Gen Z, as college costs are expected to continue to climb.
  • See more stories on Insider’s business page.

While US politicians continue to debate student-loan forgiveness, college tuition continues to soar.

Overall college costs are twice what they were in the 1970s, according to a recent GoBankingRates report that assessed generational differences among college expenses. It signals a rough road ahead for Gen Z, the first of whom just began to graduate college in 2019.

The report looked at the College Board’s estimates for average annual costs of tuition, fees, and room and board. It assumed that students attended a four-year institution between ages 18 and 22 for baby boomers, Gen X, millennials, and Gen Z, adjusting estimates for inflation.

The chart below shows just how much college costs have climbed.

From fall 1973 to spring 1977, boomers paid around $39,780 in today’s dollars for four years of public college. That’s a little more than half the cost for millennials attending public college from fall 2006 to spring 2010: $70,000. And what Gen Z is paying today is more than double that: $90,875.

The numbers are even starker for private tuition, which cost around $80,000 in inflation-adjusted dollars for boomers, compared to $165,000 for millennials and a whopping $210,000 for Gen Z.

Gen X experienced the beginning of this uphill battle, as tuition costs rose at a compounded annual growth rate of more than 7% a year from fall 1973 through the fall 1990 in real dollars. From fall 1990 to spring 1994, they would have paid $43,857 at a four-year public university and $115,000 for a private college, adjusted for inflation.

College has become so expensive, some question its value

College is expensive for many reasons, including an increase in financial aid, a lack of state funding, a need for more faculty members and money to pay them, and ballooning student services.

A surge in demand is also driving the price hike, Richard Vedder, an author and distinguished professor emeritus of economics at Ohio University, previously told Insider: “The rewards for college have expanded and grown from 1985 to a little after 2000 and sort of leveled off in the past decade.”

The “advantage of a degree today is less than it was 10 years ago, because of the rising cost,” he added. “The return on investment has fallen.”

Just ask the 49% of indebted millennials still paying off their student loans who said in an Insider and Morning Consult survey that college wasn’t worth the cost.

The pandemic scrambled this equation somewhat, with remote learning leading some to question the value proposition. Insider’s Bradley Saacks and Shana Lebowitz reported in summer 2020 that at least some colleges faced the prospect of students not returning for the upcoming school year, with potentially huge hits to revenue.

Harvard projected last spring that it would lose out on hundreds of millions of dollars during the current school year due to fewer students and no room-and-board revenue. NYU professor Scott Galloway said at a December Insider event that academia is ripe for disruption and likened Harvard to a “$50,000 streaming platform.” But even Galloway said tuition costs haven’t started coming down yet, and don’t seem likely to.

The overall increase in students attending college now compared with previous years indicates that the advantages college offers still outweigh its increasing costs for many, which will fuel costs further. And getting a degree has become increasingly important, according to Joel Anderson, author of the report.

As he wrote of Gen Z, “Not only will they need more money – comparably – than any previous generation, but the shift toward a service economy also means that a career without that pricey education is harder than ever.”

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Canceling student debt would mostly benefit middle- and high-income families, JPMorgan finds

student loans
  • JPMorgan found student debt cancellation would mostly benefit middle- and high-income families.
  • However, income cutoffs would significantly reduce the amount of debt forgiven.
  • Any long-term solution for student debt should factor in low-income families’ tuition costs and enrollment.
  • See more stories on Insider’s business page.

With student debt in the US totaling approximately $1.7 trillion, there is no question that forgiving that debt would be a welcome relief for many Americans. But whether $10,000 or $50,000 in student debt is cancelled per person, experts found middle- and high-income families would reap most of the benefits.

A new report from JPMorgan Chase examined four different cancellation scenarios: universal cancellation of up to $10,000, cancellation of up to $50,000 for people earning less than $125,000, cancellation of up to $25,000 for people earning less than $75,000 and phasing out at $100,000, and cancellation of up to $50,000 with the same phaseout.

The report found that income cutoffs would significantly reduce the total amount of debt forgiven and make a cancellation effort less regressive.

“This relative regressivity is driven by the fact that higher-income households carry larger debts, often from professional or graduate degrees,” the report said. “Conversely, more aggressive income targeting does not necessarily result in a greater share of forgiveness going to borrowers in a debt trap or facing long repayment horizons.”

Here are the main findings of the report:

  • A $10,000 cancellation would forgive 27% of the total outstanding debt, a $50,000 cancellation with the income limit would forgive 50% of the debt, a $25,000 cancellation with a phase out would forgive 28% of the debt, and a $50,000 cancellation with a phase out would forgive 39% of the debt;
  • A disproportionate amount of debt forgiveness would go to middle- and higher income families since they tend to hold more student debt;
  • A greater share of forgiveness goes to borrowers in a debt trap or under long-term repayment plans when the cancellation ceiling is higher;
  • And the distribution of cancellation benefits by race is fairly unchanged under the scenarios, meaning the scenarios may not be effective at closing the racial wealth gap.

The report also noted that if people believe more debt will be cancelled in the future, they might change their behaviors by taking out more debt or repaying it slower than anticipated. An income cutoff for debt forgiveness could also reduce people’s incentives to work, whereas a one-time cancellation could avoid those problems.

Progressive lawmakers have been unrelenting in calling for President Joe Biden to cancel up to $50,000 in student loan debt. While Biden has said he would consider cancelling $10,000 in debt, lawmakers like Sen. Elizabeth Warren of Massachusetts and Senate Majority Leader Chuck Schumer have repeatedly argued that if the president can legally cancel $10,000 in debt, there’s no reason he cannot cancel $50,000.

“If it’s OK legally to do a small amount, it’s OK legally to do a larger amount,” Schumer said during a press call on Monday.

During a CNN town hall on February 16, Biden said he would support a higher amount of debt cancellation through legislation, but Schumer said executive action remained “far and away, the quickest, best, and easiest” method. White House Press Secretary Jen Psaki said during a press briefing on February 17 that the Justice Department would review Biden’s ability to cancel student debt through executive action.

But despite the calls to cancel $50,000 in student loan debt, even the “most generous” cancellation scenario would not solve the bigger problems that drive the high debt levels in the country.

“Any economic forces that contributed to the current stock of student debt today, such as increasing tuition costs and increasing enrollment among low-income families, will continue to push tomorrow’s students to accumulate debt,” the report said. “Any long-term solution to relieving students is incomplete without addressing these underlying forces.”

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Only 32 student loan borrowers – ever – have qualified for full forgiveness through an income-driven repayment plan

Elizabeth Warren
“Our student loan system is broken,” Sen. Elizabeth Warren, who supports student loan forgiveness, wrote in a tweet. “Income-based repayment is supposed to offer relief – but only 32 people’s loans have been forgiven by the program. Not 32,000. Just 32.”

  • The first federal income-driven repayment plan was created in 1995 and has since enrolled millions of student loan borrowers in the programs.
  • But only 32 people have ever qualified for full student debt forgiveness through federal repayment plans.
  • The report comes as House Democrats passed a stim bill provision that student debt forgiven through 2025 won’t be taxed.
  • See more stories on Insider’s business page.

Only 32 borrowers have ever qualified for full student loan forgiveness in federal income-driven repayment programs, according to a study by the National Consumer Law Center released Monday.

The first income-driven repayment (IDR) plan – then known as income-contingent repayment – was introduced in 1995, giving student loan borrowers the option to set their monthly payments based on their income.

Over the years, other IDR plans emerged – all of which serve a similar purpose in setting a “borrower’s monthly payment based on a portion of the borrower’s income and cancel any remaining loan balance after 20 to 25 years of payments” according to the NCLC report.

Over eight million borrowers are currently enrolled in the repayment programs, and two million people have been in repayment for over 20 years, citing the policy brief. But in the more-than-25-year existence of the federal repayment programs, only 32 people were ever eligible for full student debt cancellation.

“Cancellation was designed to ensure that low-income borrowers are able to eventually get out from under the burden of unaffordable debt and insulate them from the harmful financial effects of this ‘negative amortization’ – ensuring that federal student loans did not turn into the type of debt trap commonly associated with payday loans and predatory subprime mortgages,” the study read.

“If this structure worked as intended when first authorized more than two decades ago, low-income borrowers would routinely see their debts cancelled under IDR today.”

The policy brief by the NCLC comes as Democrats included a provision allowing an exemption on all student-loan forgiveness from taxation through the end of 2025 as part of the $1.9 trillion stimulus bill that the House signed on Wednesday.

The provision in the upcoming stimulus bill came as Biden extended student loan forbearance through September. The president also expressed support in forgiving $10,000 in student loan debt, but Democrats are increasing pressure on him to cancel $50,000 per borrower.

The stimulus provision was included by Sen. Bob Menendez of New Jersey and Sen. Elizabeth Warren of Massachusetts, who previously ran a presidential campaign on the platform of student debt forgiveness. Warren shared an article by Inside Higher Ed about the NCLC report on Twitter Wednesday.

“Our student loan system is broken,” Warren wrote in the tweet. “Income-based repayment is supposed to offer relief – but only 32 people’s loans have been forgiven by the program. Not 32,000. Just 32.”

“We need to stop blaming student borrowers for this mess and #CancelStudentDebt now,” she wrote.

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A quarter of Americans support forgiving all federal student-loan debt

College debt
Student-loan debt reached a national high of $1.5 trillion in 2019.

  • Democrats have been going back and forth on how much federal student-loan debt to forgive.
  • President Biden supports up to $10,000, while some progressive Dems are calling for $50,000.
  • A new Insider poll found a quarter of Americans support forgiving all federal student loans.
  • Visit the Business section of Insider for more stories.

Recently, Democrats have been clashing over how much federal student-loan debt to forgive.

Sens. Elizabeth Warren and Chuck Schumer called for $50,000 in student loan forgiveness, but President Joe Biden essentially rejected that plan, throwing his support behind $10,000 in forgiveness.

“I will not make that happen,” Biden said of the $50,000 proposal at a CNN town hall. Democrats like Warren, Schumer, and Reps. Ayanna Pressley and Alexandria Ocasio-Cortez doubled down on their support for the higher loan forgiveness.

In Insider’s most recent poll, respondents were asked: “A policy under consideration would forgive an amount of student loan debt held by Americans. Do you support this? And if so, what amount?”

Out of 1,154 respondents:

  • 25% support “forgiving all federal student loans.”
  • 13% support forgiving $50,000 in federal student loans, while 12% support forgiving $25,000.
  • 19% support forgiving $10,000 in federal student loans.
  • 22% of respondents said “I do not support any amount of student loan forgiveness.”
  • 9% of respondents said “I don’t know.”

When it came to party affiliations, respondents varied in how much forgiveness they wanted. Here are some key statistical takeaways:

  • 30% of respondents who said they would probably vote in their state’s Democratic primaries or caucuses in order to support forgiving all federal student loans. 
  • 15% of likely Republican voters also support forgiving all federal student loans.
  • 30% of respondents who would “probably participate in another primary or caucus” said they support forgiving all federal student loans
  • 25% of respondents who don’t vote in primaries also support complete forgiveness.
  • 20% of both likely Republican and Democratic voters support $10,000 in federal student loan forgiveness.
  • 20% of likely Democratic voters support $50,000 in forgiveness, as do 9% of likely Republican voters.
  • Conversely, 40% of likely Republicans don’t support any “amount of student loan forgiveness,” while 10% of likely Democratic voters don’t support any amount of forgiveness.

 There was also some division between different age groups:

  • 33% of respondents between the ages of 30 and 44 support forgiving all federal student loans, the highest percentage among age groups.
  • Conversely, 40% of respondents over 60 do not support any amount of student loan forgiveness, the highest percentage among age groups. Only 11% of respondents ages 18 to 29 don’t support any forgiveness, the lowest percentage among different age groups.

As Insider’s Hillary Hoffower and Madison Hoff previously reported, forgiving student loan debt – even just $10,000, like in Biden’s proposal – could benefit millions of Americans.

Importantly, student loan forgiveness could make a tangible impact in narrowing the racial wealth gap. Black students graduate with more debt than their white peers. Further, around 87% of Black students at four-year colleges take out loans, while 60% of white students take out loans. 

SurveyMonkey Audience polls from a national sample balanced by census data of age and gender. Respondents are incentivized to complete surveys through charitable contributions. Generally speaking, digital polling tends to skew toward people with access to the internet. SurveyMonkey Audience doesn’t try to weight its sample based on race or income. Polling data collected 1,154 respondents February 22, 2021 with a 3 percentage point margin of error.

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