Delaware State University will use Biden’s stimulus to cancel over $700,000 in student debt

Student Debt
  • Delaware State University will cancel over $700,000 in student debt for pandemic financial hardships.
  • This amounts to about $3,276 in cancelation for each eligible students, which encompass recent graduates.
  • The university is using Biden’s stimulus funds to deliver this financial relief to its students.
  • See more stories on Insider’s business page.

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.

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Biden administration taps Warren ally to lead Office of Federal Student Aid, a promising sign for efforts to wipe out student debt

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  • Richard Cordray, former head of the CFPB, is set to become the head of the Office of Federal Student Aid.
  • Cordray will be tasked with figuring out how to address the $1.6 trillion of student debt owed by at least 42 million Americans.
  • Cordray is a longtime political ally of Sen. Elizabeth Warren.
  • See more stories on Insider’s business page.

The US Department of Education announced that Richard Cordray, the former director of the Consumer Financial Protection Bureau, was selected to head the Office of Federal Student Aid.

“It is critical that students and student loan borrowers can depend on the Department of Education for help paying for college, support in repaying loans, and strong oversight of postsecondary institutions,” US Secretary of Education Miguel Cardona said in a statement. “Cordray has a strong track record as a dedicated public servant who can tackle big challenges and get results.”

The move signals a shift in federal student loan policy, and a potential embrace of loan cancellation policies, Politico points out, as Cordray is a longtime political ally of Sen. Elizabeth Warren. Cordray also served as attorney general of Ohio and unsuccessfully ran for governor of Ohio in 2018.

Of Cordray’s appointment, which she pushed for, Warren said: “I’m very glad he will get to apply his fearlessness and expertise to protecting student loan borrowers and bringing much needed accountability to the federal student loan program.”

The Republican response to the appointment was mixed, Politico pointed out, with some embracing him as a good pick. Others, like Rep. Virginia Foxx of North Carolina, the ranking member on the House Education and Labor Committee, expressed skepticism, in a statement to CNN, that he “has the capability and serious character required to carry out the duties of COO of FSA.”

Cordray, who starts on Tuesday, fills the position after Mark Brown, a pick from the Trump administration with a year left to serve, resigned earlier this year after pressure from progressives.

As the head of the Office of Federal Student Aid, Cordray would be tasked with figuring out how to address the $1.6 trillion of student debt owed by more than 42 million Americans. He would also be charged with figuring out what happens after student debt repayment and interest accrual has been paused for over a year during the pandemic – set to resume in September.

In prior positions, Cordray has pushed the Education Department to reform its student lending systems and has called for more oversight on student loan servicing companies.

The announcement lines up with continued progressive pressure on the Biden administration to cancel student debt.

Cordray is primed to push for regulation of the student loan servicing industry as well as the for-profit university system under Cardona.

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Freezing student-loan payments saved just $2,000 per borrower, report finds

Average student loan balance
  • Student-loan payments are paused through September, with national savings of $82.7 billion on interest payments.
  • A report by Upgraded Points found this saved each borrower an average of $2,001 in interest.
  • California saved the most interest overall at over $8 billion – 10% of the national total.
  • See more stories on Insider’s business page.

President Joe Biden extended the pause on student loan payments through September 30, and while the inclusion of the 0% interest rate on those payments provided financial relief, it didn’t add up to much for the average individual.

A report released on April 5 by Upgraded Points – a travel research group – found that since student-loan payments were originally paused under the CARES Act in March, the average interest saved per borrower was $2,001, and the national average for principal paused per borrower was $34,971. The state that saved the most interest overall was California at over $8 billion (10% of the national total), with New York slightly behind at $5.2 billion in interest saved.

The report noted that while national averages and total state savings were high, “on an individual borrower level, average borrowers only saved a couple thousand dollars in interest over the 12 months. 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 report analyzed the states that saved the most interest per 100,000 people, DC, Georgia, and Maryland were the top three locales, which results from a combination of small populations and high savings. On the other hand, the top three states with the lowest savings per 100,000 people were Wyoming, Utah, and Alaska because although those states have smaller populations, they also generally have lower principal debts and therefore fewer interest savings.

Here are the other main findings of the report:

  • The national total interest savings is about $82.7 billion;
  • Similar to most interest saved per 100,000 people, DC, Georgia, and Maryland saved the most interest per borrower, as well;
  • And North Dakota, Iowa, and Wyoming were the states that saved the least amount of interest per borrower.
UP: National impact of student loan freeze
Via Upgraded Points, the national impact of the student loan freeze.

While the payment pause and interest freeze have been instrumental in helping borrowers financially during the pandemic, the student debt crisis still looms far beyond the pandemic, with 45 million Americans holding $1.7 trillion in student debt.

Biden has already acted on the crisis by canceling debt for borrowers defrauded by for-profit schools and borrowers with disabilities, but lawmakers and advocacy organizations continue to call for the president to cancel $50,000 in student debt per borrower to lift the debt burden.

Sen. Elizabeth Warren of Massachusetts is one of the leading lawmakers calling for student debt cancelation, and she said on Twitter on April 17 that borrowers need relief now.

“The whole student loan debt system is broken, and it’s placing a massive burden on tens of millions of people,” Warren said. “They need immediate relief. And we need big, structural change to make higher education within reach for every family.”

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36 civil rights organizations urge Biden to cancel $50,000 in student debt per borrower

Joe Biden
President Joe Biden.

  • In a letter, 36 civil rights organizations called on Biden to cancel $50,000 in student debt per person.
  • The letter said the student debt burden falls disproportionately on women and Black and Latino borrowers.
  • They want Biden to extend debt cancelation to all borrowers, including those with private loans.
  • See more stories on Insider’s business page.

The American student-debt problem encompasses 45 million people with a combined $1.7 trillion of debt, and much of the burden falls on communities of color. Civil-rights organizations want President Joe Biden to change that by canceling $50,000 in student debt per person.

On Monday, 36 civil rights organizations, led by the Leadership Conference on Civil and Human Rights, released civil rights principles for student debt cancelation in an effort to encourage the Biden administration to act on racial, gender, disability, and wealth disparities in the country. They said these disparities have left borrowers “on the brink of financial devastation” simply because they sought a higher education, and the only solution is to cancel $50,000 in student debt per person.

“As we navigate the concurrent crises of systemic racism, a global health pandemic, and the resulting economic recession, it is more important than ever that we take bold action that benefits everyone, especially communities of color,” the organizations said. “Student debt cancellation will help Black and brown borrowers build wealth and enable our economy to move forward as millions of Americans are able to start families, buy homes, and set up small businesses.”

The letter, which was signed by the National Association for the Advancement of Colored People (NAACP) and the American Civil Liberties Union (ACLU), outlined five principles that student debt cancelation should abide by:

  1. Debt cancelation must extend to all borrowers, including those with private loans.
  2. Debt cancelation should extend to all sectors of institutions, including public, private, and for-profit schools.
  3. The debt cancelation process must be easy to navigate – if it’s too difficult, many borrowers will not be able to access relief.
  4. Debt cancelation should not negatively impact borrowers’ credit scores.
  5. Debt cancelation should come with policies to increase access and affordability in the US higher education system.

The letter noted that upon graduation, Black borrowers typically owe 50% more than white borrowers, and four years later, Black borrowers owe 100% more. Canceling $50,000 per borrower would eliminate student debt for 75% of all federal borrowers, including full cancelation for 85% of Black borrowers and 96% of Latino borrowers in the lowest income quintile.

Biden’s Education Department has already taken some steps to cancel student debt for certain groups of borrowers. On March 18, Education Secretary Miguel Cardona canceled $1 billion in student debt for about 72,000 borrowers defrauded by for-profit schools, and on March 29, Cardona canceled student debt for 41,000 borrowers with disabilities.

And to build on Biden’s payment pause on all federal student-loan payments through September, on March 30, Cardona expanded the pause to borrowers with loans under the Federal Family Education Loan (FFEL) Program, helping 1.14 million borrowers with private loans.

Biden has asked the Justice Department and Education Departmentt to review his ability to use executive powers to cancel $50,000 in debt per person. White House Press Secretary Jen Psaki said in early April that Biden has not ruled out canceling that amount, although Biden had said in February that he “will not make that happen.

But Democratic lawmakers like Sen. Elizabeth Warren of Massachusetts remain adamant that Biden can and must use his executive powers to cancel $50,000 in student debt per person.

“I have legislation to do it, but to me, that’s just not a reason to hold off,” Warren said in a press call last month. “The president can do this, and I very much hope that he will.”

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Student-loan borrowers are battling for relief even after Biden’s administration canceled $2.3 billion: ‘We were taken advantage of’

college graduation
  • Biden’s Education Department has canceled billions in student debt, but trillions remain outstanding.
  • Even if you qualify for relief, you may not know about it, or you could get a 0% rate of forgiveness.
  • Borrowers told Insider there’s a lack of clarity, and experts say much more needs to be done.
  • See more stories on Insider’s business page.

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.

Alexander Cockerham
Alexander Cockerham.

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.

Joshua Kronemeyer
Joshua Kronemeyer.

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.

Called the Total and Permanent Disability Discharge program, it would reinstate loans if a borrower’s income rose above that level or if the borrower failed to submit income information.

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.

Laura staff photo
Laura Speake.

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.

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. And the Education Department released data requested by Warren showing that $50,000 cancellations would wipe out 84% of the federal student-debt pile.

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.”

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Elizabeth Warren says the government should fire student loan servicer Navient, which should fire its CEO

Elizabeth Warren
Sen. Elizabeth Warren (D-MA).

  • Sen. Elizabeth Warren said Navient CEO John Remondi should be fired at a hearing on Tuesday.
  • Navient, one of the largest student loan servicers, has been accused of misleading borrowers.
  • Remondi said the allegations are untrue and “not necessarily based on facts.”
  • See more stories on Insider’s business page.

Navient CEO John Remondi was at Sen. Elizabeth Warren of Massachusetts’ first hearing on student debt relief. Warren told Remondi that he should be fired for misleading student loan borrowers, but that wasn’t all.

“The federal government should absolutely fire Navient, and because this happened under your leadership, Navient should fire you,” Warren told Remondi during the hearing.

Warren, as the chair of the Senate Subcommittee on Economic Policy, called 11 witnesses to testify at the hearing to discuss the impact of student debt on borrowers, racial justice, and the economy.

Warren said in her letter to Remondi inviting him to testify at the hearing that while Navient currently services federal loans to 5.6 million borrowers and holds over $58 billion annually in federally guaranteed Federal Family Education Loan Program (FFELP) loans, it also has “been a contributor to the problem, with a decade-long history of allegations of abusive and misleading practices aimed at student loan borrowers.”

She added that between 2009 and 2019, Navient has been accused or fined for “actions that ripped off borrowers,” including the improper marketing of loans and failing to notify borrowers of their rights.

And an ongoing Consumer Financial Protection Bureau investigation found evidence that Navient “systematically steered thousands of borrowers who were having difficulty paying their loans into plans that were worse for the borrowers – but more profitable for Navient.”

In February, three student loan borrowers filed a legal action against Navient, arguing that Navient owed them over $45,000 in overpayments that the company had wrongfully collected after their student loans had been discharged. This followed an Education Department ruling that Navient must repay the government $22 million in overcharged student loan subsidies.

In response to Warren’s questioning on investigations into Navient, Remondi said his job is “obviously to comply with the rules and laws, and we work hard to make sure all borrowers successfully manage their loans.”

“These allegations are not true,” Remondi said. “They’re accusations and not necessarily based on facts,” he added.

Also testifying at the hearing were Rep. Ayanna Pressley of Massachusetts, Maura Healey, the attorney general of Massachusetts, and James Steeley, president and CEO of the Pennsylvania Higher Education Assistance Agency.

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Biden could wipe out 84% of the federal student-debt pile by canceling $50,000 per person

student loans graduate
  • DOE data shows canceling $50,000 in student debt per person would erase debt for 84% of federal borrowers.
  • It shows that canceling $10,000 per person would erase debt for 35% of them, Yahoo Finance reports.
  • The DOE and DOJ are reviewing Biden’s authority to cancel $50,000 in student debt.
  • See more stories on Insider’s business page.

Democratic lawmakers are continuing to push for President Joe Biden to cancel $50,000 in student debt per person, and new data from the Department of Education may have helped them make their case to the president.

A DOE analysis obtained by Yahoo Finance on Monday found that $50,000 in student-loan forgiveness per person would erase the entire debt for 36 million – or 84% – of the roughly 43 million borrowers in the US with federal loans, while $10,000 in forgiveness would erase the entire debt for 15 million – or 35% – of those borrowers.

The data also showed that 9.4 million of the 36 million borrowers who would benefit from a $50,000 loan cancelation are at risk of default, meaning they could fail to repay the loans. Also, 4.4 million borrowers, each holding an average of $48,000 in student debt, have had loans for more than two decades since graduation. Another 10.7 million borrowers have held their loans for over a decade.

Sen. Elizabeth Warren of Massachusetts and Senate Majority Leader Chuck Schumer have led efforts in calling on Biden to cancel $50,000 in student debt per person using executive powers, but the president has argued he does not have the authority to cancel $50,000, and he said he would welcome legislation to cancel $10,000 per person.

In response to Biden’s comments, Warren said in a press call last month: “We have a lot on our plate, including moving to infrastructure and all kinds of other things. I have legislation to do it, but to me, that’s just not a reason to hold off. The president can do this, and I very much hope that he will.”

Biden has since asked the Justice Department and the Education Department to review his authority to use executive action to cancel student debt, and White House press secretary Jen Psaki said in early April that the $50,000 cancelation figure hasn’t been ruled out.

The DOE data comes ahead of Warren’s Senate Banking hearing on Tuesday afternoon to discuss the burden of student debt.

“I graduated from a state school that cost $50 a semester,” Warren said on Twitter on Monday. “That opportunity is simply not out there today. Two out of every three people who go to a state school today have to borrow money to graduate. That is not how we build a future. #CancelStudentDebt.”

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Illinois could pay off up to $40,000 of your student loans to help you buy a house

House Sold
  • The Illinois SmartBuy program pays off up to $40,000 in student loans to help buyers buy a house.
  • The program also provides $5,000 to be used for a down payment or closing costs.
  • With house prices reaching record highs, the program may help increase home equity and affordability.
  • See more stories on Insider’s business page.

If you live in Illinois and have outstanding student loans, the state could pay off some of your debt to help you buy a house.

The SmartBuy program, offered by the Illinois Housing Development Authority, helps anyone who wants to buy a home in Illinois by paying off up to $40,000 in student debt, or a loan amount equal to 15% of the home purchase price. According to the Chicago Tribune, between the start of the program in December and early April, it has paid off an average of $24,100 in student debt for each buyer, and people from outside the state have even been inclined to move there to make use of the program.

“I’m getting a lot of interest,” Chanon Slaughter, a vice president of mortgage lending at Guaranteed Rate, told the Tribune. “I am getting folks literally saying, ‘I want to move back to Chicago for this program.'”

Along with paying off student loans, the program also provides $5,000 that can be used for a down payment or closing costs.

There are a few catches, though: A buyer’s outstanding student debt must be paid in full at the time of the home purchase, and if the buyer chooses to sell the house within three years of the purchase, they must repay a portion of the student loan assistance. The other catch is that Illinois has allocated $25 million to the program, so it’s only expected to help between 600 and 1,000 homebuyers.

Here are the program’s eligibility requirements, according to its website:

  • The buyer must have at least $1,000 in student loans;
  • The buyer’s FICO “mid-score” must be 640 or higher;
  • The buyer’s income must be under or at the limits for the county where the property is located, which can be found on the IHDA mortgage website;
  • And the assistance cannot be applied retroactively – the buyer must be buying a new primary residence.

This program has the potential to tackle two simultaneous affordability crises – the $1.7 trillion pile of student debt and the skyrocketing price of the median house since the housing market reopened during the pandemic, exacerbated by a serious inventory shortage. It isn’t the only experimental economic program being offered in Illinois, either. Evanston, a city in Illinois, approved spending on March 22 for a $10 million reparations fund that compensated Black residents through $25,000 housing grants.

Insider previously reported that the average home sale price hit a record high March, and the spiking housing costs have concerned housing experts, like Redfin Chief Economist Daryl Fairweather, who said in a statement that they could be putting homeownership out of reach for too many Americans.

“That means a future in which most Americans will not have the opportunity to build wealth through home equity, which will worsen inequality in our society,” Fairweather said.

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19 states have higher student-loan debt than annual budgets, report finds

student loan debt
  • Student Loan Justice found 19 states have more student debt owed than the annual state budget.
  • Georgia, Florida, and Missouri top the list, with debt of at least 140% of the budget in each state.
  • Student Loan Justice Founder Alan Collinge said Biden must use his executive powers to cancel student debt.
  • See more stories on Insider’s business page.

The student-debt problem numbers are massive: 45 million people owe $1.7 trillion. But another big number is 19, as that many states have more outstanding student debt than their annual budgets.

Student Loan Justice – an organization advocating for student-debt cancellation – released a report in March on these 19 states, with Georgia, Florida, and Missouri topping the list at 169%, 148%, and 141% of debt owed relative to their budgets, respectively, and South Carolina and New Hampshire close behind at 135% and 131%.

To put that in perspective, Georgia’s state budget is slightly more than $48 billion, but Georgians’ total student debt comes close to $82 billion.

Alan Collinge, founder of Student Loan Justice, told Insider that the reason those 19 states made the list could be a result of high borrowing alongside state budgets that are smaller than others.

He added that although President Joe Biden’s Department of Education has already taken steps to cancel student debt for borrowers defrauded by for-profit schools and borrowers with disabilities, that isn’t nearly enough to address the scope of the problem.

“I see this as massively unimpressive, and it really skirted around the real issue, which is the widespread catastrophic effects the student lending program is having on the citizens,” Collinge said.

The key question right now is whether Biden will cancel student debt through executive order or wait for Congress to draft legislation, and similar to progressive lawmakers’ arguments, Collinge said Biden does have the authority under the Higher Education Act to cancel up to $50,000 in student debt, which would not only help borrowers, but the economy, as well.

“There is no easier or cheaper way than to simply cancel it by executive order,” Collinge said. “You don’t need to raise one dime in tax, and you don’t add anything to the national debt, so I think to most common-sense thinkers, this is the low-hanging fruit on the economic stimulus tree.”

Democratic lawmakers like Sen. Elizabeth Warren of Massachusetts and Senate Majority Leader Chuck Schumer have long been calling for Biden to use his executive powers to cancel up to $50,000 in student debt per person.

In a press call last month, Warren said executive action would be much quicker than going the legislative route.

“We have a lot on our plate, including moving to infrastructure and all kinds of other things,” she said. “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.”

Schumer added in the same call that if Biden believes he can cancel $10,000 in student debt per person, which he campaigned on, there’s no reason he can’t cancel up to $50,000.

While Biden has not yet committed to canceling any form of student debt, White House Press Secretary Jen Psaki said in February that the Justice Department will review Biden’s legal authority to cancel up to $50,000 in student debt, and White House Chief of Staff Ron Klain told Politico last week that Biden asked the Education Department to prepare a memo on his legal authority to cancel debt.

At a Monday press briefing, Psaki was asked to clarify these recent statements and said Biden would “happily sign” a bill to cancel $10,000 per person in student debt, and he has not ruled out the option of cancelling up to $50,000 in debt.

“I think that would naturally be the first step before it’s a larger amount beyond there,” she said. Psaki did not clarify whether Biden is in favor of using an executive order to cancel $50,000 per person.

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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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