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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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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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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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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Outgoing Secretary of Education Betsy DeVos urged against student loan forgiveness in letter to Congress

U.S. Education Secretary Betsy Devos speaks during a White House coronavirus disease (COVID-19) task force briefing at the U.S. Education Department in Washington, U.S., July 8, 2020. REUTERS/Carlos Barria
U.S. Education Secretary Betsy Devos speaks at White House coronavirus task force briefing at the Education Department in Washington

  • Outgoing Secretary of Education Betsy DeVos advised Congress to vote against student loan forgiveness, according to a letter obtained by CBS News and Politico.
  • “Across-the-board forgiveness of college debts is not only unfair to most Americans, it is also the most regressive of policy proposals – rewarding the wealthiest sector of our labor force at the expense of the poorest,” she wrote.
  • In the apparent farewell letter addressed to Senate Majority Leader Mitch McConnell, DeVos outlined a number of education policies, including allocating direct federal funding to students
  • Visit Business Insider’s homepage for more stories.

Outgoing Secretary of Education Betsy DeVos advised against student loan forgiveness in a letter sent to Congress Monday, which was obtained by CBS News and Politico.

In what appeared to be a farewell letter to Senate Majority Leader Mitch McConnell, DeVos reflected “on the past four years and the conversations we have had together” and shared some “closing thoughts” with the Kentucky senator.

DeVos outlined a number of talking points in the letter, including considering allocating direct federal funding to students.

“Let me urge you instead to provide for students the opportunity to pursue meaningful, challenging, and rewarding learning opportunities,” DeVos wrote. “Let me encourage you to fund education – that is, learning – not a Department of Education. Let me urge you to fund students, not school buildings.”

She also dismissed student loan forgiveness in the letter – a policy in which President-elect Joe Biden has expressed support during his upcoming term. Biden has previously proposed making undergraduate education free in some cases and expanding college federal loan programs. He also suggested giving student loan borrowers $10,000 in loan forgiveness as part of coronavirus relief.

Read more: What a Biden presidency could mean for America’s student-loan debt crisis

DeVos, in contrast, urged Congress to reject such a proposal.

“Importantly, I hope you also reject misguided calls to make college ‘free’ and require the two-thirds of Americans who didn’t take on student debt or who responsibly paid off their student loans to pay for the loans of those who have not done the same,” she wrote in the letter.

“Across-the-board forgiveness of college debts is not only unfair to most Americans, it is also the most regressive of policy proposals – rewarding the wealthiest sector of our labor force at the expense of the poorest,” she continued.

In December, DeVos extended student loan forbearance through the end of January. Previously, more than 40 million student loan borrowers in the US weren’t expected to make payments again until the end of 2020, setting up a complicated situation for both borrowers and the incoming Biden administration.

Though student loan forbearance is set to expire at the end of the month, the bipartisan $908 billion coronavirus relief package signed by President Donald Trump does not include additional forbearance. It is not immediately clear what the incoming Biden administration will do with regards to the policy from the time he is inaugurated on January 20 to its expiration date on January 31.

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