House Speaker Nancy Pelosi said Wednesday that President Joe Biden does not have the power to cancel student loan debt, though some of her Democratic colleagues, including Senate Majority Leader Chuck Schumer, disagree.
The California Democrat told reporters during a press briefing that student loan debt is “a policy discussion” and that cancelation has to be “an act of Congress.”
“Here’s the thing. People think that the president of the United States has the power for debt forgiveness. He does not,” Pelosi said. “He can postpone, he can delay, but he does not have the power.”
Pelosi stands in opposition to Schumer, as well as Sen. Elizabeth Warren of Massachusetts, the two congressional Democrats leading the call for Biden to cancel $50,000 in student loan debt per borrower.
They claim that Biden can use his “existing authority” under the Higher Education Act to “immediately” wipe out debt for millions of borrowers across the country.
“President Biden can cancel $50,000 of student loan debt with the stroke of a pen,” Warren told Insider in June. “He doesn’t need Congress to act, he can do it on his own, and I hope that’s what he’s going to do.”
“All President Biden has to do is flick his pen – sign it – make America a happier, better, more prosperous place,” Schumer said.
Warren compared student loan debt to a “sword hanging over” the heads of borrowers.
“Every day that goes by, that sword draws a little closer,” she said Tuesday. “This is a matter of economic justice. It is a matter of racial justice. The president of the United States can remove this sword. The president can prevent this pain.”
White House press secretary Jen Psaki reiterated Biden’s support to wipe out $10,000 per student loan debt borrower in February, but added that he wants to see the legislation first approved in Congress, believing that he did not have the ability to cancel it unilaterally.
Biden has started to rethink that position amid increasing pressure to cancel student loan debt from congressional Democrats, including Schumer and Warren, as well as civil rights groups and student organizations.
The White House has asked the Justice Department and Education Department to review whether Biden has the ability to cancel student loan debt via executive action. But neither the White House nor the federal departments have provided an update as to when that assessment will come.
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 relief, however, is coming to an end soon: Borrowers must restart making payments after September 30.
Insider spoke with three people about how the end of COVID-19 student-loan forbearance will affect their lives and finances.
Camryn Hicks, 25, has $14,250 in student-loan debt and lives in rural Maine
I graduated from Boston College in 2018 with a degree in business and marketing. I’m part of the first generation of women in my family to go to college, and had some financial assistance in the form of loans and grants.
But I didn’t know what my student-loan payments would look like later when I was signing up for them.
When I graduated, I got a job working on a re-election campaign for Elizabeth Warren. I was able to start paying my loans off right away, and have never missed a payment. Warren dissolved her presidential campaign right around the time COVID-19 started to spread, so I ended up moving back in with my parents and starting a new job remotely.
During the forbearance, I’ve been able to make large lump-sum, principal-only payments on my student loans using my stimulus checks. Because of the forbearance, I’ve been able to start playing catch-up with my finances. When my car was stolen, I was able to replace it, and I also opened a retirement account.
For me, the forbearance period was a taste of what cancellation would feel like. The conversation around student loans, I think, focuses too much on the individual, and if that one person is going to be able to pay the debt they signed up for. But it’s an economic problem, not a personal one.
My parents took out hundreds of thousands of dollars in Parent PLUS loans to send both my sister and myself to school. Student-loan debt isn’t a personal burden, it’s a family burden.
In many ways, student loans perpetuate wealth inequality – where the people who don’t have to take them out get a head start. I think we need to stop splitting hairs over who’s worthy of relief.
Glenda Johnson, 32, has $36,693 in student-loan debt and lives in Charlotte, North Carolina
When I graduated from college in 2011, my student-loan balance was over $50,000, and I’m still paying back most of it.
I’m fortunate because throughout the pandemic, I’ve had a job. I make about $49,000 a year working in the sales department of a big tech company and also freelance on the side.
Most of my loans were in an income-based repayment plan before the forbearance. The forbearance has been able to keep me afloat, because for over a year I haven’t had to worry about being able to make my payments or not.
A few of my loans didn’t qualify for forbearance, so I’ve still been making payments on those.
With the forbearance ending, student-loan forgiveness is my best bet. The job market I graduated into isn’t what they told us it would be when I was in school, and it’s a lot of money to repay when I’m not seeing a rise in income.
Having to make payments again will weigh heavy on me, but I’m staying positive that there will be a solution somewhere – whether it’s me getting a promotion, or getting more money from my side gig.
I remain hopeful because the conversation around student loans is changing, but for whatever reason, we can’t push the needle, and people like me with student loans will have to keep waiting for change.
Dylan Cawley, 32, has $185,682 in student-loan debt and lives in northeastern Pennsylvania
I graduated with a master’s in public health from the University of Pittsburgh in 2013. For my undergraduate degree, I went to a state school, but for my master’s program I had to take out extra loans to pay for my rent and living expenses, which totaled in over $50,000 a year.
With the exception of the six-month grace period after graduation, I’ve been making monthly payments on my loans for over eight years. My federal loans are on income-driven payment, and I’ve been making regular payments on my private loans.
The forbearance has given me room to breathe. I’ve always wanted an emergency fund, and thanks to the CARES Act I’ve been able to start one. Once it ends, I’ll have to readjust my budget to include an additional $260 payment.
I think a lot of people who don’t have student loans don’t realize just how stressful it is. We aren’t complaining for no reason.
I’m not holding my breath for student-debt forgiveness. You can’t just forgive all existing student loans. If we forgive all student loans now, we’re going to be in the same situation 15 years from now. We have to start looking at student loans as a whole problem within itself.
Even if the pause on student-loan payments does get extended past October, it would only be temporary. Lawmakers want to ensure the Education Department has plans for long-term borrower protections.
On Wednesday, Sen. Elizabeth Warren of Massachusetts, Sen. Cory Booker of New Jersey, and Rep. Ayanna Pressley of Massachusetts led 23 of their Democratic colleagues in requesting information from the Education Department on practices that “harm student borrowers.” Specifically, in their letter to Education Secretary Miguel Cardona, the lawmakers wanted to know the steps the department is taking to protect borrowers’ wages and benefits when payments resume.
“Even before the coronavirus disease 2019 (COVID-19) pandemic, collections on defaulted student loans were catastrophic for borrowers in default, who saw their wages, tax refunds, and even Social Security checks confiscated, in addition to being forced to pay exorbitant fees,” the Democrats wrote.
The letter cited a report from the Center for American Progress that found 45% of borrowers in default have not found a path to return their loan to good credit standing, which makes housing and job opportunities more difficult to land.
Democrats added that although the CARES Act initially paused student-loan payments during the pandemic, the Education Department and Treasury Department still “improperly garnished and withheld” over $200 million from about 390,000 borrowers during this time.
“The Department’s failure to fully implement the collections moratorium raises concerns about how it will handle the upcoming scheduled resumption of collections and payments on October 1, 2021,” the letter said.
The Education Department also said it would refund any wage or tax refunds collected after the pandemic began, but over 23,000 borrowers who had their wages garnished have yet to receive refunds because the department didn’t have borrowers’ correct addresses on file, according to the National Consumer Law Center, which is why the Democrats are stressing the importance of proper preparation to transition into student-loan repayment.
Many Democrats who have signed this letter are also calling for the payment pause to be extended through at least March of next year, given that both borrowers and services have said they are not prepared to resume payments in just a few months.
The lawmakers wrote: “As we near the currently scheduled end of the suspension of payments and collections, we are concerned about plunging borrowers back into an untenable financial situation, causing long-term damage to their credit and financial stability and a sudden unnecessary drag on our recovering economy.”
President Joe Biden may not have yet canceled student debt for every borrower, but new hires to his administration suggest the crisis could be inching up on his agenda.
On Monday, the Education Department announced five new hires to the Federal Student Aid (FSA) office, four of which were former employees at the Consumer Financial Protection Bureau (CFPB). Sartaj Alag, Bonnie Latreille, Kristen Donoghue, and Stephanie Richo all previously served at the CFPB, which was founded by Massachusetts Sen. Elizabeth Warren, the leading lawmaker on cancelling student debt.
“We have important work ahead of us on behalf of students, parents, and borrowers, and we are pleased to have these experienced, dedicated public servants here at Federal Student Aid,” Richard Cordray, FSA director and former CFPB head, said in a statement.
Over the past months, Biden’s administration has continued to hire experts who have fought alongside Warren in protecting borrowers and holding student-loan servicers accountable. Cordray, for example, has been a longtime ally of Warren’s and has shared much of her agenda throughout his career.
Last week, Insider reported that Toby Merrill was hired as the Education Department’s Deputy General Counsel. Merrill, along with Eileen Connor and Deanne Loonin from the Project of Predatory Student Lending, wrote a letter to Warren in 2020 affirming her legal ability to cancel student debt using executive action – something Warren is now pushing Biden to do.
The new hires announced on Monday will likely help further Warren’s agenda. Alag, who will serve as Principal Deputy Chief Operating Officer at FSA, served as the CFPB’s chief operating officer in 2018, and upon stepping down, Warren told Morning Consult in an email that his “vision and leadership” helped CFPB establish its consumer hotline, which helped process millions of complaints.
“He helped build a strong consumer agency that stands up for millions of American families,” Warren said.
And Latreille, who was formerly CFPB’s student loans ombudsman and later joined the Student Borrower Protection Center, which was founded by CFPB members to protect student-loan borrowers, is now serving as the third ombudsman in FSA’s history.
After President Donald Trump selected Mick Mulvaney to lead the CFPB, Latreille joined a few others in leaving the agency to form the Student Borrower Protection Center because its director, Seth Frotman, said at the time that Education Secretary Betsy DeVos and Mulvaney had turned their backs on “millions of borrowers drowning in student-loan debt.”
Donoghue’s ties to the CFPB go all the way back to its founding in 2013 – she was one of the bureau’s original employees and worked alongside Warren during its creation.
Also included in Monday’s new hires is Colleen McGinnis, who has worked in public service for over 20 years and will serve as FSA’s chief of staff.
While the new hires have not commented on large-scale student-debt cancellation, Warren continues to push for Biden to cancel $50,000 in debt per borrower and extend the pandemic freeze on student-loan payments in the meantime.
“About 40% of people with student loan debt weren’t able to finish their degrees-so now they’re stuck trying to pay college-graduate-sized bills on high-school-diploma-sized salaries,” Warren wrote on Twitter. “We’re fighting to #CancelStudentDebt because people need relief.”
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.
Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, like American Express, but our reporting and recommendations are always independent and objective.
The best debt consolidation loans of 2021
5.74% to 24.24%
$3,000 to $100,000 for unsecured loans, $3,000 to $250,000 for secured loans
5.93% to 19.99%
$5,000 to $100,000 (for excellent credit)
Lightstream Debt Consolidation Loan
5.99% to 16.19% APR (with AutoPay)
$5,000 to $100,000
SoFi personal loan
5.99% to 24.99%
$5,000 to $40,000
From 9.95% – 35.99% APR
$2,000 to $35,000 for unsecured loans; $5,000 to $25,000 for secured loans
Avant Personal Loans
Generally, you’ll need a personal loan for debt consolidation, which means replacing multiple loans with a single loan instead.
Most personal loan lenders ask about loan purpose when starting the loan application process, and often, personal loans for debt consolidation have higher interest rates than other personal loans and other loan types.
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Flexibility makes Personal Loan a top contender for best personal loans for debt consolidation. Wells Fargo separates debt consolidation loans from personal loans, but the interest rates are the same.
Benefits include incredibly competitive interest rates, ranging from 5.74% to 24.24% APR, and an autopay discount of 0.25% if payments are made from a Wells Fargo account. For unsecured personal loans, the most common type for debt consolidation, the amount available ranges from $3,000 to $100,000 and there are no origination or prepayment fees.
Wells Fargo gives several options for personal loans that aren’t common elsewhere. Firstly, there’s an option to secure your loan with a CD or savings account, though that option is only available to current customers. Secured loans allow you to borrow up to $250,000, though an origination fee of $75 applies to secured loans (unsecured loans don’t have a fee).
Wells Fargo can send your loan funds to your Wells Fargo bank account, or to a credit account outside of Wells Fargo to pay down your debts directly.
Watch out for: Secured loan options. Secured loans use collateral to bring down interest rates and increase the amount available to borrow. But using these savings accounts as collateral could mean losing your savings or CD if you don’t pay on your loan.
Additionally, it’s worth mentioning Wells Fargo’s history with data security and compliance. The bank has faced several federal penalties for improper customer referrals to lending and insurance products, and security issues tied to creating fake accounts several years ago.
Lightstream Debt Consolidation Loan is a highly regarded lender for many loan types, and has been a top pick across Insider’s coverage of the best personal loans and best auto loans. However, this lender only works with borrowers with good or better credit, with a minimum credit score requirement of 660.
LightStream offers consistently competitive interest rates, though its minimum interest rate for debt consolidation is higher than its typical personal loan’s interest rates. However, this lender does not have any prepayment or origination fees. Same-day funding is available with LightStream.
Watch out for: Varying loan terms between LightStream’s typical personal loans and debt consolidation loans. Only borrowers with excellent credit can borrow the $100,000 maximum, and anyone without excellent credit may not qualify for the full amount.
LightStream defines excellent credit history as an account with five or more years of credit history, stable and sufficient income for debts, and a variety of credit history with little or no credit card debt. If you’re looking for a debt consolidation loan, chances are you have a significant amount of debt, and may not fit these qualifications.
Additionally, LightStream doesn’t have a way to pre-qualify online. You’ll have to apply for the loan to find out exactly what your rates and terms could look like, which could make comparison shopping difficult.
A SoFi Personal Loan is the best option for anyone with a high balance, as this lender makes debt consolidation loans of up to $100,000. Debt consolidation loans from this lender are comparable in rates to those offered by LightStream, but SoFi offers higher loan limits to all applicants, whereas LightStream only allows some borrowers to borrow up to $100,000. Similarly, SoFi doesn’t have any application, origination, or prepayment fees.
SoFi offers unique features like unemployment protection, which could put loans in forbearance for up to three months if you find yourself out of work.
Watch out for: Stringent requirements. SoFi personal loans have a minimum credit score of 680. According to NerdWallet, the average income among borrowers is over $100,000.
In the fair credit range, it can be tough to qualify for a personal loan with reasonable interest rates – many lenders have a minimum of 660 or 680. However, a Payoff loan could be a good option for people with credit scores as low as 640. Interest rates are comparable to those offered by LightStream and SoFi, but this lender has less stringent requirements.
Compared with competitors Prosper and Best Egg, which both have the same 640 minimum credit score requirement, Payoff’s interest rates are capped lower, and could have lower origination fees.
Watch out for: Origination fees. Payoff offers loans with origination fees ranging from 0% to 5%. Competing lenders Prosper and Best Egg charge minimum 2.41% and 0.99% origination fees, respectively. The better deal will depend on your credit score, income, and repayment term.
With bad credit, a personal loan for debt consolidation can be expensive, or hard to qualify for. An Avant personal loan is the best bet for borrowers with poor credit, requiring a minimum credit score of 600.
Compared to other personal loan lenders offering debt consolidation loans for bad credit borrowers, Avant’s terms are the most generous. Interest rates range From 9.95% – 35.99% APR. While there is an administration fee, it could be lower than competitors’ fees with a cap at 4.75%. Avant also has the advantage of quick, next-day funding available.
Watch out for: Secured loan options. Like Wells Fargo, Avant offers the option to secure your loan with collateral like your car. While this could be helpful to lower interest rates, it could put your car in jeopardy if you don’t pay. Secured loans have an administration fee of 2.5%, and a maximum amount of $25,000.
LendingClub personal loans: This lender has the potential for high origination fees that could add to the cost of borrowing. The average origination fee is 5.2%. Read Insider’s full review here.
Prosper personal loans: Prosper’s minimum credit score requirement is 640, but borrowers with this score could get lower interest rates and potentially lower fees from Payoff. Read Insider’s full review here.
Best Egg personal loans: Like Prosper, borrowers with credit scores of 640 or above could get lower minimum interest rates and lower maximum fees from Payoff. In order to qualify for the lowest possible interest rates, borrowers need a minimum FICO score of 700 and an income of at least $100,000 per year. Only three-year and five-year loan terms are available, making these loans less flexible than other options. Read Insider’s full review here.
Discover personal loans: Discover’s personal loan rates start higher than other lenders’ loans, and borrowers who meet the minimum credit score requirements could get lower interest rates from LightStream, which cap lower. However, Discover makes payments directly to creditors, which could simplify your payoff process. Wells Fargo is the only other bank on our listing to offer that option.
Axos personal loans: This lender’s personal loans require a minimum credit score of 720. For borrowers with this type of credit, lower interest rates can be found elsewhere.
OneMain Financial personal loans: OneMain doesn’t have a minimum credit score required to apply, which could make it a viable option for people who don’t meet Avant’s 600 minimum. But interest rates range from a high 18.00% – 35.99%. Read Insider’s full review here.
Which lender is the most trustworthy?
We’ve compared each institution’s Better Business Bureau score to give you another piece of information to choose your lender. The BBB measures businesses’ trustworthiness based on factors like their responsiveness to customer complaints, honesty in advertising, and transparency about business practices. Here is each company’s score:
With the exception of Wells Fargo, our top picks are rated A or higher by the BBB. Keep in mind that a high BBB score does not guarantee a positive relationship with a lender, and that you should continue to do research and talk to others who have used the company to get the most complete information possible.
The BBB currently does not have a rating for Wells Fargo as the BBB is investigating its profile. Previously, the organization gave Wells Fargo an F in trustworthiness. In the past few years:
The bank paid the city of Philadelphia $10 million as a result of the city’s claims that Wells Fargo was involved in predatory mortgage lending to racial minorities (2019).
The Consumer Financial Protection Bureau and Office of the Comptroller of the Currency charged Wells Fargo $1 billion for overcharging and selling extra products to consumers with auto and home loans (2018).
If you’re uncomfortable with this history, you may want to use one of the other personal loan lenders on our list.
Frequently asked questions
Why trust our recommendations?
Personal Finance Insider’s mission is to help smart people make the best decisions with their money. We understand that “best” is often subjective, so in addition to highlighting the clear benefits of a financial product, we outline the limitations, too. We spent hours comparing and contrasting the features and fine print of various products so you don’t have to.
How did we choose the best debt consolidation loans?
To find the best personal loans for debt consolidation, we combed through the fine print and terms of about a dozen personal loans to find the ones that were best suited to help with consolidating debt. We considered four main features:
APR range: For the most help with debt payoff, a personal loan for debt consolidation needs to have lower interest rates than the credit card or other debts you’re consolidating. We looked for the loans that had the lowest rates possible for each credit range and purpose. The average credit card interest rate was 16.28% in 2020, so we focused on loans that had the potential to beat this.
Appropriate loan amounts: We looked for personal loans that had the most variety in loan amounts. According to loan comparison site Credible, the median amount of debt consolidated in May 2020 was $18,000. To benefit the most borrowers, we included personal loans with maximum limits over $10,000.
Minimum credit score requirements: Where available, we considered the minimum credit score requirements for each company. We considered loans for excellent, fair, and poor credit, grouping loans into categories based on these credit score requirements.
Fees: We considered fees like origination or administrative fees in our decisions, looking for loans with the fewest or lowest fees. None of the best loans listed have prepayment penalties.
Nationwide availability: We only considered loans with availability in most or all 50 US states.
What is debt consolidation?
Debt consolidation takes all sorts of debts, including credit cards, medical debt, or typically any other type of unsecured debt, and rolls it into one loan.
Can I use any personal loan for debt consolidation?
Most personal loans allow a variety of uses, and while most include credit card consolidation or debt consolidation, not all do. Make sure to read the fine print of any personal loan you’re applying for, and make sure that debt consolidation is an acceptable use of your loan. All of the loans we considered had an option to use the loan for debt consolidation, if not a separate loan, which we included details for.
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Once the payment pause on student loans lifts in October, the Education Department will resume efforts to collect student debt from 43 million borrowers across the country. But according to a new report, collection of debt held by higher education institutions – and owed to taxpayers – doesn’t appear to get similar treatment.
The nonprofit National Student Legal Defense Network released a report last week that found as of February 2021, nearly 1,300 higher education institutions owed approximately $1.2 billion to the Education Department. Most of the debt is held by for-profit schools, with the largest outstanding debt of over $244 billion owed by the defunct Vatterott College.
“While the Department aggressively attempts to collect from borrowers, institutions and their owners and executives walked away from more than a billion dollars owed to taxpayers,” the report said.
The report noted that even thought the department has a “wide array” of methods to require institutions to repay their debt, it has failed to make use of those tools, allowing debt to go uncollected.
Department of Education Press Secretary Kelly Leon told Insider in a statement that the department “is committed to improving our policies and practices to better hold institutions accountable for their actions and to provide borrowers with fair and streamlined access to the benefits to which they are entitled.”
Here are the other main findings from the report, obtained by the group through Freedom of Information Act requests:
About 200 of the 1,300 institutions with debt still received Title IV funding from the government;
The department has recertified institutions owing debt for participation in student aid programs;
And the department’s failure to collect has cost at least $218 million because the statue of limitations on collections had expired.
The report added that the department has not collected relatively small debt amounts. For example, the for-profit University of the Rockies owed $883,613 in 2019 that the department had not collected as of the data collected in the report.
President Joe Biden’s Education Department has begun to act on fraudulent behavior of for-profit schools through cancelling student debt for some defrauded borrowers. Most recently, Education Secretary Miguel Cardona cancelled student debt for 18,000 borrowers defrauded by now-defunct ITT Technical Institutes, totaling to about $500 million in debt relief.
But even as institutions still owe taxpayers billions in debt, the Education Department is preparing to transition borrowers back into repayment in October – something lawmakers have advocates are strongly urging against.
“When we organize together, fight together, and persist together, we win together,” Massachusetts Sen. Elizabeth Warren wrote on Twitter on Sunday. “We’ve all got to raise our voices and call on the Biden administration to extend the pause on student loan payments and #CancelStudentDebt.”
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.
I’m a first-generation college grad born to two amazing parents from South America. I prepared to graduate from a private, all-girls, college-preparatory high school at 16, got a partial academic scholarship to a private university, and proceeded to take out $15,000 a year in federal Stafford and parent plus loans to cover the rest. (Fun fact: no one, not even the government, is willing to lend to a college-bound kid who’s not even remotely 18 yet. This meant my parents had to put their credit on the line to help me finance my education. I know that’s not unorthodox, but it would’ve been nice to at least have the option to shoulder the burden myself from the outset.)
So, let’s recap. It’s 2008, I’m aware America’s economy is going up in flames, but I got a pretty significant scholarship to attend college – which no one in my immediate family has done before. I went in with my eyes wide open, researching interest rates, deciding against private loans, refusing to accept my dad dipping into his 401k to fund my endeavor, and getting an on-campus job to subsidize costs while I was in school. (I obviously wasn’t aware of what we should all know by now – women, and Black women in particular, are disproportionately ensnared in student debt.)
“There’s more you could have done!” say folks who refuse to empathize with us (greedy/lazy/opportunistic/careless?!) millennials. “You chose to play rugby and spend frivolously on cleats, gas, and stitches for your unnecessarily procured gaping wounds! You could’ve sold a kidney, donated plasma, or went to a community college! How dare you even begin to complain about a college experience you knew would cost so much?!”
Stop right there, y’all. I knew. I was ready.
I lay awake at 20 years old in the spring of my senior year with unwavering determination. I was going to get a kick-ass job in journalism/communications/marketing and not even wait the six-month deferment period to allow my loan’s interest to capitalize. I viewed my loan balance as yet another thiccc rugby woman I had to stiff-arm into submission (and I’d had plenty of practice). I wasn’t scared. I’d incurred a significant fee to finance an education I both desired and relished the process of receiving … and I was ready to pay when my bill came due. I understood that each promissory note was another proverbial nail in my coffin.
This is what folks who stridently and stubbornly refuse to empathize with young student loan borrowers will never understand.
Many of us operate as though no one will save us, forgive our debt, and pretend our responsibility has ended. There are millions of us who lose sleep every night for years, plugging formulas into Excel spreadsheets and debt repayment calculators, budgeting for jobs they apply for mere months after enrolling in school. There are countless tears, anxieties, and plans that result in this burden we know we are accountable for.
Before I’d turned 21, I already accepted that the remainder of the decade would be spent in service to the investment I’d made when I was still too young to vote.
So I got down to it. I’m 30 now, and I’ve never missed a student loan payment. The monthly bills have fluctuated between $462 and $2,695 dollars per month, but I have never. missed. a single one.
What began as an original balance of nearly $60,000 when I graduated in 2012 ballooned to over $82,000 in 2018.
Yes, you read that right.
A 21-year-old who never missed a monthly $450+ student loan payment financed by the United States government saw her balance increase by over $20,000over the course of six years.
You could comment on how I should’ve paid more than the minimum, how I should’ve worked over the course of six years to land a job that paid double so I could make a dent in the principal. That I should’ve gotten my parents or family to help, should’ve gotten a side hustle, should’ve lived in squalor and cut back on my already meager meal plans to pay more, ever more.
And I’m going to call bullshit on that.
I made my debt a massive priority. But when the minimum payment for my federal 8.5% interest rate loan is nearly $500, I will not accept that the issue lies with me. A kid with a degree bringing home $50,000 a year three years out of school should be able to make at least a dent in her debt burden. Instead of seeing my diligence rewarded, I saw my balance increase.
It’s earth-shattering. It’s enough to make you question if you’re insane; if you’ve been reading your billing statements correctly; if the loan officers you call every quarter are lying to you; if you’re the reason your efforts are failing.
But I’m still at it, y’all. I refinanced my loans to a 5.25% interest rate because my credit is over 815 at this point (yes, I’m proud). I married – which, besides being the best decision I ever made for my heart, also helps because (and I’ll just say it) after paying off his student debt, we’re contributing his entire monthly salary to mine. Every. last. cent.
We’re choosing not to have children partially because we’re already paying the equivalent of Montessori tuition for a non-existent five-year-old.
Hear this: People are feeling all kinds of ways about potential federal student loan forgiveness. I forfeited any possibility of that when I refinanced my loans with a private company three years ago, and I’d do it again in a heartbeat. I pray every night for the millions of folks still paying endlessly to the government to get their loans forgiven. They deserve it. They’re still sprinting up a treacherous mountain with no end in sight, paying astounding amounts of interest while suffocating under the weight of other basic financial responsibilities.
I wanted to be out of that hell so badly that I gave up any hope of a government bailout. If I still had federal loans, I’d still be running in place. I will support anyone who is still trapped in that federal student debt purgatory and sees their loans forgiven, because I know that pain. I feel that strife. When they are free, we’ll all be free. Their salvation couldn’t possibly deny me the sweet reprieve of my efforts for all of these years.
My husband and I are now paying twice the amount of our mortgage to my student loans every month. From the fall of 2018 to now, my balance has decreased from over $82,000 to $44,000. It’s the first thing I think about when I wake up and the last thing we talk about most nights before bed.
Sometimes, people ask me if I ever think about graduate school and it makes me want to vomit. Even as the pursuit of knowledge calls out to me, the shadowy nightmare of its cost keeps me far from ever considering it.