Student Loan Forgiveness: Biden Administration Debating Details
Big week ahead as Biden to decide on student loan forgiveness and student loan moratorium extension – key details
The student loan moratorium will end in 9 days.
For most borrowers, federal student loan payments have been suspended for more than two years, along with interest charges and collection efforts. The repayment period applies to federal student loans serviced by the government. The suspension, originally enacted by the CARES Act about two and a half years ago, was supposed to provide a relatively short six-month hiatus. But President Trump and then President Biden issued several short-term extensions. The hiatus is now in its 29th month. Biden’s latest extension of the student loan moratorium expires on August 31, with just one week left. No previous extension of the moratorium has ever been issued so close to the end date. But given that the Department of Education has directed its loan servicers not to send billing notices to borrowers, signs point to another expansion. Education Secretary Miguel Cardona has indicated that Biden will announce a student loan moratorium within a week. “We know that August 31st is a date that a lot of people are looking forward to hearing something from,” he said in an interview on NBC on Sunday. “We’re talking about it every day, and I can tell you the American people will hear within the next week or so.”Forbes student loan forgiveness
Biden said he would make a decision on student loan forgiveness by August 31.
The student loan freeze isn’t the only major student loan decision on Biden’s plate. Biden has also said he will make a final decision on whether to implement broad student loan forgiveness by August 31. Measure “by the stroke of a pen.” But Biden has so far resisted the campaign, opposing large amounts of federal student loan forgiveness and expressing doubts that he has enough legal authority to act unilaterally.
However, in recent months, Biden’s position appeared to soften after it became clear that Congress would not pass a comprehensive student loan forgiveness bill. The Biden administration has dropped several hints that the president is seriously considering a broader measure of student loan forgiveness, including using legal arguments in recent court filings to suggest officials endorse a legal theory. Current federal law allows for at least some grades of students. Debt cancellation. Meanwhile, the Department of Education has reportedly already set up an administrative system to implement massive student loan forgiveness if Biden decides to go ahead.Department of Education student loan forgiveness
Biden could decide on student loan forgiveness and other relief measures.
While the big-ticket items Biden is considering are student loan relief and broader student loan forgiveness, Biden must also decide how to proceed with other federal measures related to student loans. Is:
Limited PSLF Waiver is a measure that temporarily relaxes the rules to extend relief through the Public Service Loan Waiver Program. Advocates are pushing Biden to extend the measure, which is currently set to expire on October 31.
An IDR account adjustment is a measure designed to provide retroactive credit for the student loan forgiveness period of borrowers under federal income-driven repayment plans. The Education Department has not marketed the move as much as it has focused on limited PSLF waivers, but officials could complete the move by January. Borrower advocates are also pushing for an expansion of the program.
A new income-based repayment plan is also being considered, which could provide borrowers with lower monthly payments after the student loan period ends. The Education Department released a new proposed income-based plan last year, but it has been widely criticized for its complicated formula and strict eligibility rules that restrict graduate school borrowers and Parent Plus borrowers. Discharged.
Learn more about student loans
The Biden administration has approved $32 billion in student loan forgiveness, and more is coming — here’s how to apply.Student loan repayment update
who qualify for nearly $4 billion in automatic student loan forgiveness under the new Biden initiative
Settlement providing $6 billion in student loan forgiveness clears bottleneck: 5 key takeaways
If you went to these schools, you may qualify for student loan forgiveness: Here’s what to do
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Even before the public health crisis, repayment problems were common among student loan borrowers.
The nation’s outstanding education debt fell by $1.7 trillion and burdened households with more than a credit card or auto loan. About a quarter of student loan borrowers — or 10 million AfrAd — were judged to be in delinquency or default.
Experts say the financial toll of the public health crisis has worsened the situation. A recent study found that surveyed student loan borrowers reported a 16% chance of missing a payment immediately if the payment period was over.
Although Biden has expressed skepticism about student loan forgiveness in the past, another development this week suggests he is pushing the idea. According to several reports, the form of student loan cancellation.
Democrats and advocates have pressed the president to act before the midterms, pointing out that canceling student loans is a campaign promise he can fulfill without Congress, while his more But the agenda has stalled in the House and Senate.
It is still debated among some lawyers whether the president has the power to forgive the debt through executive action.
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Meanwhile, opponents of student loan cancellation say the policy forces taxpayers to foot the bill for those who have benefited from higher education and is unfair to Americans who have attended college. Never enrolled, never borrowed or paid off a loan.
Advocates point out that the rising cost of college has left people with no choice but to take out loans if they want to get decent-paying jobs, and that people of color and women are hurt the most by the lending system. Picking up Two-thirds of federal student loan debt is held by women.
According to a recent study by the Federal Reserve Bank of New York, about 70 percent of the relief from a theoretical $50,000 in student loan forgiveness would go to middle-income and low-income neighborhoods.
Limitation of Executive Authority
Many experts CNBC Make It spoke with suggest that student loan forgiveness is within the president’s power.Student loan forbearance
“[Biden] has the authority to direct the secretary of education to cancel at least all of the federal government’s student loans, which account for about 95 percent of student loans out there,” said Suzanne Kahn, managing director of research. and policy at the Roosevelt Institute.
“President Biden has absolute authority to cancel student loans,” says Ashley Harrington, federal advocacy director and senior counsel at the Center for Responsible Lending. “This is the same authority that the Trump administration used last year to freeze interest and payments to federal borrowers who owed money to the federal government. The same authority will expire later this year. Used to extend. And then it was used. The Biden administration is going to extend the moratorium again until the end of September.”
Biden has repeatedly rejected the idea, including during a February town hall. “I’m willing to forgive $10,000 [of] debt, but not $50,000,” Biden told an audience member. “I don’t think I have the option.”
This month, the president’s chief of staff, Ron Klein, revealed to Politico that Biden had asked Education Secretary Miguel Cardona to draft a memo about his legal authority to cancel student loans.
“He’ll look at that legal authority, he’ll look at the policy issues around it, and then he’ll make a decision,” Klein said. “He hasn’t made a decision either way. In fact, he hasn’t yet received the memos he needs to focus on making that decision.”
$10,000 vs. $50,000
Logistics aside, there’s still a lot of debate about how much student debt should be forgiven.
“We will see a significant number of borrowers in default cancel over $10,000 of student loan debt. That’s about two-thirds of borrowers will have their loans canceled in default,” Yu estimates. . “However, at $50,000, we’ll see 93% of student loan borrowers default on their loans.”
Many economists have argued that relief should be targeted at those who need the most help and have pointed out that borrowers with less than $10,000 in student loans are the most likely to default. More likely.
The borrowers who struggle the most “are more in the category of a student who started at a community college, had something unexpected happen in their life, and didn’t graduate. Investments that didn’t make a profit, they’re stuck with that debt, and it’s hard for them to get out of that debt,” says Philip Levine, professor of economics at Wellesley College. “Sure, there are students who borrowed $50,000 to go to a four-year college and are struggling to pay it back. But there are plenty of students who borrowed $50,000 who are struggling to pay it back. are going to.”
Levin argues that forgiving up to $50,000 of student debt would inadvertently benefit some college graduates who are relatively well-off.
“At the $50,000 level, I’m not saying those people don’t [struggle]. It’s just that there are a lot of people that make up that group that are going to do just fine and pay off that debt. No problem.And so if you this loan for all these peoplereduce that, then you’ve given a huge benefit to a lot of people who don’t need it,” he says. “There’s no question that we have problems of limited economic opportunity. Addressing these issues must directly benefit those who need the benefits. He continues, “The irony in all of this is that it doesn’t really serve progressive goals. Progressive goals make it seem like you should give things to people who need them.”
Others have argued that forgiving large student loans would lead to racial and gender disparities in borrowers’ debt.
For example, The Brookings Institution estimates that, on average, black college graduates owe $52,726 in student debt while white college graduates owe around $28,006.
“Black and brown borrowers, low-income borrowers, veterans, women. These are the people who have been disproportionately affected by this crisis,” Harrington says. “There’s a Brandeis study that shows that even after 20 years of paying off, the typical black borrower still owes 95% of their original balance, while the typical white borrower owes 95% of their original balance. is only 4%.”
“African-American borrowers, in particular, take on more debt to pay for education, and they often struggle more to repay those loans,” Yu adds. “So while $10,000 might work great for borrowers in default in general, it’s not going to be enough to actually help borrowers of color who are in default because they have There’s usually more balance.”
Is loan forgiveness permissible?
At the same February town hall in which Biden rejected $50,000 in student loan forgiveness, he also claimed that $50,000 in loan forgiveness for those who went to Harvard and Yale and Penn would be “billions of dollars.” Loans will be waived.”
This has become a common misconception of the student loan forgiveness debate. Only 0.5% of college students attend Ivy League schools such that most of them do not need to take out student loans. However, the idea that student loan forgiveness could help some already well-off people has caught on because of the national conversation about fairness.
Is it fair for people who went to college — an opportunity many Americans don’t have — to have their loans forgiven?
“It’s a common criticism that there are a lot of borrowers who are well off, who would benefit from student loan cancellation, and I think that talking about a student loan portfolio in that way. is a little misleading. Each income quintile. The majority of households with student loans are households making less than $100,000,” says Yu. “It’s true that there are some people who will benefit who are high-income, but what we’ll see is the majority of people who will benefit, really, low- and middle-income student loan borrowers.”
“There are always things that happen in our political system, in our economy, where it doesn’t seem like all the direct benefits are going to everybody. But this wouldn’t be the first time. It’s the first time we’ve seen the direct benefits actually go to that.” addressing a problem that disproportionately affects black and brown families,” says Harrington. “There have been many times in the history of this country where direct benefits have been obtained by the federal government to help people who are struggling or to help people build wealth: land, housing, Education benefits, the GI Bill, all of these things. It’s been done before. It’s not something new or unique that we’re asking for. It’s just something that will actually help so many people of color. Just like none of these other programs did.
Also, it’s important to note that the student loan crisis isn’t “fair” either. And it’s not “fair” that some students should take out more student loans for the same education.
“The system itself is unsustainable”
Beyond fairness, the debate over student loan forgiveness has also revived the debate about how to best fund higher education.
“College is a wonderful financial investment. People who go to college do much better and earn hundreds of thousands of dollars over their lifetime than students who don’t. It’s a great investment. Sometimes financial The right way to support. Very good investment is through debt. That doesn’t mean it has to be excessive debt. It doesn’t mean it has to be brought to a point where it’s too much of a burden on people. “They’re not willing to take it up,” he says. “But there’s nothing wrong with sama. loan money if that small amount of debt is contributing to a quality education that can provide them with the financial returns that college usually does.”
Harrington says there is broad support among voters to envision how college is paid for in the United States. A Morning Consult survey found that 56% of all American adults and 62% of Generation Z (who voted disproportionately for Biden) support $10,000 in federal student loan forgiveness.
“The system itself is unsustainable,” she says.The debt-driven model of higher education is unsustainable.” “On the campaign trail, President Biden talked about debt cancellation in many different forms. We are just asking them to fulfill their promise.”
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