Developments and debates about student loan forgiveness have continued to dominate the news in the first month of 2022. Here’s the latest.
1. Biden administration has cancelled $15 billion using “targeted” student loan forgiveness 2. Progressives in Congress continue to press Biden to cancel more student debt 3. Private student loan forgiveness? Probably not – with one notable exceptionBiden administration has cancelled $15 billion using “targeted” student loan forgiveness
According to the U.S. Department of Education, at least 675,000 student loan borrowers have benefited from $15 billion in “targeted” student loan forgiveness initiatives, where the Biden administration has used executive action to tweak, expand, and relax certain requirements governing existing federal student loan forgiveness programs. This includes the following:
Public Service Loan Forgiveness (PSLF)
The administration enacted the “Limited PSLF Waiver” program in October, which has temporarily eased the PSLF rules to allow more types of federal student loans and more types of repayment plans to count towards loan forgiveness.
Already, the waiver has resulted in $5 billion in new student loan forgiveness for 70,000 borrowers, according to the Department of Education.
Total and Permanent Disability (TPD) Discharge
The administration has taken several initiatives to improve and expand the TPD Discharge program, which can eliminate the federal student loan debt for disabled borrowers. The Education Department is automatically discharging the federal student loan debt for hundreds of thousands of borrowers receiving Social Security Disability benefits (rather than requiring a formal application).
The Department is also reversing the reinstatement of previously-discharged loans since the pandemic began and has indefinitely waived post-discharge income monitoring while the administration works overhauling the TPD rules to eliminate such monitoring in the future permanently.
Closed school discharges
The Department has streamlined group relief for borrowers who attended ITT Technical Institutes, a chain of for-profit institutions which collapsed in 2016 following allegations of misconduct.
The Closed School Discharge program cancels the federal student loan for borrowers who could not complete their degree or certificate program due to the closure of their school.
Borrower defense to repayment
The Administration has reversed policy guidelines that allowed the Department of Education to provide “partial relief” to borrowers approved for loan forgiveness under the Borrower Defense to Repayment program, which discharges the federal student loan debt for borrowers who were defrauded by their schools.
The policy reversal means that thousands of borrowers who already had their Borrower Defense claims approved will receive millions of dollars in additional student loan forgiveness.
Additional relief for borrowers
More targeted student loan forgiveness may be on the way. In public remarks on Thursday marking the administration’s first year in office, Education Secretary Miguel Cardona committed to continuing to explore ways of providing more relief to borrowers, saying, “It is unacceptable to be burdened with unmanageable debt because you earned a college degree.”
Download the Best Student Loan CalculatorProgressives in Congress continue to press Biden to cancel more student debt
Progressive Democrats in Congress and a diverse coalition of advocacy groups have been engaged in a sustained campaign to persuade President Biden to enact broad student loan forgiveness through executive action.
Senate Majority Leader Chuck Schumer (D-NY) and other leading Democrats in Congress have repeatedly argued that Biden could cancel student debt “with the stroke of a pen” rather than relying on legislation passed by Congress. Advocates have called on Biden to cancel $50,000 or more for every student loan borrower.
While Biden supported widespread student loan forgiveness during his presidential campaign, he has said he would oppose such high amounts of debt cancellation. Administration officials have also expressed significant uncertainty about whether existing federal statutes provide the President with authority to wipe out people’s federal student loans on a massive scale.
Last year, Biden directed the Education Department and Justice Department to produce formal memos outlining his possible legal authority to forgive student loan debt. The conclusions of those memos have not been publicly released.
This week, a group of more than 80 congressional Democrats sent a letter to President Biden calling on him to release the memos and reiterating their stance that Biden can – and should – cancel up to $50,000 of student loan debt for every borrower.
The signatories argued that such widespread debt cancellation “would give 36 million Americans permanent relief” and would have significant economic benefits, helping more “Americans access important paths to build the middle class which have been delayed by student loan debt.”
The lawmakers also argued that student loan cancellation would help close the racial and gender wealth gap in America, as “systemic barriers” mean that “Black, Latino, and Native American borrowers are more likely to struggle with repayment and consequently default on their loans at higher rates.”
The signatories noted that widespread cancellation would also benefit older student loan borrowers, who are making up an increasingly large share of student debtors.
Later this week, White House Press Secretary Jen Psaki dodged a reporter’s question about when the administration would release the conclusions of the legal memos, saying only that they are “still looking at administrative options.”
Psaki reiterated that Biden would sign a student loan forgiveness bill passed by the House and Senate, but the prospects of such legislation passing both houses of a closely-divided Congress would appear to be quite dim.
Private student loan forgiveness? Probably not – with one notable exception
Most of the discussion surrounding student loan forgiveness centers on federal student loans. The $15 billion in “targeted” student loan forgiveness already disbursed by the administration, and the calls to provide across-the-board loan forgiveness for every borrower through executive action, are all limited to federal student loans. That’s because Biden must act under existing federal statutes.
While federal law does give a president the ability to tweak, expand, or temporarily modify loan programs in certain circumstances, that authority is limited to the federal student loan system. Borrowers with private student loans have, unfortunately, been left out.
Private student loan borrowers did get some good news this month, however. Over three dozen state attorneys general reached a settlement agreement with student loan giant Navient. The terms of the settlement (under which Navient admitted to no wrongdoing) provide for $1.7 billion in private student loan forgiveness.
Since private student loans are generally ineligible for loan forgiveness in most cases because current loan forgiveness programs are limited to federal student loans, this is a significant development. But there are precise eligibility criteria for relief based on residency in certain states, disbursement dates, attendance at specific institutions, and loan delinquency status. You can learn more here.
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