Student debt: What Biden is doing (and not doing) | Education

The last few days have been good and bad headlines related to student loans.

  • Good – The government has been praised for canceling student debt of $ 415 million for victims of college fraud.
  • Bad – The Biden administration has been criticized for failing to change the rules for bankruptcy of student loans.

I turned to Katie Labasca, a CNN writer on student loans, to better understand how much student debt there is, who holds it, and what else the government can do about it.

Our email conversation, slightly edited, is below.

Huge pile of debts

WHAT IS IMPORTANT: First, can you tell me how big the student debt problem is in the US? How much is owed and how many people?

LABOSKA: This is great. According to the Federal Reserve, Americans owe nearly $ 1.8 trillion on student loans – more than they owe on credit cards or car loans.

According to Federal Student Aid, most student debt is owned by the federal government and is held by about 43 million people. This is approximately 17% of adults aged 18 years and older.

The total amount of outstanding student debt has been growing steadily since at least 2006.

But I think it should be noted that today’s students do not borrow as before. Annual student loans peaked in the 2010-2011 academic year, and since then college students have borrowed less money each year in a row, the College Council reports.

Whose money is this?

WHAT IS IMPORTANT: Who owns all this debt and how can it be written off?

LABOSKA: As of 2020, about 75% of student loan borrowers took out study loans at two- or four-year colleges. According to the Brookings Institution, they make up about half of all student loan debt. The remaining 25% of borrowers entered graduate school and accounted for the other half of outstanding debt.

More than half of all federal student borrowers owe less than $ 20,000 as of March 2021. Only 7% owe more than $ 100,000, which is more than one-third of all federal student debt, according to the college council.

There are a number of repayment programs offered for federal student loans. Many of them tie the amount of monthly payments to the income of borrowers and can be as much as $ 0 per month. Some of these revenue-based payment plans will eliminate the amount of outstanding debt remaining after a certain period of time. There is also a 10-year apology program specifically for public sector borrowers.

The federal government also forgives student debt to borrowers who have been deceived by their college, as well as to borrowers who are permanently disabled and can no longer work.

Some prominent Democrats, including Senate Majority Leader Chuck Schumer and Massachusetts Sen. Elizabeth Warren, argue that President Joe Biden can and should use his executive powers to more widely cut off federal student debt by urging him to forgive $ 50,000 each the borrower.

Last year, Biden instructed lawyers from the Ministry of Education and the Ministry of Justice to assess whether he actually has the authority to do so, but the administration has not disclosed those findings. Biden said he supports Congress by using its legislative powers to repeal up to $ 10,000 per borrower.

What is happening and what will not?

WHAT IS IMPORTANT: What has the Biden administration done to forgive the debt, what it wants to do, and what it is unlikely to be able to do?

LABOSKA: Under Biden, the Department of Education approved about $ 16 billion in federal student loans for more than 680,000 borrowers – more than in any previous administration.

Much of this effort was aimed at reaching people who were already eligible for debt relief but were awaiting paperwork. The department eliminates the backlog of pardon claims filed under policies known as protecting the borrower to maturity, allowing former students who have been tricked by their colleges to seek federal debt relief. Under the policy, the Biden administration has cut off about $ 2 billion from more than 107,000 individuals who have attended nonprofit colleges such as the ITT Institute of Technology and the University of DeVree. The department has also improved efforts to reach borrowers who are eligible for debt relief due to permanent disability.

The Biden administration has also revised its government debt forgiveness program, which cancels outstanding federal student loan arrears for those working in the public sector after they have made 10 years of payments. It has temporarily extended the eligibility criteria to apply to borrowers who have old loans that did not initially meet the requirements, as well as those that were in the wrong repayment plan, but met other requirements – until October 31. The expansion has resulted in nearly $ 5 billion at the moment to ease the debt of 70,000 borrowers.

Biden also extended the pandemic-related pause to pay off federal student loans, interest and fees. In fact, borrowers have not had to make payments since March 2020. Now the benefit expires on May 1.

The Department of Education is likely to continue all these efforts aimed at targeted debt repayment. He also plans to rewrite a rule known as lucrative employment, which aims to prevent students from taking on too much debt to attend predatory nonprofit colleges. The rule was repealed by the previous administration.

I think it is unlikely that we will see that the Biden administration will widely abolish student debt, especially for high-income people. Biden argued that the government should not forgive the debt to people enrolled at Harvard, Elle and Penn. He also noted that he believes that Congress should make changes through legislation that will make it harder to repeal them. A recent speech by Education Minister Miguel Cardona, outlining the department’s priorities for next year, did not mention the future widespread abolition of student enrollment.

Biden v. Trump

WHAT IS IMPORTANT: How is it different under President Biden than under President Trump?

LABOSKA: While the Trump administration has made it difficult for borrowers to qualify for some apology programs, the Biden administration is making it easier.

Here are two key examples:

  • Under the leadership of former Education Minister Betsy DeVos, she stopped processing the claims of borrowers, trying to rewrite the regulations, which allowed to accumulate more than 100,000 claims. It also changed the cancellation calculation so that some borrowers were entitled to only partial assistance. DeVos was even accused of contempt of court for continuing to collect some of these debts. Biden, on the other hand, has abolished this calculation of partial assistance and is reducing the backlog.
  • The Trump administration has also called for an end to the debt forgiveness program for public services, excluding it from the federal budget proposed by the president for all four years of his tenure. Congress never accepted the offer, and as I said earlier, Biden extended the right to participate in the program.

Payments are coming

WHAT IS IMPORTANT: While we touch on the topic of student debt, let’s turn to deferred payments. Payments on the federal loan were suspended during the pandemic and are scheduled to resume in May. What should people with student responsibilities do?

LABOSKA: Borrowers must receive a statement of account or other notice at least 21 days before their due date. It should be somewhere on May 1 or after. Not all monthly payments of borrowers are repaid in one day.

Borrowers who have previously set up car payments may need to inform their loan service company that they want them to continue. If he or she can no longer afford a monthly payment, they may be eligible for an income-based repayment plan. Under these plans, which are based on income and family size, the monthly payment can be as little as $ 0 per month. The Department of Education has more information online about restarting payments.

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