Biden forgave $ 9.5 billion in student loan debt
During the election campaign, President Joe Biden pledged to make the cancellation of student loans a priority as president. So far, however, none of its broader proposals to reduce some of the $ 1.6 trillion in federal debt have come to fruition.
But Biden didn’t completely neglect his promise; his administration has discharged nearly $ 10 billion in student loan debt since January. That’s more than either of the previous two administrations canceled in their first year in office.
Here’s a closer look at the recipients of student loan cancellation so far this year and the likelihood of a large student loan cancellation initiative.
Who has qualified for the student loan exemption so far?
Although a nationwide student loan cancellation plan appears to be on hold for now, the Biden administration has granted a targeted remission under existing programs. So far, over half a million borrowers have had their debts wiped out entirely, largely through two types of discharges.
The first, called the borrower’s repayment defense, focuses on borrowers who have been defrauded in their schools.
“To be eligible for this program, a borrower’s school must have misled [students], or have engaged in other reprehensible acts of certain state laws, ”said Jacquie Carroll, Certified Financial Advisor and Regional Director of The AccessLex Center for Education and Financial Capability.
As recently as last week, the administration forgave the debt of 115,000 former students of ITT Tech, a now defunct for-profit college that closed in 2016. This followed two previous cancellations in under the same program. In March, the Department of Education paid off the student loan debt of 72,000 borrowers who attended for-profit colleges, for total relief of about $ 1 billion. And in June, he canceled an additional $ 500 million in outstanding loans belonging to 18,000 former ITT Tech students.
It is likely that there will be additional discharges under this program, as there is still a backlog of applications from individual borrowers requesting discharges, including students who attended Westwood College, Marinello Schools of Beauty and the Court Reporting Institute. The backlog was due to the way the Department of Education handled borrower defense demands in the previous administration, which involved calculating the economic damage caused by these schools and granting a loan forgiveness commensurate with that. prejudice. Now, the approval process has been expedited to grant a 100% discount as soon as an applicant is deemed eligible.
The rest of the forgiveness that has happened so far this year has been done through what is known as the Full and Permanent Disability Release Program. In August, the Ministry of Education announcement it would automatically write off $ 5.8 billion in student loan debt belonging to 323,000 borrowers deemed eligible for the program. Earlier this year, he also reinstated $ 1.3 billion in loan repayments for 41,000 other borrowers who were eligible but did not verify their income.
Previously, borrowers with disabilities had to submit detailed documentation and undergo a three-year monitoring period to obtain a rebate.
“The good news is that in the future, ED plans to systematically write off the debt of these borrowers when the Social Security Administration determines their disability status,” Carroll said.
In total, that brings the total amount of loan forgiveness approved by the ministry to $ 9.5 billion since January this year, relieving nearly 570,000 borrowers. While this may seem like a big change, it represents less than 1% of all federal student loan debt. Many are pushing the administration to grant a more general pardon beyond these targeted measures.
What is the likelihood of a widespread forgiveness of student loans?
It’s important to note that all debt forgiveness under the Biden administration was made under existing programs and regulations. Whether the executive can write off all student debt is currently a legal debate, but Biden himself has said he doubts he has the power and would rather write off the debt with congressional backing. Mark Kantrowitz, student loan expert and author of “How to Appeal for More College Financial Aid, nods.
“The Biden administration cannot implement broad loan forgiveness through executive action – only Congress has the power of the stock market,” he said.
Even so, if a large loan forgiveness were to take place, it is now more likely than at any other time, Kantrowitz said, especially because the pandemic-era pause on student loan payments ends on January 31, 2022. And although Biden’s current budget does not include loan cancellation, he reaffirmed his campaign pledge to write off up to $ 10,000 in federal student debt for some borrowers as part of his education plan.
Several bills have also been introduced to fight against the cancellation of student loans. For example, the Student Loan Relief Act would order the Secretary of Education to pay up to $ 50,000 in federal student loan debt per borrower. And the Civil Servants Loan Forgiveness Strengthening Act would allow borrowers to receive a rebate under the civil service loan forgiveness program in proportion to their years of payment, rather than requiring 10 years of payment. service before getting a discount. However, Carroll said she was skeptical about passing any of the bills given the divided nature of Congress.
There are also several other student loan forgiveness options for anyone who qualifies, including
- Teacher loan waiver: Up to $ 17,500 in forgiveness is available to individuals who teach full-time for five full, consecutive school years in select elementary or secondary schools, or to educational service agencies that serve low-income families and meet needs. ‘other qualifications.
- Public Service Loan Discount (PSLF): Borrowers who work full-time for government or non-profit organizations are eligible for a remission of their remaining balance after 120 qualifying payments. “This program has been expanded to include the Temporary Extended Public Service Loan Remission (TEPSLF) for borrowers who have been denied PSLF loan forgiveness due to payments under an ineligible repayment plan,” Carroll said.
- Income Based Refund (IDR): These plans adjust a borrower’s monthly payments to a small percentage of their discretionary income and extend the payment term to 20-25 years, depending on the specific program. Any balance remaining after this period is canceled. However, Carroll noted that unlike Teacher Loan Forgiveness or PSLF, borrowers may have to pay income taxes on the amount forgiven.
- Waiver of total and permanent disability for veterans: Borrowers with a service-related disability may qualify for federal and private student loan forgiveness.
Any borrower interested in pursuing any of these programs can get more information and apply on the Federal student aid website.
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