Yahoo Finance Biden's piecemeal student debt forgiveness 'transformational' for borrowers, advocates say
April 23 (UPI) -- In less than a year since the U.S. Supreme Court blocked President Joe Biden's student loan forgiveness, his administration has taken a piecemeal approach to forgiving billions of dollars in debt for millions of borrowers.
The president initially set out to cancel $10,000 to $20,000 of student debt for borrowers who received Pell Grants if they earned less than $125,000 per year. Tens of millions signed up for debt relief before the Supreme Court ruled against the plan in June.
Biden and the Department of Education have since announced more narrowly targeted debt cancellations for borrowers that meet certain requirements. Many who have had their debt canceled have been paying off their student loans for 10 years or more.
As of April 12, the White House said its efforts have resulted in $153 billion in debt relief for 4.3 million borrowers.
Fixing broken programs
Among the most impactful forms of relief, according to borrower advocates, were fixing the Public Service Loan Forgiveness and income-driven repayment programs.
The PSLF program was instituted in 2007 and was set to become active in 2017. It would allow borrowers who made 120 payments while working in public service to have their remaining balance forgiven.
Spencer Dixon, senior policy advisor for the Student Debt Crisis Center, told UPI, however, that the "program was so poorly managed" under President Donald Trump's administration that "only 7,000 people received relief under the program."
"Under Biden so far we've seen more than 100 times as many people benefit from the program," Dixon said.
In October 2022, the Department of Education announced permanent changes to the PSLF program including allowing borrowers working in the public service fields to obtain credit for late, partial or lump sum payments as well as offering credit for months in deferment or forbearance including those related to military service or deferments for economic hardship or cancer treatment.
Following a series of loan discharges the administration said it has since approved $62.8 billion in forgiveness for nearly 876,000 borrowers through the PSLF program.
As of April 12, the Education Department said that more than 996,000 borrowers have also received relief under additional fixes to IDR programs with the administration approving $49.2 billion in debt relief.
The first relief announcement, following the Supreme Court's decision to block Biden's broader debt cancellation plan, was made on July 14. The Department of Education announced it would notify more than 804,000 borrowers that they qualified to have a total of $39 billion forgiven.
This batch of cancellations took place automatically. Borrowers that had made 240-300 monthly payments, the equivalent of 20-25 years on an IDR plan.
Additionally, in response to the Supreme Court's rejection of his broader student debt relief plan, Biden introduced the Saving on a Valuable Education Plan, or SAVE, which offers automatic relief to borrowers who have been making payments for more than 10 years if they initially took out loans of $12,000 or less.
In February, SAVE borrowers began receiving forgiveness ahead of the originally planned July deadline with $1.2 billion in loans forgiven, impacting nearly 153,000 people. The Education Department said more borrowers will eventually be forgiven as they hit the 10-year repayment threshold. There are about 7.5 million people signed up for the SAVE repayment plan.
In total, the Education Department said $3.6 billion loans for almost 206,800 borrowers have been forgiven under the program as of this month.
'This is transformational'
Repayment flexibility and debt relief have particularly benefited workers in the nonprofit world and government workers, according to Dixon. Lower- and middle-income families and Black and Latino families are also represented among those to be greatly impacted.
The Biden administration has emphasized debt relief for public service workers. Days after announcing the early SAVE plan forgiveness in January, the Biden administration canceled $5 billion for 74,000 public service workers. Teachers, nurses, firefighters and other public servants benefitted.
About 30,000 of those borrowers had been paying their student loans for 20 years. The rest had been paying for 10 years.
Debt relief has been crucial for educators, whether they are just starting their careers or nearing retirement. Becky Pringle, president of the National Education Association, told UPI that the impact for educators has been almost immediate.
"The early career educators who are taking two or three jobs and living with their colleagues in an apartment, all of that is real," Pringle said. "When that changes for them, they tell us about how it not only encouraged them to stay in the profession but that they can live their lives and start their families."
Pringle added that borrowers are often mischaracterized by opponents of debt relief as not paying their loans. However, those who have received relief have been paying toward their debt for 10 years or more in most cases. Some who have paid for a decade or longer had balances larger than their initial loan.
"They've been [paying] it but can't get out from under it because of the way it was structured," she said. "We found out that over 25% of educators over 61 had still not paid off their student loans. About 35% were carrying more than 45,000 of their debt."
Those debt terms have caused some of those educators to delay retirement or believe that retirement will never be an option.
"That's unbelievable and unacceptable," Pringle said.
Pringle and Amy Czulada, outreach and advocacy manager for the Student Borrower Protection Center, told UPI that student debt has caused many people to delay starting a family or purchasing a home.
"We were surprised to find out how many of our members were delaying starting families or buying houses because they were laboring under this debt," Pringle said."
With relief, Czulada says those people can begin to participate in the economy in a way they were not able to before.
"It's been a really exciting time to be doing this work," Czulada said. "It's the first time we've seen the ledger move down on student debt. In the past decade it's been ballooning. The stories we get from folks about what debt cancellation means to them are really inspiring. They're freer to do things they've wanted to do for a long time. This is transformational."
'Plan B'
While the Biden administration has rolled out multiple efforts to broaden debt relief it is also seeking to implement a broader plan like originally intended. Last week it submitted a notice of proposal to waive certain student debt under the authority of the Higher Education Act.
"The plans, if implemented, would provide debt relief to over 30 million Americans when combined with actions the Biden-Harris Administration has already taken to cancel student debt over the past three years," the White House said in a statement.
"This plan b broad-based forgiveness is more targeted," Dixon said. "A reasonable person could say that it's in response to the way in which the first plan was struck down."
Czulada explains that this new proposal would seek to fill some gaps for those who have been missed by previous relief plans. It would also fix more programs that have not been working as intended.
The proposal would introduce a number of new regulations that would lower the debt burden for borrowers who have been making payments, experienced hardship or may have qualified for relief without knowing about it.
A portion of debt, or in some cases the full amount, could be waived if it exceeds the amount of the loan when it entered repayment if the borrower falls at or below certain income levels. Borrowers who were eligible for plans like the IDR plan could have their outstanding balance forgiven even if they are not enrolled.
However, Biden's piecemeal debt forgiveness plans have also come under fire.
Kansas Attorney General Kris Kobach has been among the most ardent opponents of canceling student debt. He organized a coalition of 11 states last month to sue the Biden administration over his efforts to forgive student debt. Alabama, Alaska, Idaho, Iowa, Louisiana, Montana, Nebraska, South Carolina, Texas and Utah joined the lawsuit.
Kobach alleges that Biden's plans have defied the Supreme Court's ruling and circumvented Congress.
