Biden’s $20 Billion Student Loan Cancellation Targets These Borrowers
BY Lake SydneyApril 25, 2022, 6:35 p.m.
US President Joe Biden speaks during Earth Day at Green River College in Auburn, Washington, as seen in April 2022. (Photographer: David Ryder—Bloomberg/Getty Images)
Joe Biden has forgiven more student loan debt than any other president, having rolled out nearly $20 billion in forgiveness since taking office last year. That still represents just over 1% of all federal student loan debt, which currently stands at $1.7 trillion among 45 million borrowers.
Biden has campaigned to agree to forgive up to $10,000 in student loan debt per borrower, but so far he has only given relatively smaller groups of borrowers a rebate.
“A good education should be a reliable path to the middle class”, he tweeted during his campaign. “But for too many people, getting a title or degree after high school comes with a mountain of debt or is out of reach altogether.”
Over the past year, however, there has been debate over Biden’s power to cancel student debt en masse by executive order. Biden and House Speaker Nancy Pelosi don’t think he has the power to do so, but other Democrats, including Senate Majority Leader Chuck Schumer and Sen. Elizabeth Warren, say he does. — and that Biden should write off up to $50,000 per borrower.
Since taking office, Biden has announced several rounds of pardons, which have been granted to borrowers with total and permanent disabilities, government workers and borrowers who attended now-defunct institutions. In total, these rounds of forgiveness will help hundreds of thousands of federal student loan borrowers.
Last week, Biden also announced major changes to the Public Service Loan Forgiveness Program (PSLF) and income-driven repayment plans that will help an additional 40,000 borrowers. This development follows changes to the PSLF announced in October 2021, which immediately erased $1.7 billion in student loan debt for 22,000 borrowers.
While Biden is still short of student loan forgiveness for all borrowers, there are still plenty of people currently benefiting from forgiveness. Fortune gathered who got forgiveness so far.
Loan forgiveness for defrauded borrowers
In March 2021, the Ministry of Education announced that it would streamline the processing of borrower defense requests, which can be submitted by borrowers who have been deceived by their institutions. This announcement and several subsequent rounds of rebates have helped more than 100,000 borrowers and totaled more than $2 billion.
The first round of such pardons totaled about $1 billion and went to about 72,000 borrowers who attended Corinthian Colleges, ITT Technical Institute and the American Career Institute. Borrowers who attended Westwood College, the Marinello Schools of Beauty and the Court Reporting Institute were also granted forgiveness last summer and began receiving automatic discharges for their student loans in September 2021.
Then in February, Biden announced another round of pardons for borrowers who attended DeVry University, Westwood College, Corinthian Colleges, Marinello Schools of Beauty, ITT Technical Institute’s nursing program, and colleges. Minnesota School of Business/Globe University Criminal Justice Programs. About 20% of this round of pardons went to DeVry University because the education department found that DeVry had advertised the school as a “Career Placement University” with a 90% placement rate. In reality, however, the school’s placement rate was around 58%.
Cancellation of debts for borrowers with a total and permanent disability
The largest round of student loan forgiveness has been granted to borrowers with “total and permanent disability.” The Department of Education first announced $5.8 billion in cancellations that went to 323,000 borrowers.
With changes to the TPD verification process, this discount for these borrowers increased to $7 billion for 400,000 people in January 2022. The Social Security Administration now identifies TPD borrowers through a data match instead of requiring applicants to identify their disability through the Department of Veterans Affairs. The SSA now assesses whether a borrower can still work. Borrowers with a DPT have their loans automatically discharged.
Relief for public service workers, borrowers with an IDR plan
Congress created the PSLF in 2007 to provide debt relief to public servants who had made 10 years of payments, or 120 qualifying monthly student loan payments. Until October 2021, however, the program has been largely unsuccessful as around 98% of borrowers who applied for forgiveness were turned down by the program due to several obstacles in the approval process.
One of the main problems with the PSLF program was that it did not count payments on certain types of federal loans. But now, a limited waiver introduced in October 2021 will allow borrowers to count payments on loans from the Federal Family Education Loan (FFEL) program or the Perkins loan program as long as you submit a PSLF form by October 31. 2022.
The Ministry of Education announced further changes to its PSLF and IDR programs last week. At least 40,000 borrowers will see their debt immediately canceled as the ministry makes corrections to “historic failures” in the administration of the two programs.
“Student loans were never meant to be a life sentence, but it certainly is for borrowers stuck on the debt relief they are eligible for,” the US Secretary of Education said. Miguel Cardona, in a press release. According to previous reports of Fortune, the average balance of PSLF loans discharged is $97,289, implying that approximately $3.9 billion in student loans will be forgiven this cycle. The Ministry of Education has not officially released a value on this forgiveness round.
IDR plans are designed to help borrowers make affordable payments on their federal student loans. The Ministry of Education, however, found that borrowers who could have benefited from IDR plans had not been given specific information about their options. This has led some borrowers to forbearance instead of an IDR plan, according to the department.
The Ministry of Education has also indicated that it will continue to push for more reforms for these groups of borrowers.
“Beyond the immediate remedies announced today which will provide relief to borrowers harmed in the past, the FSA will take steps to ensure that borrowers receive these benefits in the future,” according to the department’s statement.
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