The White House is announcing more debt relief for thousands of student loan borrowers, after student loan payments resumed this month.
The forgiveness will impact 125,000 borrowers, totaling $9 billion in relief, through the administration’s efforts to fix historical inaccuracies in income driven repayment plans, public service loan forgiveness and automatic relief for those with total and permanent disability.
“It's a signal to the millions of Americans out there that are looking to President Biden to continue to lead to make college more affordable, more accessible, and quite frankly, just fix a broken system,” said Secretary of Education Miguel Cardona.
The latest round of relief includes 22,000 borrowers with total or permanent disability, 51,000 approved through fixes to income driven repayment plans and 53,000 borrowers through public service loan forgiveness.
“We're talking about military service members, teachers, nurses, everyone we called essential three years ago, right? Well, they kept their end of the bargain, and they worked for 10 years, they paid their loans for 10 years. So under the 2007 law, after 10 years, they receive public service loan forgiveness. The problem is that the public service loan forgiveness program wasn't being followed through in the last administration. We recognize this issue, and we're making sure we're discharging loans away the law requires,” Cardona said.
Student loan borrowers face budget strains as repayments kick back in
The Department of Education estimates 43 million people in the U.S. owe a collective $1.6 trillion in federal student loan debt.
The new expansion brings the administration’s total debt cancellation to $127 billion for nearly 3.6 million borrowers.
The priority to provide relief for student loans ties back to a campaign promise from President Biden. However, his student debt cancellation plan was dealt a major blow when it was struck down by the Supreme Court earlier in the year.
In the wake of the ruling, the administration has pursued other options for relief. It includes the SAVE plan, which aims to further cut loan payments tied to income by increasing the income exemption above the poverty line; providing an ‘on ramp’ to repayments with a one year grace period for borrowers to avoid penalty; and pursuing an alternative path to relief through the Higher Education Act, for which the administration is in the midst of a negotiated rule-making process.
This month, though, millions of borrowers will have to resume student loan repayments after the pandemic pause going back to March 2020. It comes as the economy deals with inflation cooling, but still higher than the fed’s target rate, after a series of interest rate hikes and as gas prices have ticked up.
An August survey from The Harris Poll on behalf of Intuit Credit Karma found more than half of borrowers expected to have to choose between making their student loan payments or bills for necessities.
“We do believe that many, many of the folks that are going to struggle, who may not have a high income, they'll benefit from the SAVE plan — someone making less than $33,000 a year will have a zero monthly payment. So we're doing what we can to soften it. We recognize how difficult it is, which is why we're proud to announce the additional $9 billion in debt relief today,” said Cardona.
Cardona said they are trying to simplify the process, including pushing for more resources and staffing.
Student loan scams surge as payments resume
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Like other federal agencies, the Education department had to contend with the possibility of a government shutdown over the weekend, which was avoided at the final hour with Congress’ agreement to fund the government to mid-November. But this week, the House voted to vacate Kevin McCarthy as speaker amid turmoil among House republicans.
“I am very concerned with what I'm seeing in the house, Republican side. You know, not having a speaker now, God knows how long it'll be. We have a looming shutdown in 45 days, their last plan was cutting Title One programs by 80%. You know, the shutdown that we came so close to would have made it harder for folks to get someone to pick up the phone, if they're calling their servicer. We've been advocating to make sure that we're, we have adequate funding, to provide these services to make sure that we're giving our borrowers the best support they can get. We keep getting slammed. And, you know, it's just a very, it's an unfortunate situation, the American people want us to work for them. You know, right now, it is quite a spectacle. And I do hope that we can get to a spirit of bipartisanship, where we can focus on those things that we want to make sure help the folks we serve. For me, that's education. Look, education is an investment in our country,” Cardona said.
However, the administration’s mosaic of relief plans has continued to face criticism from Republicans, who believe it burdens taxpayers.
Rep. Virginia Foxx, chair of the House Committee on Education and the Workforce stated:
“The Department of Education acts as if hardworking taxpayers are both willing and able to foot a tab worth billions of dollars that they do not owe. Either the Department is blissfully ignorant of its own binding legal constraints, or it is purposefully evading Congress’ approval and pushing forward with its own illegal charade — the latter is the obvious answer. Hardworking taxpayers deserve much better than this.”
“The Department still refuses to share with Congress what statutory authority they are claiming to justify the expenditure of taxpayer dollars,” said Sen. Bill Cassidy, ranking member of the Senate HELP committee, in part in a statement. “This is part of a pattern of the Biden administration illegally acting without congressional approval, costing the American people hundreds of billions of dollars.”
Biden believes cutting student debt is beneficial for the economy, as his administration has focused on lowering costs for Americans in his broader economic agenda, particularly among the middle class.
“This kind of relief is life changing for individuals and their families but it’s good for our economy as a whole as well by freeing millions of Americans from the crushing burden of student debt. It means they can go and get their lives in order. They can think about buying a house they can start a business they can be starting a family. This matters,” Biden said.
