By Stacy Cowley, The New York Times
Nearly $10 billion in student loan debt has been wiped away since President Joe Biden took office, the most sweeping attempt to fix badly broken parts of the federal student loan system in at least a decade.
The beneficiaries include permanently disabled people, those who were defrauded by failed for-profit schools, and soldiers deployed to war zones. More than 500,000 borrowers had their loans erased this year, largely through aid programs that all but stopped functioning during the Trump administration.
While Biden has so far fended off calls for the kind of blanket debt cancellation that is a top priority of many progressive lawmakers, a parade of relatively modest eligibility and relief enhancements adds up to a significant expansion of support for beleaguered borrowers. And more may be coming: The Department of Education said it was planning regulatory changes to programs aimed at helping public servants and those on income-driven repayment plans.
“We’re at an inflection point,” said Seth Frotman, a former student loan ombudsman for the Consumer Financial Protection Bureau who now runs the nonprofit Student Borrower Protection Center. “If we continue to see progress and the Biden administration builds on this, the government can actually fulfill its promises to borrowers and ensure that payment plans don’t become long-term debt traps.”
Alicia Bradford is one of the recent beneficiaries. A letter last month informed her that the $23,564 she owed for her associate degree in information technology at ITT Technical Institutes, a problem-plagued chain that abruptly closed its doors in 2016, had been forgiven.
“It took years and years to get to this point,” said Bradford, whose degree and training from two ITT campuses turned out to be worthless to recruiters in the job market. “Finally having those loans gone — seeing a $0 balance — means the world to me.”
Bradford was among hundreds of thousands of students who filed forgiveness claims under a program known as borrower defense to repayment, which grants relief to those who were significantly misled by schools that broke consumer protection laws. But former President Donald Trump’s education secretary, Betsy DeVos — who denounced the initiative as a “free money” giveaway — stymied the program, which has been tied up in years of litigation over her efforts to gut it.
After Biden’s pick, Miguel Cardona, took over the department in March, he quickly approved thousands of applications that had languished and pledged to fully eliminate the debts of 72,000 defrauded borrowers who had previously been granted only fractional relief. He also cleared bureaucratic obstacles to relief for disabled debtors and military personnel.
There is plenty of incentive for the federal government — the primary lender for Americans who borrow for college, holding $1.4 trillion in debt owed by 43 million borrowers — to fix faltering relief programs soon. Since the pandemic took hold in March 2020, virtually all of those loans have been on an interest-free pause, which is scheduled to end Jan. 31. And every loan discharged is one fewer for the agency to service.
“Our overall goal is permanent change,” said Kelly Leon, a Department of Education spokesperson. “We are building a student loan system that works for borrowers and provides them the relief authorized by Congress that has proven elusive for far too long.”
Persis Yu, director of the National Consumer Law Center’s Student Loan Borrower Assistance Project, said she was pleased to see the Department of Education moving more quickly to approve claims but would like to see the administration go further: a blanket cancellation of $10,000 or more in debt for all federal borrowers.
“Even with all the programs we have, we’re not getting relief to all of the people who need it,” she said. Barely 1% of federal loan borrowers have benefited from this year’s discharges, she added.
While the department’s actions so far have generated little controversy — few oppose giving military personnel, disabled borrowers and scammed students the relief to which they are legally entitled — the idea of more broadly canceling student debt is a lightning rod. Republicans dislike the idea of saddling taxpayers with the cost, and its critics on the left see it as a subsidy for those with expensive professional degrees.
Blanket debt forgiveness “creates a moral hazard for current and future student borrowers and is poorly targeted,” Sen. Bill Cassidy, R-La., a member of the Senate’s Health, Education, Labor and Pensions Committee, wrote in an opinion piece.
Biden endorsed large-scale debt cancellation on the campaign trail but said he wanted it done legislatively. Congressional backers, however, acknowledge that they do not have the votes; the proposal did not make it into the $3.5 trillion budget social policy bill that Democrats are now scrambling to pass.
Two Democratic senators, Chuck Schumer of New York and Elizabeth Warren of Massachusetts, have pressed the Department of Education to use a novel legal maneuver to cancel a chunk of federal student debt without congressional action.
“President Biden can do it on his own, with the flick of his pen,” said Schumer, the majority leader.
The Biden administration is reviewing its legal authority to do that but has offered no update on the review or timeline for a decision. The tactic would inevitably face legal challenges, but proponents say it is worth trying to ensure relief arrives where it is needed.
“People always fall through the cracks” of piecemeal relief efforts, said Thomas Gokey, a founder of Debt Collective, a member-led advocacy group.
Even when debts are canceled, the process is messy. It took nearly seven months for the Department of Education to notify Jessica King that her debts had been eliminated.
King had multiple loans she did not know about — totaling around $13,000 — from a nine-month medical assistant certification program she completed at Everest College’s campus in Newport News, Virginia, in 2008. The only debt she knowingly took on, she said, was $1,200 from a private lender, and she believes that Everest officials forged her name on the federal loan applications.
After Everest — part of the collapsed Corinthian Colleges chain — closed down, the department last year granted her a 25% discharge. Cardona’s March action bumped her up to full relief, but her loans still showed up as active in the department’s tracking system as recently as last week.
Finally, on Tuesday, an email arrived saying she had receive a 100% discharge.
“I cried,” said King, who hopes she can now afford computer classes at her local community college.
The department appeared to have notified thousands of people about their loan relief Tuesday, Gokey said. But confusion remains: Multiple people received notifications with inaccurate information. One borrower who attended ITT, for example, got a letter saying his loans for studying at the Marinello School of Beauty would be eliminated.
The push for widespread debt cancellation has overshadowed calls to mend these and other glaring administrative problems that urgently need to be addressed, advocates say — ideally before January, when borrowers will start getting bills again.
“The next few weeks and months will be incredibly consequential,” Frotman said.
He and others said the Biden administration should prioritize long-standing struggles with the Public Service Loan Forgiveness program, which is supposed to eliminate the debts of people who work in government or nonprofit jobs for a decade while making payments on their loans. Millions of people could be eligible — the Consumer Financial Protection Bureau estimates that 1 in 4 American workers is in a qualifying job — but a variety of problems have left the program with a 98% denial rate.
And a new debacle is looming: FedLoan, the servicer in charge of guiding borrowers through it, recently said it would end its contract with the Department of Education. Its 9 million clients will need to be moved to other servicers, a process that has in the past been riddled with mistakes.
Leon said the agency planned to take up broad rule-making negotiations “in the coming months” that would address regulatory issues for the public service program and others, but she did not offer any specifics.
Advocates hope the Biden administration will help borrowers like Niki Woodard, who earned a master’s degree in communications from Georgetown University and has been working in nonprofit jobs — often low-paying ones — for well over a decade. Woodard faithfully made her payments for 10 years, then applied for relief on her remaining loan balance, which is now nearly $60,000.
She was rejected in 2018 because she had the wrong kind of federal loan, a problem that has derailed hundreds of thousands of others. None of her past payments counted.
Woodard, a single mother in Sacramento, California, worries that her 13-year-old daughter’s college choices will be constrained by her mother’s debts.
“I don’t want to saddle her with this problem and pass it on to the next generation,” Woodard said. “The student loan debt crisis has been going on for so long, and it’s nowhere near the end.”
This article originally appeared in The New York Times.