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Forgiven a student loan: Biden’s next step

Forgiven a student loan: Biden’s next step

President Biden has hinted that he is considering releasing at least part of the $ 1.7 trillion in debt to the federal government of more than 40 million student loan borrowers. However, as the final proposal is still in the air, the appropriateness of this approach has been questioned by both Department of Education staff and higher education experts.

Concerns were also expressed about the long-term consequences of debt relief, including the need to reform very complex programs and student loan and service systems in the country.

“It seems increasingly clear that the Biden administration intends to announce some attempt to cancel the loan or apologize, but there is absolutely no information that will help people understand even the most basic elements of what such a policy will look like,” said Terry Hartle. . , senior vice president of the American Board of Education. “There is a lot of confusion and uncertainty about what might happen.”

With the current student loan hiatus ending in September, a few weeks before the midterm elections, the Biden administration has not yet taken a step on one of its central campaign promises: to ease at least $ 10,000 in student debt per borrower. Faced with growing political pressure from fellow Democrats and voters, Biden indicated he was likely to announce some sort of apology plan in the coming weeks.

Since then, student debt forgiveness has become highly politicized: Democrats say aid is a necessary step to rebuild the economy after a pandemic, and Republicans, on the other hand, say forgiveness is a wasteful use of federal resources that will bring unfair benefits to the rich. and damaged the working class.

What Biden has done so far

According to the Department of Education, since January last year, the Biden administration has forgiven about $ 18.5 billion in student loan arrears to more than 750,000 borrowers through programs including a public student loan forgiveness program, student debt forgiveness for those with full and permanent disabilities. and an apology to students who attended the now closed nonprofit ITT technical institutes.

The pause of the student loan pandemic era with a 0 percent interest rate has been extended four times since Biden took office. The move provided temporary relief to borrowers with federal debt during the COVID-19 pandemic. The break ends on August 31.

In addition, the changes, which expanded qualifications for the 2007 PSLF program led by the Biden administration, helped forgive more than 100,000 borrowers, according to data from Department of Education. This policy allows some borrowers working in nonprofit and government positions to clear federal debt after 10 years of service or 120 monthly payments.

The administration has also made changes to the income-adjusted repayment plan and Pay As You Earn to allow some borrowers to claim an apology after 20-25 years of payment. Both of these programs use an income-based formula to make student loan payments more manageable and affordable. The Department of Education estimates that the plan will automatically forgive the debts of at least 40,000 borrowers.

Income restrictions?

As the payment break ends, the Progressive Democrats, including Sen. Chuck Schumer of New York, Elizabeth Warren of Massachusetts and Rafael Warnock of Georgia, want Biden to use his powers to wipe out at least $ 50,000 in debt. the borrower. However, the administration said that figure is likely not presented and reported from The Washington Post revealed that the administration is considering introducing an income-limiting apology that could exclude borrowers who earn more than $ 125,000 to $ 150,000 a year.

According to Politics, several Department of Education officials said the material-based forgiveness could cause several problems due to the Department’s lack of revenue data needed for automatic forgiveness. Data on annual income are collected by the Internal Revenue Service using tax information. The Department of Education does not have access to this information in accordance with applicable law.

As a result, a profit-oriented approach is likely to require an application process in which borrowers provide evidence of income. Experts from the department and higher education expressed concern that such an approach could create a confusing bureaucratic system for borrowers.

Braxton Bruington, a spokesman for Debt Collective, an organization representing debtors, said low-income borrowers may be disproportionately excluded from income-verification programs because they are less likely than wealthy individuals to file taxes.

“Creating documents will just be a disaster for those in particular, it will be the biggest disaster for low-income people,” Bruington said. “Irony [of] means that testing, cancellation and applications are what people you are supposed to target will be excluded. ”

Bruington said the automatic easing without income restraint would allow more borrowers to take advantage of forgiveness without bureaucratic barriers.

In addition, the lack of communication between borrowers and the Department of Education has led to confusion as to what borrowers are currently qualifying under existing forgiveness plans, which experts say is likely to worsen with extended forgiveness.

A report published by the U.S. Government Accountability Office) in March, it was found that 11 percent of those eligible for loan repayment under the income-based repayment plan had not yet applied. According to the report, the Department of Education called data constraints and lack of communication with borrowers a major source of difficulty in identifying qualified borrowers.

According to a January study Education Data Initiativeonly 6.7 percent of student borrowers are eligible for loan forgiveness.

Many experts note that the lack of communication between the Department of Education and student loans is long overdue. Scott Buchanan, executive director of the Student Loan Service Center, which represents both public and private student loan providers, points out that the lack of instructions for providers from the Department of Education, which he said makes it difficult for credit service centers to connect borrowers. with the relief to which they may be entitled in the face of a complex system of borrowing.

“It will be very difficult to do. Anyone who says anything easy in this program was not around for a minute. It is incredibly difficult to give any of these benefits, ”Buchanan said. “Especially if you’re making such big software changes and you don’t have time to plan them, but try to do it fast, you’ll ruin everything.”

Concerns were also expressed about the ability of the Department of Education to cope with the influx of documents when applying for a loan forgiveness. According to PoliticsThe Department of Education is already having difficulty servicing borrowers during the freeze on federal loan repayments due to staff cuts.

“The Department of Education is the largest consumer bank in the country. The problem is that they are not staffed like a bank, ”Buchanan said.

This was announced by a spokeswoman for the Department of Education Inside the Supreme Ed“The review by the Department of Extensive Debt Cancellation continues.”

The need for reform

Many higher education officials said that while the apology would give borrowers temporary relief, broad reforms are needed to simplify student loan programs and fix administrative problems to increase transparency between borrowers, the Department of Education and credit services.

“The absence in the conversation has nothing to do with how we are going to reform the system, so we will not return to the same situation in a year, five or 10 years,” said Justin Draeger, president and CEO of the National Association of Financial Aid Administrators. “Apologizing without student loan reform would be a pretty big mistake.”

“I think that such targeted assistance is needed sooner rather than later, but if we look at debt forgiveness for everything, to do so without a comprehensive set of solutions for student loan reform seems to me politically appropriate but stupid,” he continued.

These reforms include facilitating guidance in repaying student loans so that borrowers can better decide which plan is best for them.

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