THROUGH Sydney lake23 November 2021, 21:42
US Senator Charles Schumer talks about the student debt cancellation plan at Hunter College, as seen in April 2021. (Photo by Lev Radin — Pacific Press / LightRocket / Getty Images)
There are officially less than 40 days left until the end of 2021, a year that has seen some pretty big changes for federal student loan borrowers. The Biden administration and the Department of Education forgave about $ 11 billion in debt; some federal student loan officers have terminated their contracts; and a major overhaul of the Public Service Loan forgiveness program (PSLF) has materialized.
President Joe Biden made big promises during the election campaign – touting a policy that would write off up to $ 10,000 in federal student loan debt per borrower – and his tune changed during his tenure. Biden isn’t so keen on the idea of mass forgiveness, and the debt cancellation has been given to highly targeted groups of borrowers: students who have attended institutions now defunct, individuals with total and permanent disability and civil servants.
A question that still looms on the horizon: is the massive cancellation of student debt a possibility? Some federal student loan experts say so, but most are planning other rounds of targeted student loan cancellations instead.
“The Biden administration now has a real track record that we can look at and find out how they envision providing student loan relief,” Andrew Pentis, a certified student loan advisor with Student loan hero, recount Fortune. “This is a history of relief targeted at specific borrowers, not the mass forgiveness proposals that many progressives have called for.
Looking ahead to 2022, who else could have their federal student loans canceled? Fortune spoke with several student loan experts. Some people predict additional forgiveness rounds, while others see changes to existing loan forgiveness programs as a more likely possibility.
Defaulted borrowers and low-income borrowers
Much has changed in the 20 months since the initial freeze on federal student loan payments through the CARES Act in 2020. Even as the economy has rebounded, lower wages, budgetary difficulties and more ‘other financial challenges from 2020 persist.
Payments on federal student loans are expected to resume in February 2022, and some borrowers were already in default before the pandemic.
“I can see the administration automatically putting delinquent loans back into good standing, which would immediately help the roughly 7 million borrowers who were in default before the pandemic,” Robert Farrington, founder of The College investor, recount Fortune. “It would put an end to potential wage garnishments, tax compensation, etc.” “
Low-income borrowers could also get relief through an overhaul of the Federal Income-Based Repayment Plan (IDR) option, according to Pentis.
While this is not the same type of targeted loan cancellation we saw in 2021, a more streamlined IDR process could “seriously reduce borrower monthly contributions” by reducing contributions to 5% or more. 10% after tax, explains Pentis. Currently, the federal student aid office offers four different IDR options, which limit monthly contributions to just 10% to 20% of a borrower’s income. The rates are set to help borrowers repay their loans over a period of 20 to 25 years.
“This is the priority: to make it easier for low-income borrowers to make their payments and stay up to date on their debt without going as far as the massive cancellation of student loans, which remains a very controversial issue,” says Pentis.
Teachers and parents
At the beginning of October, the Directorate of Education unveiled radical changes to its widely failed Public Service Loan Forgiveness Program (PSLF), which was created to provide debt relief to public servants.
The PSLF the program is designed to help public servants, including teachers, firefighters, social workers and other government or nonprofit employees; but since its inception in 2007, eligible borrowers have faced many hurdles to overcome, with 98% of applicants ultimately being turned down. Under the original pretexts, borrowers were required to take a job in the public sector, be on a repayment plan, and make 120 on-time payments on their student loans.
Short-term changes to the program will automatically make 22,000 borrowers eligible for the rebate “without the need for further action on their part.” according to the Ministry of Education. But long-term changes have to be brought about by a process called negotiated regulation.
In early October, the Office of Post-Secondary Education compiled a list of issues related to how the PSLF was regulated and managed, along with ways to “make payment rules less confusing, to ensure borrowers don’t lose. not accidentally progressing towards relief through deferrals, abstentions and consolidations, and give borrowers a clearer process for reconsidering their decisions, ”according to notes from the initial rule-making session.
“Teachers and parents do not necessarily fall into these categories as clearly as the education ministry hoped, so these borrowers may also need some level of access to forgiveness,” says Pentis. .
The military and the borrowers who “really can’t pay off those student loans”
Leslie Tayne, Founder and CEO of Tayne Law Group, is skeptical of the possibility of massive debt cancellation, but says she believes more action will be taken with targeted loan forgiveness.
The Biden administration and the education department “will look to those who really can’t pay off those student loans,” said Tayne, who specializes in debt relief law. Fortune. “People with total and permanent disabilities are a realistic group. Those leaving the military who have been injured in the line of duty may be considered a group.
Viewing the PSLF as a road map, Tayne also believes the Biden administration will see how changes to existing debt cancellation programs come to fruition.
Is massive debt cancellation possible?
Many student loan policy insiders agree that mass cancellation is a long plan.
First, there is still a lot of debate about whether the president even has the power to cancel federal student loans through an executive order. Political experts, House Speaker Nancy Pelosi and Biden himself don’t think that’s possible; they think it would take an act of Congress to achieve radical debt cancellation.
“Yes [mass debt cancellation is] A possibility is a remote possibility and I am not sure it will materialize, certainly in Biden’s first term, ”Pentis said. “Biden and his administration removed free community college from his social policy bill [the Build Back Better Act], and I think it would have been a lot more reasonable to see that potentially cross the finish line as opposed to a massive loan forgiveness.
Other student loan experts argue that the massive cancellation does not fully address the complexity of the student debt problem.
“The massive cancellation doesn’t really solve the problem of the student loan crisis or the rising costs of higher education,” says Farrington. “It kicks the box on the road.”
Farrington offers the following example: If you give up a random amount of student loans, say $ 10,000 per borrower, what does it really do? He wonders if this really solves the problem, asking, “Is the random cancellation of loans every few years going to become a policy?” “
“It doesn’t really make sense,” he says.
Tayne also argues that even massive debt cancellation, as presented, can still be discriminatory or unfair for some borrowers. If the President or Congress canceled their debt today, what about borrowers who had already paid off their debt?
“You can make a case for radical student loan reform, but it comes with a lot of challenges,” says Tayne. “I don’t think that’s really something borrowers should hang their hats on. “
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