September 25, 2022

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Biden’s $20 billion in student loan cancellation targets these borrowers

BY Sydney LakeApril 25, 2022, 6:35 PM

U.S. President Joe Biden speaks on Earth Day at Green River College in Auburn, Wash., as seen in April 2022. (Photographer: David Ryder—Bloomberg/Getty Images)

Joe Biden has canceled more student loan debt than any other president, having deployed nearly $20 billion in forgiveness since taking office last year. That’s still only slightly more than 1% of all federal student loan debt, which currently stands at $1.7 trillion among 45 million borrowers. 

Biden campaigned on agreeing to cancel up to $10,000 in student loan debt per borrower, but so far he’s just issued forgiveness to comparatively smaller groups of borrowers. 

“A good education should be a reliable pathway to the middle class,” he tweeted during his campaign. “But for too many, earning a credential or degree after high school comes with a mountain of debt or is out of reach altogether.”

During the past year, though, there’s been debate about Biden’s authority to cancel student debt en masse through executive order. Biden and Speaker of the House 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 cancel up to $50,000 per borrower. 

Since taking office, Biden has announced several rounds of forgiveness, which have gone to borrowers with total and permanent disabilities, public service workers, and borrowers who attended now-defunct institutions. In all, these rounds of forgiveness will aid hundreds of thousands of federal student loan borrowers. 

Last week, Biden also announced some major changes to the Public Service Loan Forgiveness (PSLF) program and income-driven repayment plans that will help an additional 40,000 borrowers. This development is a follow-up to PSLF changes announced in October 2021, which immediately wiped out $1.7 billion in student loan debt for 22,000 borrowers.

While Biden is still falling short of student loan forgiveness for all borrowers, there are still plenty of people who are currently benefiting from cancellations. Fortune has rounded up who’s gotten forgiveness thus far. 

Loan forgiveness for defrauded borrowers

In March 2021, the Education Department announced it would streamline processing for borrower defense claims, which can be submitted by borrowers who have been deceived by their institutions. That announcement and several subsequent rounds of forgiveness have helped more than 100,000 borrowers and totaled more than $2 billion.

The first round of forgiveness of this kind totaled about $1 billion and went to about 72,000 borrowers who attended Corinthian Colleges, ITT Technical Institute, and American Career Institute. Borrowers who attended Westwood College, Marinello Schools of Beauty, and the Court Reporting Institute also earned forgiveness last summer and started receiving automatic discharges for their student loans in September 2021.

Then this February, Biden announced another round of forgiveness for borrowers who attended DeVry University, Westwood College, Corinthian Colleges, Marinello Schools of Beauty, the nursing program at ITT Technical Institute, and the criminal justice programs at Minnesota School of Business/Globe University. About 20% of that round of forgiveness went to DeVry University because the Education Department found that DeVry advertised the school as “Career Placement University” with a 90% job placement rate. In actuality, though, the school’s job placement rate was just about 58%. 

Debt cancellation for borrowers with a total and permanent disability

The largest round of student loan forgiveness has gone to borrowers with a “total and permanent disability.” The Education Department first announced $5.8 billion in cancellations that went to 323,000 borrowers. 

With changes made to the TPD verification process, that forgiveness for these borrowers grew to $7 billion for 400,000 people as of 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 evaluates whether a borrower can still work. Borrowers with a TPD have their loans automatically discharged. 

Relief for public service workers, borrowers with an IDR plan

Congress established PSLF in 2007 to provide debt relief to public servants who had made 10 years’ worth of payments, or 120 qualifying monthly student loan payments. Until October 2021, however, the program was largely unsuccessful, as about 98% of borrowers who had applied for forgiveness were denied by the program because of several hurdles with the approval process.

One of the main issues with the PSLF program was that it didn’t 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 Oct. 31, 2022. 

The Education Department announced last week more changes to its PSLF and income-driven repayment (IDR) programs. At least 40,000 borrowers will have their debt immediately canceled as the department makes corrections to “historical failures” in the administration of both programs. 

“Student loans were never meant to be a life sentence, but it’s certainly felt that way for borrowers locked out of debt relief they’re eligible for,” U.S. Secretary of Education Miguel Cardona said in a statement. According to previous reporting by Fortune, the average balance of PSLF loans discharged is $97,289, which implies that about $3.9 billion in student loans will be canceled during this round. The Education Department didn’t officially release a value on this round of forgiveness. 

IDR plans are designed to help borrowers make affordable payments on their federal student loans. The Education Department found, however, that borrowers who would have qualified for IDR plans weren’t given accurate information about their options. This led some borrowers into forbearance instead of an IDR plan, according to the department. 

The Education Department also indicated it will continue to push out more reforms for these groups of borrowers.

“Beyond the immediate corrective actions announced today that will provide relief to borrowers harmed in the past, FSA will take action to ensure that borrowers receive these benefits in the future,” according to a statement from the department.

See how the schools you’re considering landed in Fortune’s rankings of the best master’s in public health programs, business analytics programs, data science programs, and part-time, executive, full-time, and online MBA programs.


https://fortune.com/education/business/articles/2022/04/25/bidens-20-billion-in-student-loan-cancellation-targets-these-borrowers/