The winners and losers of Biden’s student loan forgiveness initiatives

In recent months, the Biden administration has announced more than $ 11 billion in student loan cancellations. Thanks to executive action, the administration relaxed requirements and broadened eligibility for existing federal student loan exemption programs, benefiting hundreds of thousands of borrowers.

This approach, which officials called “targeted” student loan cancellation, allowed the Biden administration to credibly claim that it canceled a significant amount of student loan debt, while avoiding battles. legal and political potential that could be associated with the more sweeping forgiveness of federal student loans than progressive advocates and lawmakers have called for.

However, a consequence of this targeted approach to canceling student loans is that the initiatives have benefited clear and definable categories of borrowers, while leaving many others excluded from any significant relief. Here’s a breakdown.

The winners of Biden’s student loan forgiveness expansion

Here are some of the biggest winners:

Student loan borrowers scammed by their schools

The Biden administration has extended relief under the Borrowers Against Repayment program, which can write off federal student loan debt for borrowers who have been defrauded by their college, university, or business school. Specifically, the administration rescinded an earlier policy that allowed partial relief under the program, which allowed the Department of Education to grant limited or minimum student loan forgiveness, even for approved applications.

The administration also approved more than $ 1 billion in new student loan forgiveness for alumni of ITT technical institutes under the Closed School Discharge program, which provides relief to borrowers who were unable to complete their program. diploma or certificate due to school closure.

Student loan borrowers working in the public service

The administration recently expanded the troubled Public Service Loan Cancellation Program (PSLF) by temporarily relaxing program requirements and allowing more types of federal student loans and more types of repayment plans to be made. qualify for loan cancellation. The changes will be in effect until October of next year. The Department of Education estimates that more than half a million student loan borrowers will earn an average of two more years towards the 10 years of qualifying payments required to obtain a loan forgiveness under the program, with many becoming instantly eligible for cancellation of their loans.

Disabled student loan borrowers

The Biden administration has approved $ 5.8 billion in automatic federal student loan releases under the Total and Permanent Disability (TPD) Release Program, which eliminates federal student loan debt for borrowers who are unable to to keep a substantial and remunerative job because of a health problem. The relief applies to borrowers who have already been found disabled by the Social Security Administration and who are receiving Social Security disability benefits with a review period of at least five years. The administration also wiped out $ 1.3 billion in loan repayments for TPD borrowers who had lost their previous disability releases because they did not comply with the program’s post-discharge monitoring requirements, which the education ministry has given up indefinitely due to the pandemic.

Many more excluded from Biden’s student loan forgiveness expansion

Biden’s focused approach to student loan cancellation left out many other borrowers, shutting them out of relief.

Parent PLUS borrowers

Parent PLUS loans are a type of federal loan made directly to a parent for the benefit of their undergraduate child. Parent PLUS loans generally have the highest interest rates of any federal loan and are already excluded from the government’s most generous income-based repayment programs.

While Parent PLUS borrowers could potentially benefit from some of the latest reliefs from the Biden administration, including borrower advocacy and the TPD discharge program, the administration specifically excluded Parent PLUS loans from the new changes to the Biden. the forgiveness of public service loans (PSLF).

Low income student loan borrowers

Student loan borrowers struggling with low income and general financial hardship have not received specific, sustained relief. These borrowers have benefited from the ongoing national student loan payment break, which has suspended most federal student loan payments since March 2020. But that payment break is coming to an end in just a few months, and so far. These borrowers were not provided with any new programs or options. For some, existing income-based repayment plan programs may still be too costly because they do not take into account exceptional expenses or circumstances.

The administration would consider a new, more affordable income-based repayment plan, but creating such a plan is a long and tedious process, and any resulting new program can take a year or more. Congress is also considering a new bill to reform the bankruptcy code to facilitate the discharge of federal student loans in bankruptcy, but so far this bill has not moved forward.

Private student loan borrowers

Biden made changes to existing federal student loan cancellation programs through executive action. However, the president has the legal authority to act only under federal laws, which generally only govern federal student loans. As a result, private borrowers of student loans have not benefited from recent reforms. In the absence of congressional action, Biden wouldn’t be able to do much to bring direct relief or loan cancellation to private student loan borrowers.

For-profit private sector workers

While direct employment in public service positions may allow borrowers to access federal student loan relief programs such as the Public Service Loan Remission (PSLF), private sector workers who are self-employed, independent contractors or working in for-profit companies are excluded, even if they work in a space oriented towards public service, such as health or education. The administration is considering more permanent changes to the PSLF program, including broadening the definition of eligible employment, but nothing is guaranteed, and any resulting changes may be in a year or two.

Further reading

4 signs Biden may not cancel large-scale student loan debt

Biden to transform civil service loan forgiveness with huge changes: key details

Student loan forgiveness changes: who qualifies and how to apply for Biden’s relief extension

Student Loan Waiver: Did you receive a “good news” email from the Department of Education? Others are on their way.

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