Tag: student loans

Biden administration to forgive $4.5 billion of public service workers’ student loans

After making what it called “significant fixes” to the Public Service Loan Forgiveness (PSLF) program, the Biden administration on Thursday is announcing the approval of $4.5 billion in student loan forgiveness for 60,000 borrowers who work in public service jobs. 

The PSLF was established by Congress in 2007 under then-President George W. Bush, to allow those working full time in public service jobs for 10 years who had made 10 years of student loan payments to have their loans forgiven. But as of four years ago, only about 7,000 people nationwide had received loan forgiveness under the program, due in part to its complicated rules and a lack of federal oversight. 

“Teachers, first responders, service members, sometimes have student debt and choose to get back to their communities or their country and accept low paying jobs, and student debt is often a real obstacle in that,” James Kvaal, Under Secretary of the Department of Education, told the Capital-Star. “So Congress created the Public Service Loan Forgiveness Program in a bipartisan way, but it was never implemented.” He said some who were eligible for the program were in the wrong repayment plan, or some didn’t file the right paperwork at the right time. 

In 2021, the Department of Education (DOE) overhauled the PSLF program, which made more people eligible for forgiveness sooner. Since that time, 44,150 Pennsylvania public service workers have had more than $3.15 billion of student loans canceled, according to a fact sheet from the DOE, with a total of $175 billion forgiven for more than 4.8 million people nationwide. 

For those who may have applied for PSLF before and been rejected, Kvaal encourages them to reapply. And while some other student loan forgiveness programs the Biden administration has put forth have been blocked in the courts, the PSLF is an established program with bipartisan support, Kvaal said. The DOE has been working on streamlining the application process, he added, so that it’s easier for eligible borrowers to apply and track their status. 

And public service workers don’t have to wait until they’re past the 10-year mark to apply, Kvaal said, if they’re in a job that qualifies them for the program and plan to stay there, they can apply and track their progress on the DOE website until they’ve completed the requirements. 

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Making Over $141K, Minneapolis Mayor Thanks Biden For Student Loan Forgiveness

If you weren’t already infuriated by Joe Biden’s exploitation of the federal student loan program as a means of buying votes and redistributing wealth, this should do the trick. 

On Wednesday, Minneapolis Mayor Melvin Carter — who earns makes takes $140,814 a year before benefits — rushed to Twitter to thank President Biden for erasing his remaining student debt, sharing a screen shot showing his outstanding balance had turned to zero. 

The latest drip in the fiscal Chinese water torture that’s being inflicted on responsible, productive Americans came earlier that day, with Biden announcing he was cancelling another $7.7 billion of debt. With that, the total such debt wiped away by his administration has reached $167 billion.  

After emphasizing that the average beneficiary of Biden’s self-serving abuse of taxpayers has had $35,000 in debt forgiven, White House Press Secretary Karine Jean-Pierre fielded a challenging question from, of all sources, NBC News. Correspondent Peter Alexander asked, “Why don’t those individuals who didn’t receive $35,000 in debt cancellation deserve a $35,000 check from other Americans for what other means they would want to use it?”

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Republicans accuse Biden of having ‘no shame’ as he cancels student debt for 813,000 people in ‘re-election ploy’ that will force taxpayers to saddle billions of dollars extra

The leading Republican opponent of student loan forgiveness on Wednesday slammed President Joe Biden‘s plan to cancel student debt for 813,000 people as a clear effort to buy his way to reelection next year.

Hundreds of thousands of former students will receive emails from the president in the coming days telling them that their debt has been forgiven.

Republican Sen. Bill Cassidy posted the president’s message on X, the platform formerly known as Twitter, including a request for beneficiaries to share the good news. 

‘Couldn’t make it any clearer that Biden’s ploy to force taxpayers who didn’t go to college to saddle hundreds of billions of someone else’s student debt is a ploy to gain political support for his reelection,’  wrote.

‘No shame.’

Biden’s move means he has forgiven a total of $127 billion for 3.5 million borrowers, despite the fact that his plan to cancel $400 billion in debt was rejected by the Supreme Court in June.

Aides and supporters see it as nothing but good news, with their social media feeds filling with details. 

Even Republicans who complained that it meant ordinary taxpayers were footing the bill kept largely quiet after the latest announcement. 

The email – making clear that the help has come from Biden – read: ‘Congratulations — your student loan has been forgiven because of actions my administration took to make sure you receive the relief you earned and deserve.’ 

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Joe Biden’s Incoherent Student Loan Logic

In the hours after Friday’s Supreme Court ruling that struck down his attempt to forgive large amounts of federal student debt, President Joe Biden promised two new actions to ease borrowers’ burdens. The president’s next steps and his rhetoric suggest that little has changed in his flawed logic regarding student loan forgiveness—which has always seemed to have been more about electoral politics than serious policymaking, despite the huge price tag.

Going forward, Biden’s student loan plan will include the two steps announced Friday and one lingering element from his earlier proposal that wasn’t part of the Supreme Court’s review.

First, Biden has invoked a different federal statute in another attempt to unilaterally forgive some student debt. Under powers contained in the Higher Education Act of 1965, Biden intends to direct Secretary of Education Miguel Cardona to “compromise, waive, or release loans under certain circumstances.” That will be a federal ruling process, and those tend to take a while—the White House says the first step is a virtual public hearing on July 18—and it is unclear how much debt could be forgiven this way, who would benefit, or what the cost to taxpayers will be.

In the meantime, federal student loan payments will come due again in October after being paused since the COVID-19 emergency was declared in March 2020. But borrowers will be able to ease back into paying what they owe: Biden also announced Friday a 12-month “on-ramp” process during which missed payments will not accrue penalties and won’t result in delinquent borrowers having their credit scores dinged.

When they do restart, those monthly payments will be lower than before the pandemic for many borrowers. That’s due to the third part of Biden’s plan, which caps monthly payments at 5 percent of a borrower’s discretionary income—which the Department of Education defines as income that exceeds 150 percent of the federal poverty guidelines. In practice, that means a single borrower with no children starts making payments on income that exceeds $20,400. Additionally, outstanding loan balances will be forgiven after 10 years for those who borrowed $12,000 or less, with a maximum payment period of 20 years no matter how much was borrowed.

That part of the plan isn’t new, but the Department of Education finalized those rules on Friday just after the Supreme Court’s ruling. “It will cut monthly payments to zero dollars for millions of low-income borrowers, save all other borrowers at least $1,000 per year,” Cardona promised.

The consequences of capping monthly payments and also capping the length of time a loan can be in repayment should be fairly obvious: A lot of loans will never get paid back in full. “On average, borrowers (current and future) might only expect to repay approximately $0.50 for each dollar they borrow,” the Brookings Institution concluded in an analysis last year.

That’s going to create some major perverse incentives in the already screwed-up student loan marketplace. Brookings warns that Biden’s income-based repayment plan will result in “tuition inflation” and “increased borrowing,” particularly by students in pursuit of “low value, low earning” degrees.

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The Student Loan Pause Has Made Borrowers Worse Off

The over three-year-long moratorium on federal student-loan repayment has long been hailed as a godsend for student loan borrowers. While announcing yet another extension of the moratorium in December 2021, President Biden praised it as “badly needed breathing room during the economic upheaval caused by the global COVID-19 pandemic.”

However, a new working paper from the National Bureau of Economic Research indicates that borrowers whose loans were frozen by the moratorium actually ended up in a worse position than they started in—and have even accrued more student loan debt.

In March 2020, the Trump administration announced a moratorium on federal student loan payments for 60 days, citing the financial hardship faced by borrowers in the early days of the pandemic. In the three years since, the pause has been extended eight times with a variety of legal justifications. Payments are still currently paused, though the recently signed debt ceiling bill sets a hard expiration date for the moratorium on August 30.

The total cost of the pause is estimated to be as high as $5 billion per month, or almost $200 billion by the time repayment starts in September. And all that spending might not have even helped those whom the moratorium was supposed to benefit. According to the paper, those whose loans were frozen by the moratorium actually took on more debt—borrowing more on credit cards and mortgages and even accruing more student loan debt rather than working to pay off other debt they owe. 

The paper compared those whose student loans were frozen by the moratorium because their loans were held federally to those whose student loans were not frozen because their loans were private. There were stark differences between the two groups. For those whose loan payments were paused, they did reap some benefits, like increased credit scores and a decrease in delinquency on student loan debt. However, by other metrics, they actually became worse off. By the end of 2021, borrowers who saw their student loan payments paused increased their credit card, mortgage, and car-loan debt by $1,800 on average and even took on an additional $1,500 in student loan debt compared to those whose loan payments were not paused by the moratorium. Rather than being the “badly needed breathing room” that Biden suggested, the student loan payment pause has actually resulted in borrowers ending up financially worse off than they were before.

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How Senator Biden Helped Create The Student Debt Crisis President Biden Is Pretending To Fix

There’s a lot that’s wrong with Biden’s student debt forgiveness plan — morally, economically, and legally. The plan is fundamentally unfair; many experts think it will be inflationary, and it’s almost surely illegal under Supreme Court case law. But that’s not the whole story: As a senator in 2005, Joe Biden pushed changes in bankruptcy law on behalf of the credit card industry that helped precipitate the student debt crisis.

There is indeed a student debt crisis. About 45 million Americans owe something like $1.6 trillion in student loans. Most of the debt is owed to the government. But a sizeable chunk (about 8 percent) is owed to private lenders.

In general, borrowers burdened by too much debt and unable to pay their loans can usually discharge them in a personal bankruptcy case. Some debts, particularly those owed to the government, are not dischargeable. But consumer loans and credit card debts generally are dischargeable. Before 2005, young people who were overwhelmed by student loans from private lenders were able to get relief by filing for bankruptcy. Even student loans from the government had been dischargeable before 1976, though that was later changed.

The upside of bankruptcy for the debtor is that the slate is wiped clean. But there’s a major downside to bankruptcy: Your credit rating is shattered. You’re a proven bad risk, and if lenders deal with you at all in the future, they’re likely to demand high-interest rates or substantial collateral or both. But that’s just as it should be: You shouldn’t be able to walk away from your debts and stiff your creditors with no consequences at all. Fear of being branded a bad risk is a healthy incentive either not to borrow too much or to pay up if you can.

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How the US Government Created the Student Loan Crisis

President Joe Biden unveiled a sweeping plan on Wednesday to let delinquent student loan borrowers transfer tens of thousands of dollars in debt to taxpayers. If he were a biblically minded leader, Biden would have used his nationally televised press conference to repent of his role in creating the student loan crisis in the first place.

Biden’s student loan bailout lets individuals write off $20,000 in unpaid student loans if they received Pell Grants or $10,000 if they did not. The plan is open to households that make up to $250,000 a year or individuals who make $125,000. It would also reduce the number of people who have to make student loan payments at all, as well as the amount and time they must pay before US taxpayers pick up the tab for their full loan.

While much of the commentary has focused on students who refused to make their loan payments, few have discussed how successive presidential administrations set those students up for failure. The federal government largely nationalized the student loan industry in 2010 via a piece of legislation related to Obamacare, the “Health Care and Education Reconciliation Act of 2010.” The US government now holds 92 percent of all student loans — and the nation’s total student debt has more than doubled, from $811 billion in April 2010 to $1.748 trillion in April 2022.

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