Sunday, November 15, 2020

Trump’s student loan cliff threatens chaos for Biden

At midnight on New Year’s Eve, President Donald Trump’s pause on student loan payments for 33 million Americans is set to expire, just three weeks before President-elect Joe Biden is slated to take over.
© Evan Vucci/AP Photo 
President Donald Trump walks away after speaking Nov. 5 in the White House briefing room.

The Education Department started warning borrowers through text messages and emails this week that their monthly payments will resume in January. Even though Trump said this summer that he planned to later “extend” the freeze beyond Dec. 31, a White House spokesperson declined to comment on whether the president is still considering another executive action to move the expiration date.

If Trump doesn’t act unilaterally and Congress doesn’t act to avert the cliff either, Biden could waive his own executive wand once inaugurated, though the president-elect's campaign will not divulge his plans. The intervening weeks of limbo could cause mass confusion and uncertainty for borrowers. For the incoming president, the economic and administrative mess could take months to untangle, consuming the early days of his Education Department.

The federal student loan system “was not designed to start and stop at the same time for 30 million borrowers,” said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group that represents the companies that collect and manage loan payments on behalf of the Education Department.



https://www.msn.com/en-ca/news/politics/trump-s-student-loan-cliff-threatens-chaos-for-biden/ar-BB1b1T7E?ocid=msedgntp



“It would be very chaotic,” he said.

In March, it took a couple of weeks for the Education Department to fully suspend student loan payments after the CARES Act bestowed those benefits, and there were some administrative hiccups. The Trump administration was sued for failing to fully halt debt collections against defaulted borrowers. And one of the department’s loan servicers incorrectly reported data about the paused payments to credit bureaus about more than 5 million borrowers, lowering their credit scores in some cases.

The student loan relief has kept borrowers out of default and delinquency over the last eight months, with the pandemic cratering the economy and unemployment skyrocketing. The benefits have even modestly helped improve the credit scores of student loan borrowers during the pandemic, especially for borrowers who were pulled out of default, according to analyses by the New York Fed and Urban Institute.

In an unusual alliance, loan industry officials are advocating alongside congressional Democrats, higher education groups and consumer organizations, all warning that suddenly turning back on the federal government’s massive student loan apparatus — mostly frozen since March — in the midst of a presidential transition could lead to anguish for everybody involved.

The Education Department’s previous, targeted payment pauses in response to natural disasters have led to spikes in delinquencies among borrowers after the relief, noted Debbie Cochrane, executive vice president of The Institute for College Access & Success.

“It’s hard to think that this goes well for borrowers,” she said. “Helping borrowers get back into repayment smoothly has never been done at this scale.”


Gallery: Biden could wipe out $50,000 of student debt per borrower without Congress. Here are 3 other areas where he can help the struggling US economy even with a GOP-controlled Senate. (Business Insider)
https://www.msn.com/en-ca/news/politics/trump-s-student-loan-cliff-threatens-chaos-for-biden/ar-BB1b1T7E?ocid=msedgntp


Nearly 41 million federal student loan borrowers have had interest suspended on their loans since March 13, beginning with the CARES Act and continued under Trump’s executive action over the summer. Roughly 33 million of those borrowers have had their payments paused, and the Education Department has stopped seeking to collect from the 8 million other borrowers who were in default.

A Pew survey earlier this fall found that 58 percent of borrowers who said their payments had been paused during the pandemic reported that they would face difficulty if they were required to resume making those payments in the next month.

Advocates for extending the benefits say turning payments on in the midst of a surge of coronavirus cases and unemployment levels that remain high would result in an increase in defaults.

“There’s no indication that we are through the pandemic, and it’s a bit of a mystery why the administration that has extended the benefits already wouldn’t extend them once again,” Cochrane said.

When Trump took executive action in August to provide the loan forgiveness, he said, “Today I’m extending this policy through the end of the year, and we’ll extend it further than that, most likely right after Dec. 1.”

Many Democrats, including Sens. Chuck Schumer and Elizabeth Warren (D-Mass.), are pushing the incoming Biden administration to use executive authority to go further than merely pausing payments by outright canceling billions of dollars of outstanding debt.

Biden during the campaign committed to canceling $10,000 per borrower as an immediate economic stimulus during the coronavirus pandemic, though he has not promised to bestow that debt relief through executive action, as progressives want.

The looming expiration of student loan benefits will likely present a more immediate and pressing challenge for the beginning days of the Education Department under Biden, which may have to scramble to reinstate the relief.

In Congress, lawmakers could attach an extension of the student loan relief to a stimulus deal or year-end government funding bill. But Democrats and Republicans have disagreed for months about whether to include an extension of the student loan benefits as part of an economic rescue package.

House Democrats’ stimulus legislation would extend the freeze on student loan payments until next October and keep the interest rate at zero until at least that time — or longer if the unemployment rate remains high.

Senate Republicans’ latest stimulus proposal did not include an extension of the benefits, and Senate Majority Leader Mitch McConnell has said he wants to pursue a smaller pandemic relief bill during the lame-duck session.

Consumer advocacy groups, labor unions and civil rights organizations have already urged the Trump administration and Education Secretary Betsy DeVos to act to extend the benefits for at least another nine months.

“If the cliff isn’t resolved, borrowers will find it harder than ever to make ends meet as they are thrown back into repayment or forced collections while the economy continues to suffer,” the groups wrote in a letter to DeVos last month. “Waiting to address the cliff will cause unnecessary stress, confusion, and errors for borrowers, servicers, and collectors alike.”

Biden inherits a widening gap in American education. It could affect economic growth.


Leticia Miranda 


In his first address to the nation as president-elect, Joe Biden made it clear that he will make education a priority during his administration. He noted in his victory speech that his wife, Jill, is a teacher and that educators “will have one of your own in the White House.”
© Provided by NBC News

But Biden is also inheriting an educational system that is more troubled than at any time in modern history. The number of new coronavirus cases among children in the month of October was the highest since the pandemic started, according to the American Academy of Pediatrics. School districts, including those in Boston, Washington, D.C., and Los Angeles, are delaying reopening plans left and right. New York City is also contemplating moving to all remote learning.


It is so troubling that on Thursday Jerome Powell, chair of the board of governors of the Federal Reserve System, identified children as one of the groups he is most concerned about. “It’s kids who are not getting the education they should be getting," he said.

This latest news has forced some of the nation’s top education experts to revise estimates about the long-term economic impact for children who are missing school. Researchers on a study released in September from the Organization for Economic Cooperation and Development predicted that children who are part of this online learning generation are expected to see 3 percent shaved off their earnings over time. They estimated an even higher drop of 4 to 5 percent for children with less access to extensive educational resources.

In recent days, researchers recalculated these figures and expect the impact to be much worse, with losses of 5-6 percent in lifetime earnings for all children in this generation of online schooling. The nation will lose $25-30 trillion over the rest of the century, according to the report, which relates labor market earnings to a cross-analysis of individual pay and test scores.

“The school closures hurt everybody who is in K-12 in spring of 2020 because they were locked out of school,” said Eric Hanushek, a senior fellow at the Hoover Institution of Stanford University and co-author of the OECD report. ”These are permanent losses unless we do something about it.”

The education level of people entering the workforce has a significant impact on the rate at which the economy grows in the long run, Hanushek told NBC News. A more educated person is more likely to have a job, work longer hours and be paid more. Higher education levels also correspond to improved health and lower rates of mortality and crime, according to a 2013 report from the Economic Policy Institute. All of these dynamics contribute to a faster growing economy, Hanushek said.

That’s especially troubling for students like Amiracle Johnson, 11, from Long Island, New York, a sixth grader who shares her family's HP laptop computer and a Chromebook, on loan from her school, with two siblings in a makeshift at-home classroom. She has no in-person learning, and in the spring, Amiracle's father lost his position as a porter at a pressing company and her mother left her job at a nursing home because she feared getting infected with the virus. The family lived on about $1,200 a month over the summer. But their expenses are two to three times that.

“With the remote learning, you have to keep the cable on, and they’re not giving out any breaks,” Kevin Johnson, Amiracle’s father, told NBC News.
© Kevin Johnson Amiracle, a sixth-grade student in Longwood, on New York's Long Island, with her brother Khalif. (Kevin Johnson)

Economic chasm

Education researchers and economists are all finding that the long-term economic consequences of such a prolonged period without in-person schooling are devastating. Gross domestic product, a figure used by economists to gauge the overall size and health of the economy, could drop by 2.9 percent for the remainder of the century as this generation of kids enters the workforce, according to Hanushek.

“We’re talking about significant losses into the future,” he said. “That makes it harder to think about how we compensate disadvantaged kids because this will subtract from resources of the nation as a whole.”

Leading into the pandemic, the public school system had already undergone a decade of punishing budget cuts leading to historic teacher strikes in 2018 over pay and staffing. Last summer, President Donald Trump threatened to cut more funding to public schools that refused to reopen, even though 90 percent of state budgets are paid by state and local taxes. He backtracked in August telling reporters at an education event with Education Secretary Betsy DeVos that he preferred any stimulus money to “follow the student.”

“You know, why are we paying if a school is closed? Why are we paying the school?” Trump said. “I’d rather give it to the student, the parents, and you do your own thing.”

But nearly every level of government agrees that online learning, and prolonged periods out of school, can stunt a child’s educational growth. While there is no clear cut parallel in history to the coronavirus pandemic, academics and educators have pointed to the impact long periods out of school had on children during the aftermath of Hurricane Katrina in 2005. Doug Harris, a professor of economics at Tulane University, found that it took students two years to catch up. Only Black and low-income students fell 2 to 4 percent behind the path they were on before Hurricane Katrina shut down schools. White and higher-income students experienced no declines, he told NBC News.

“We know there was an initial dip in scores and students didn't learn much in the aftermath of the hurricane,” Harris said. “The upshot is that the degree to which kids catch up is dependent on what schools do. That’s the wild card — how quickly can schools reopen and how able they can target resources for kids with disadvantages or disabilities.”

As families deal with their own economic crisis at home, school districts scramble to balance in-person and remote learning with fading financial support. The federal CARES ACT provided a $13.2 billion lifeline for schools to weather the pandemic. But educators have told Congress they need more funding to cover the costs of operating school remotely this school year. In New York, Gov. Andrew Cuomo has threatened to slash school budgets by 20 percent if Congress does not pass another stimulus bill — a threat that may pierce some school districts more than others.

Longwood Central School District, where Amiracle goes, has been hard at work trying to offer its students resources. It offered Chromebooks and WiFi hot-spot devices to student households based on need. More than half, or 53 percent, of students in Longwood Central School District are considered economically advantaged.

“We’ve been very prudent in designing budgets that were giving us what we need year-to-year. As long as the revenues that have been promised to us from the state come through, we will skate on by,” Longwood Central School District Superintendent Michael Lonergan told NBC News. “We just worry about what the future will bring because of the economy.”
Rainy day funds

To make up for the losses that are anticipated through online learning, some parents are turning to any financial savings they have to ensure their kids don’t fall further behind.

“Parents at all levels of income are struggling,” said Deborah Stipek, a professor at Stanford’s Graduate School of Education. "It’s hard even if you have a high income and are able to work from home. You worry about whether your child is getting the kind of education that you want them to get.”

The market for private tutors and teachers to lead small learning pods for students has been booming, several education companies and teachers told NBC News. Jill Cooper, a former part-time substitute teacher in Houston, told NBC News that she jumped at the opportunity to lead a learning pod this fall.

“I prefer it over teaching because you get to know the kids so well,” said Cooper, who leads three learning pods with a total of five kids for $30 an hour. “I can drive away at 3 and I don’t have any papers to grade.”

Online learning companies have also expanded their services to cater to this growing market for private tutors this academic year. Waine Tam, CEO of the online teacher and school matching company Selected, told NBC News that about half of all inquiries it received at the end of summer were requests for learning pods. Teachers on the Selected platform can make anywhere from $30,000 in a city like Tulsa to $60,000 in a city like New York, depending on their rate. Even at these prices, parents are willing to pay to pool their resources with other families and pay, said Tam.

“Pod teachers are being paid a premium because of the novelty and newness of the role, and the supply dynamic is skewed in favor of the teacher,” he said. “Parents are in high need.”
Becoming a teacher

Without significant funds, in September, Amiracle's mother, Felicia, pinned up a set of multiplication tables and a schedule for each of their three children in a corner of the family's home office. Since their kids started remote learning in March, Kevin and Felicia have shared the teaching responsibilities. But neither of them is a teacher and their teenage son has already advanced in his education past their skills, which makes it difficult to help him at home.

“They were good students and fit in with everyone at school,” Amiracle's father said. “But now I guess they just don’t want to do the home schooling.”

Kevin Johnson started a new job as a valet at a car dealership in Long Island last week, making $15 an hour, $2 less than he made as a porter. Felicia is still receiving unemployment as she stays at home to help the kids with school. They are now faced with an excruciating decision: continue their fall into poverty on a single income or leave their children to teach themselves at home. Either way, their kids lose, Johnson said. While Amiracle has always earned good grades and taken on extra credit, her father said she’s increasingly overwhelmed because she’s essentially teaching herself.

“I feel like the kids are getting cheated on education, and we’re already far behind as Americans in that department,” he said. “We’re making our kids dumber by not giving them the best way to learn.”

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