Emma Kinery and Alex Tanzi
Sat, April 30, 2022,
(Bloomberg) -- President Joe Biden is considering forgiving at least $10,000 in student loans per borrower, a promise he made on the campaign trail, through executive action.
Here are key data points:
$1.75 trillion -- the total amount of outstanding student-loan debt in U.S., according to the Federal Reserve. About 92% of that debt -- more than $1.6 trillion -- is in the hands of the federal government. Put another way, student-loan debt equals about 6.5% of U.S. gross domestic product.
43.4 million -- the number of borrowers with federal student-loan debt, according to the Education Data Initiative.$37,113 -- the average balance for borrowers of federal student loans. Including private debt, the number jumps to $40,904.Four -- the number of months Biden has to make a decision. The moratorium on student-loan payments is set to expire on Aug. 31, and the president has said he intends to either extend the moratorium or do some sort of debt cancellation before that date. The deadline leaves just over two months until November’s midterm elections that will decide which party controls Congress.41% -- Biden’s approval rating among Americans aged 18 to 29, according to the Harvard Institute of Politics youth poll released Monday. His approval rating is down 18 percentage points from a year ago, according to the poll. The top reason cited for dismay was his “ineffectiveness.” Young Americans are likely to be a decisive voting bloc in the midterms. Harvard’s poll found that with more than six months until the election, youth turnout is expected to match the historically high turnout seen in the last midterm cycle: 36% said they will “definitely” vote; 37% said so at this point in 2018.34% -- adults aged 18 to 29 who have student-loan debt, according to the Education Data Initiative.85% -- young Americans, regardless of party, who favor some sort of government action on student debt, according to the Harvard poll; 38% favor total debt cancellation. Only 13% believe the government should not take any action on it. Among young Americans who are not currently enrolled in college and without a degree, support for government action is 79%.$22,690 to $39,150 -- the average cost of attendance for full-time in-state and out-of-state undergraduate students at public four-year institutions, according to the College Board. The average cost of private non-profit four-year universities is $51,690.$52,000 -- the average student debt owed by Black bachelor’s-degree holders. By race, Black college graduates owe considerably more than others on average. Four years after graduation, almost half owe an average of 12.5% more than they borrowed, according to the Education Data Initiative.
A recent analysis by the Federal Reserve Bank of St. Louis found that rates of missed payments on student loans are at risk of climbing when the forbearance ends.
“Serious delinquency rates for student debt could snap back from historic lows to their previous highs in which 10% or more of the debt was past due,” Lowell Ricketts, a data scientist for the Institute for Economic Equity at the St. Louis Fed, said in the post.
Interest rates for federal student loans vary depending on the loan type and generally are set in May for loans disbursed from July to same month of the following year, according to the Department of Education’s Federal Student Aid office.
Students currently pay 3.73% for the most limited subsidized loans, to 5.28% for unsubsidized loans. Unlike other forms of debt, such as credit cards and mortgages, the loans are daily interest loans, which means that interest accumulates daily. Parents of students and graduate students pay 6.28%. This raises the outstanding amount due on the loan and interest is then charged on that higher principal balance, increasing the overall cost of the loan.
Most federal student loans also have an origination fee that is a percentage of the total loan amount. This fee is deducted from each loan that is disbursed. This means the money received will be less than the amount the student actually borrowed and is charged interest on.
The interest rates on federal student loans is set by federal law by using the May 10-year Treasury note auction and adding 2.05 percentage points to 4.6 percentage points based on the loan type.
By CHRIS MEGERIAN
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WASHINGTON (AP) — For student loan activists, the week began with hope as President Joe Biden gave his clearest indication that he was considering canceling federal debt rather than simply allowing borrowers to defer payments during the pandemic.
But that soon gave way to disappointment when Biden signaled days later that any debt relief would be much less than activists wanted. So Melissa Byrne, one of the organizers who has been leading the charge, got back to work.
First, she tweeted that activists need to “ramp up” their efforts, stay “warm + fuzzy” and “fight until we win.” (“White House staff reads tweets,” she explained.) Then she and her allies dove into their group chats as they considered ways to keep the pressure on.
“We need to keep our eye on the prize,” Byrne said.
The flurry of activity comes in a crucial stretch, with Biden saying he would make a decision in the coming weeks. After promising to address the issue during his campaign for president, he’s now weighing how much federal student loan debt should be canceled and who should benefit.
Critics caution that forgiving debt might anger voters who already paid off their loans, and Republicans describe the idea as a political giveaway in a midterm election year. However, an expansive approach could buoy young people whom Democrats view as a central part of their coalition, allowing Biden to deliver concrete results when many of his proposals from the left remain stalled on Capitol Hill.
John Della Volpe, director of polling at the Harvard Kennedy School Institute of Politics, said student loan forgiveness is “a cornerstone in the relationship between President Biden and young Americans.”
Without young voters on board, “we don’t have a Democratic House, a Democratic Senate and a Democratic president,” said Della Volpe, who worked as a consultant for Biden’s campaign.
About 43 million Americans owe $1.6 trillion on their student loans, more than either credit cards or car payments. It’s a growing problem for younger people, who have assumed more and more debt to finance their educations when public funding for colleges has declined.
And it’s a challenge that Biden has personally experienced. While running for office, he told a student in New Hampshire that he “ended up with a debt of over $280,000” to pay for college and graduate school for his three children.
“I get it,” he said.
In a poll of Americans under 30 years old conducted by the Harvard Kennedy School and released on Monday, 85% said the federal government should take some action on student loan debt.
However, opinions were split about the best path forward. Although 38% supported full cancellation, 21% wanted such a step to be taken for only those with the greatest financial needs. In addition, 27% wanted the government to help with repayment, but not debt cancellation.
Biden said Thursday that he was still considering what to do.
“I’m in the process of taking a hard look at whether or not there will be additional debt forgiveness,” he said. “And I’ll have an answer on that in the next couple of weeks.”
It’s possible that his idea will include means testing, which involves limiting by income who would see their debts forgiven.
“He has talked in the past about how, you know, he doesn’t believe that millionaires and billionaires, obviously, should benefit, or even people from the highest income,” White House press secretary Jen Psaki said Thursday. “So that’s certainly something he would be looking at.”
During the campaign, when Biden was consolidating support in the Democratic primary, he pledged to “immediately” cancel $10,000 in federal student loan debt per person. But he did not use his executive authority to do so once in office — whether he has such power remains the subject of debate in Washington — and Congress took no action on his promise, either.
Now Senate Majority Leader Chuck Schumer, D-N.Y., is calling for $50,000 in debt to be canceled and some activists want all debt wiped out without exception.
Biden’s pending decision comes as he struggles to make progress on other parts of his liberal agenda that could appeal to young people, such as tackling climate change by expanding clean energy.
“We need to motivate voters and show them that Democrats are fighting for them,” said Emma Lydon, who lobbies for the Progressive Change Campaign Committee. “And this is a slam dunk way to do that.”
Sen. Mitt Romney, R-Utah, mocked the idea by tweeting that “desperate polls call for desperate measures.” He added, “Other bribe suggestions: Forgive auto loans? Forgive credit card debt? Forgive mortgages?”
Celinda Lake, a Democratic pollster who worked with Biden’s campaign, didn’t see a downside to the inevitable criticism.
“The voters who are going to grouse about this, we weren’t getting them anyway,” she said.
However, the issue can still be controversial among Democrats, even evoking raw emotions at times.
“We just had a fight about this in a focus group last night,” Lake said.
An older woman who had paid off her debts didn’t like the idea, while a middle-aged man with children was enthusiastic.
Byrne is trying to tip the scales as far as she can, and on Friday she plastered signs around downtown Washington with other activists.
“President Biden: Not 10k, not 50k, no means-testing,” said black letters on a hot pink background. “Cancel student debt, ALL OF IT.”
Some of the signs went outside places where there would be parties during the weekend of the White House Correspondents’ Association Dinner. Perhaps they would catch the eye of someone influential as they walked by in a tuxedo or evening gown.
Although it’s unclear what Biden’s final decision will be, Byrne said activists have already scored a victory.
“We’ve won the argument that we have to cancel student loan debt,” she said. “Now it’s about how much we can get.”
President Joe Biden recently said that he's considering some level of broad-based student loan forgiveness in the coming weeks, and one Democrat who has repeatedly pushed for cancellation says that's major progress.
"All we know is that the President has expressed an openness to to cancel some debt... that in its in and of itself, is a tremendous victory," Congresswoman Ayanna Pressley (D-MA) told Yahoo Finance in an exclusive interview (video above), later adding: "Any relief that we can provide people in the midst of unprecedented economic hardship as we begin to round the corner and head into a recovery from this pandemic induced recession would make a difference."
Pressley, alongside Senate Majority Leader Chuck Schumer (D-NY), and Senator Elizabeth Warren (D-MA) have repeatedly called on Biden to cancel $50,000 in student loan debt immediately via executive order on the premise that there is sufficient legal backing for the administration to do so.
"This is about the president keeping his word," Pressley stressed. "He has the authority, and I think he has a mandate from this electorate ... this is about being responsive to the multi-generational, multiracial coalition, which decisively elected him."
Biden, who backed broad student loan forgiveness of $10,000 on the campaign trail in 2020 amid more generous proposals from then-rivals Sen. Bernie Sanders (D-VT) and Warren, has been mostly reluctant to do so after he entered the White House.
On Thursday, during a press conference, Biden reversed that sentiment and said he was "considering dealing with some debt reduction." He was not in favor of erasing $50,000 in student loan debt per borrower, he stressed, but added that he was "in the process of taking a hard look at whether or not there are going to — there will be additional debt forgiveness, and I'll have an answer on that in the next couple of weeks."
On Friday, Bloomberg reported that he was considering canceling "at least $10,000" per borrower.
Pressley said this was a good sign, regardless of his resistance to cancelling $50,000.
"I've always advocated for a broad-based student debt cancellation," she said. "It's transformational, it's impactful, and we were advocating for $50,000 by executive action, because that would help 80% of those in the lowest income bracket
Cancelling $10,000 in student loan debt per borrower would help the most number of borrowers at the lowest cost, recent research from the New York Fed found.
The Fed researchers, using data from the New York Fed/Equifax Consumer Credit Panel, estimated the cost of two federal loan forgiveness proposals, one for $10,000 and another for $50,000. They found that limited forgiveness and placing income caps on who would be eligible would "distribute a larger share of benefits" to low-income borrowers while also reducing the cost of forgiveness.
The basic argument for broad cancellation, as detailed by the Legal Services Center of Harvard Law School, is that the Education Secretary has the power “to cancel existing student loan debt under a distinct statutory authority — the authority to modify existing loans found in 20 U.S.C. § 1082(a)(4).” (Toby Merrill, who founded the Project on Predatory Student Lending at Harvard Law School and co-authored the legal analysis, currently works for the Education Department.)
Rep. Pressley has repeatedly stressed that women and people of color hold significant levels of student loan debt and that cancellation would represent a massively impactful form of relief given the disproportionate burden.
Meanwhile, the Education Department has been busy revamping existing loan forgiveness programs.
"The first thing we did was reform the system that was in place that didn't work for anybody that allowed people to write off debt if they engaged in public service," Biden said, pointing to ED's efforts to allow more civil servants to take advantage of the Public Service Loan Forgiveness (PSLF) program.
In any case, what happens after some student debt is erased?
"Student debt cancellation would be historic and life changing ... [but] what we're really trying to address here is an affordability crisis," Pressley said. "We need to expand Pell Grants, we need tuition free college. And then there's so many other things that we need to do to right-size the burden that working families are experiencing, particularly in the midst of rising inflation."
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Aarthi is a reporter for Yahoo Finance. She can be reached at aarthi@yahoofinance.com. Follow her on Twitter @aarthiswami.
Alicia Adamczyk
Thu, April 28, 2022,
Jim Watson / Getty
President Joe Biden threw cold water on calls for large-scale student loan debt cancellation during a speech Thursday.
He will not cancel $50,000 in debt for every borrower, as some Democrats are pushing for. Beyond nixing that specific number, the president did not provide more details on what actions, if any, he may be planning.
"I am in the process of taking a hard look at whether or not there will be additional debt forgiveness," Biden said. "I’ll have an answer on that in the next couple of weeks."
This statement comes a few days after members of the Congressional Hispanic Caucus told several news outlets that Biden seemed open to canceling student loan debt in a private meeting, causing a flurry of headlines and renewing hope for cash-strapped borrowers that their debt may soon be forgiven.
It also comes the same day that Biden forgave $238 million in cosmetology school loans for 28,000 borrowers defrauded by the Marinello Schools of Beauty.
During his presidential campaign, Biden backed forgiving $10,000 in federal student loan debt per borrower. It's possible that amount is still on the table. So far, he has canceled debt for some defrauded borrowers and certain disabled borrowers, and has made changes to established forgiveness programs like public service loan forgiveness (PSLF) and income-based repayment plans (IRP).
Canceling $10,000 per federal borrower would eliminate $321 billion of student loans, while canceling $50,000 would discharge $904 billion, according to a recent report from the Federal Reserve of New York. About one-third of borrowers would see their debt completely erased if $10,000 were forgiven; eight out of 10 borrowers would be debt-free if $50,000 were canceled.
Federal borrowers have not had to make loan payments since March 2020. In that time, they've saved $1.5 billion each month in interest payments alone, according to a recent report.
This story was originally featured on Fortune.com
