Emma Kinery
Wed, May 4, 2022
(Bloomberg) -- The U.S. Department of Education approved about $6.8 billion in student debt relief for more than 113,000 borrowers through adjustments to its Public Service Loan Forgiveness Program.
The relief -- which the DOE says will average about $60,000 per borrower -- is being given after President Joe Biden made changes to the program in October, under which nonprofit and government employees can have their federal student loan debt forgiven after 10 years, or 120 payments.
While the debt forgiveness will come as a relief to those who qualify, the number represents only 0.26% of the 43.4 million Americans burdened by federal student loan debt.
Also read: Biden’s $1.75 Trillion Student-Debt Problem by the Numbers
Biden has come under pressure in recent weeks to make good on his campaign promise to forgive $10,000 worth of student loans per borrower as the deadline for the student loan payment moratorium approaches at the end of August. The president said he will either extend the moratorium, which has been in place since the start of the Covid-19 pandemic, or do some sort of debt cancellation before then.
The White House has been looking into whether Biden has the legal authority to forgive student loan debt through executive action. White House Press Secretary Jen Psaki said Tuesday that the president was considering limiting his student loan forgiveness program to Americans earning less than $125,000 a year.
Forgiveness of $10,000 per borrower would clear loans for 15 million borrowers.
Biden must cancel federal student debt 'for each and every borrower,' 8 state attorneys general say: 'Now is not the time for half measures'
Ayelet Sheffey
Wed, May 4, 2022,
New York State Attorney General Letitia James.REUTERS/Brendan McDermid/File Photo
Eight state attorneys general urged Biden to cancel federal student debt for every borrower.
They wrote that in their roles, they have seen the consequences falling behind on payments can have.
Biden said he will make a decision on debt relief in coming weeks, but it will likely be limited by income.
State attorneys general have joined the fight for broad student-loan forgiveness.
On Wednesday, attorneys general from New York, Hawaii, Illinois, Michigan, Minnesota, New Mexico, Puerto Rico, and Washington wrote a letter to President Joe Biden urging him to cancel federal student debt "for each and every borrower."
They wrote that, in their roles, they have seen the burden student debt can have for borrowers who fall behind on payments. This includes wage garnishment and seizure of federal benefits, which Biden can ensure permanent relief for by forgiving that debt.
"Restarting federal student loan payments, rather than permanently forgiving them, will only make matters worse," they wrote. "While pushing out repayment restarts and attempting to tackle past forbearance abuses are helpful, they are not enough.
"Now is not the time for half measures, extensions or patchwork solutions," they added. "Now is the time for decisive action."
—NY AG James (@NewYorkStateAG) May 4, 2022
State attorneys general have previously fought for protections for student-loan borrowers. In January, 39 of them reached a $1.85 billion settlement with major student-loan company Navient over accusations the company misled borrowers and steered them into deeper debt, which Navient denied. And now, with Biden saying he will make a decision on student-loan relief in the coming weeks — before student-loan payments are set to resume after August 31 — they are joining Democrats in Congress pushing for broad relief for every federal borrower.
Based on recent reports, it looks like not every borrower will access the relief Biden might implement. White House Press Secretary Jen Psaki told reporters on Tuesday that Biden is looking at helping student-loan borrowers making under $125,000 a year, and while that would help the majority of borrowers, lawmakers have pushed back on capping the relief.
"I don't believe in a cutoff, especially for so many of the front-line workers who are drowning in debt and would likely be excluded from relief," New York Rep. Alexandria Ocasio-Cortez told The Washington Post.
And while Biden has not yet commented on an amount for forgiveness, he said he is not considering $50,000 in relief, which progressives were pushing for. Recently released data from Massachusetts Sen. Elizabeth Warren's office found that while every amount of forgiveness will make a different, the more the better — while $10,000 in relief would wipe out debt loads for a third of borrowers, and 2 million Black borrowers, $50,000 in forgiveness would zero out 30 million borrowers' balances.
"Cancelation of federal student loan debts will reduce stress and mental fatigue, free families to invest in new homes and new lives, and provide countless opportunities," the attorneys-general wrote. "And because student loan debt exacerbates the racial wealth gap, widespread cancelation of student loan debt is not merely a matter of economic justice, but of racial justice as well."
Biden could wipe out 30 million student-loan borrowers' debt loads with $50,000 in relief — but $10,000 would still turn a third of their balances to zero
New data from Sen. Elizabeth Warren's office highlighted the effect of student-debt relief.
It found $10,000 in relief would erase debt for 32% of borrowers, and $50,000 would do so for 76%.
Also, $10,000 in relief — which Biden pledged — would erase debt for 2 million Black borrowers.
Any bit of student-loan relief would help borrowers. But new data found that the more forgiveness, the better.
On Tuesday, an analysis prepared for Massachusetts Sen. Elizabeth Warren and obtained by Insider found that if President Joe Biden fulfilled his campaign pledge to cancel $10,000 in student debt for every federal borrower, 32%, or 13 million borrowers, would see their debt balances turn to zero.
And with every $10,000 increment, the share of borrowers affected would only increase: $30,000 in relief would zero out balances for 24 million borrowers, and $50,000 in relief — an amount Warren and many of her Democratic colleagues have pushed for — would wipe out total debt balances for 76% of borrowers, or 30 million people.
"Our findings bolster prior research showing that debt cancelation would free millions of borrowers from financial burdens, help close debt and wealth gaps between Black and white households, and eliminate runaway student loan balances for distressed borrowers," said the analysis, prepared in part by Dr. Charlie Eaton at the University of California, Merced. "Higher levels of cancelation do more towards each of these ends. In sum, every dollar of student debt cancelation counts, but bigger is better for advancing racial equity and economic security."
The analysis also showed how influential broad student-loan relief would be for minority borrowers. $10,000 in debt forgiveness would wipe out balances for 2 million Black borrowers, and $50,000 in relief would reduce the share of Black people with student debt from 24% to 6%, narrowing the Black-white gap.
Warren has long been a proponent for broad student-loan forgiveness, not only because it would stimulate the economy but also because of the effect it would have on closing the racial wealth gap in the country, she said. This new data comes as Biden inches closer toward making a decision on debt relief. He told reporters last week that while he wasn't considering $50,000 in forgiveness, a decision on canceling student debt would be made "in the next couple of weeks."
The racial effects of student debt have also been a focus for other prominent lawmakers, such as Senate Majority Leader Chuck Schumer. In a recent opinion piece with Derrick Johnson, the NAACP's president, Schumer detailed how Black borrowers were more likely to take out student loans to begin with than their white counterparts, and while the median white borrower would owe 6% of their student debt 20 years after entering college, the median Black borrower would owe 95% of their debt over the same time period.
"This disparity is unacceptable," Schumer and Johnson wrote. "It is un-American. And at the current rate, it is entirely unsustainable."
It's unclear how exactly Biden plans to act on student debt, but reports have said he's considering at least $10,000 in forgiveness that may be subject to income limits. Still, as the analysis said, "every dollar of immediate debt cancelation counts, but bigger is better for racial equity and tackling wealth inequality."
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