A student-loan forgiveness program was 'run by greedy loan servicers' under Betsy DeVos, Elizabeth Warren says — and Biden can fix 'the mess' by canceling debt

asheffey@businessinsider.com (Ayelet Sheffey) - 

Sen. Elizabeth Warren (D-MA). Drew Angerer/Getty Images

Sen. Warren slammed Betsy DeVos' handling of a student-loan forgiveness program for public servants.

She said the best first step Biden can take to fixing growing debt burdens is canceling it.

When Biden took office, 98% of public servants were being denied relief to the program.

Massachusetts Sen. Elizabeth Warren isn't too upset that a former education secretary is no longer in office.

On Friday, Warren joined the American Federation of Teachers convention in Massachusetts to discuss higher education reform and the student debt crisis. She addressed the Public Service Loan Forgiveness (PSLF) program, which is intended to forgive student debt for public servants, like teachers, after ten years of qualifying payments. While the first group of borrowers should have become eligible for forgiveness in 2017, the program ran up a high denial rate under former President Donald Trump's Education Secretary Betsy DeVos.

"Less than 3% of the public servants that applied to have their loans forgiven under the PSLF program actually got the relief they were promised," Warren said. "More than 97% were denied. And by the way, this is why math education is so important. You can keep track of when Betsy DeVos is cheating you. The good news: Betsy DeVos is gone."

In 2019, the American Federation of Teachers President Randi Weingarten sued DeVos over the high PSLF denial rate, and in October, the organization reached a settlement with President Joe Biden's Education Department that required the department to reconsider any denied PSLF applications upon request and give denied borrowers a detailed response as to why they were denied, among other things. It also discharged $400,000 in student debt for the eight plaintiffs in the case, which Weingarten said at the time was "a day of vindication for the millions of borrowers who took the government at its word but were cruelly denied through no fault of their own."

Biden is teasing a coming decision on student-loan forgiveness. Here's everything we know about how it could look.

Pressure has been mounting for Biden to cancel student debt, as he pledged during his campaign.

Last month, he said his decision on relief would come in a matter of weeks.

While Republican opposition mounts, a few developments hint at the kind of relief borrowers might see.

Despite President Joe Biden's campaign pledge to cancel $10,000 in debt per borrower, he's been largely silent on the issue through his presidency.

But there may be a light at the end of tunnel for more than 40 million Americans with federal student loans.

In late April, Biden said he'd "have an answer" on relief in the coming weeks. That was a year after Biden asked the Department of Education to prepare a memo outlining his legal power to cancel student debt. Insider found that the Education Department created and circulated the memo, but Biden has not revealed its contents.

Instead of relief for all borrowers, so far, Biden has focused on targeted groups like borrowers with disabilities and those defrauded by for-profit schools, who have seen more than $9 billion in collective debt relief. He also extended the pandemic pause on student loan payments four times since taking office, following two from former President Donald Trump.

Democrats are pressuring him to relieve borrowers in fear of low midterm turnout, with some progressives urging him to cancel at least $50,000 for those in debt. Meanwhile, Republicans senators have introduced bills intended to prohibit cancellation.

Biden's approval rating among the young people who helped get him elected is tanking. With the payment pause set to expire after August 31, Americans are on pins and needles to find out what Biden will do.

Here's everything we know so far.

Following the high PSLF denial rate under DeVos, Biden's Education Department announced a series of reforms to the program last year, including a waiver that runs through October 31, 2022, that allows any past payments, including those previously deemed ineligible, to count toward forgiveness progress. Warren said she's "all in favor of this relief, but it's not enough."

Student Loan Forgiveness and the Future of Paying for College

"We need to deal with the mess we're in right now," Warren said. "Mr. President, our educators and our firefighters and everyone who is struggling with a mountain of student loan debt, it is time to cancel $50,000 of student loan debt."

Warren has long called for $50,000 in relief for federal borrowers, even though it's an amount Biden previously said he is not considering. Instead, recent reports have suggested he is mulling $10,000 in relief for borrowers making under $150,000 a year. It'll likely be announced in July or August, closer to when the pause on student-loan payments expires after August 31.

While Democrats like Warren want the president to go big on relief, many Republican lawmakers have slammed the idea of forgiving student debt broadly. Arkansas Sen. Tom Cotton, for example, wrote on Twitter that canceling debt will "have a significant inflationary impact, so the working poor and seniors will be the hardest hit."

"Biden wants to raid the treasury to bribe his progressive base to turn out for the midterms," Cotton wrote.

The White House has not publicly confirmed how it plans to act on student debt, but with payments resuming in less than two months, lawmakers on both sides of the aisle are waiting for the final decision.