(CNN) — There have been good and bad headlines related to student loans in recent days.
- Good — The government has been praised for canceling $415 million in student debt for victims of for-profit college fraud.
- Wrong — The Biden administration has come under fire for its failure, so far, to change student loan bankruptcy rules.
I went to Katie Lobosco, the CNN writer who covers student loans, to better understand how much student debt is, who owns it, and what else the government could do about it.
Our email conversation, slightly edited, is below.
A huge pile of debt
WHAT MATTERS: First, can you tell us how much of a problem student debt is in the United States? How much is due and by how many people?
LOBOSCO: It’s big. According to the Federal Reserve, Americans owe nearly $1.8 trillion in student loan debt, more than they owe on credit cards or auto loans.
The majority of student debt is owed to the federal government and held by about 43 million people, according to Federal Student Aid. This represents approximately 17% of adults aged 18 or over.
The total amount of outstanding student debt has increased steadily since at least 2006.
But I think it’s worth noting that today’s students don’t borrow as much as they used to. Annual student loans peaked in the 2010-11 school year, and students have borrowed less money in each consecutive year since then, according to the College Board.
Whose is this money?
WHAT MATTERS: Who owns all this debt and how can it be cancelled?
LOBOSCO: In 2020, about 75% of student borrowers took out loans to attend two- or four-year colleges. They make up about half of all outstanding student loan debt, according to the Brookings Institution. The remaining 25% of borrowers have higher education and represent the other half of the outstanding debt.
More than half of all federal student borrowers owe less than $20,000, as of March 2021. Only 7% owe more than $100,000, which is more than a third of all federal student debt, according to The College Board.
There are a number of repayment programs offered for federal student loans. Many of them tie monthly payment amounts to the borrower’s income and can even be as low as $0 per month. Some of these income-based payment plans will cancel the amount of remaining debt after a set period of time. There is also a 10-year forgiveness program specifically for borrowers who work in the public sector.
The federal government will also forgive student debt for borrowers who have been defrauded by their college as well as borrowers who are permanently disabled and can no longer work.
Some prominent Democrats, including Senate Majority Leader Chuck Schumer and Massachusetts Sen. Elizabeth Warren, argue that President Joe Biden can and should use his executive power to write off federal student loan debt more broadly, asking him to forgive $50,000 per borrower.
Last year, Biden asked attorneys for the Department of Education and the Department of Justice to assess whether he indeed had the authority to do so — but the administration has not disclosed those findings. Biden said he supports Congress in using its legislative authority to cancel up to $10,000 per borrower.
What’s going on and what’s not going to happen?
WHAT MATTERS: What has the Biden administration done to cancel the debt, what does it want to do, and what is it unlikely it can do?
LOBOSCO: Under Biden, the Department of Education approved about $16 billion in federal student loan releases for more than 680,000 borrowers — more than in any previous administration.
Most of these efforts have focused on people who were already eligible for debt relief but were waiting for paperwork to be processed. The department has reduced a backlog of forgiveness applications filed under a policy known as borrower defense to repayment that allows former students who were defrauded by their colleges to apply for federal debt relief. As part of this policy, the Biden administration canceled about $2 billion from more than 107,000 people who attended for-profit colleges like the ITT Technical Institute and DeVry University. The ministry has also improved its efforts to reach borrowers eligible for debt relief due to permanent disability.
The Biden administration also overhauled the Public Service Loan Forgiveness Program that forgives outstanding federal student loan debt for those working in the public sector after making 10 years of payments. It temporarily expanded the eligibility criteria to apply to borrowers who have older loans that weren’t originally eligible as well as those who were in the wrong repayment plan but fulfilled other requirements – until October 31. The expansion has resulted in nearly $5 billion in debt relief for 70,000 borrowers to date.
Biden also extended the pandemic-related pause on federal student loan payments, interest and collections. Essentially, borrowers have not had to make any payments since March 2020. The benefit is now due to expire on May 1.
The Ministry of Education should continue all these efforts aimed at targeted debt relief. He also plans to rewrite a rule known as gainful employment that aims to prevent students from taking on too much debt to attend predatory, for-profit colleges. The rule was repealed by the previous administration.
I think it’s unlikely that we’ll see the Biden administration write off student debt globally, especially for high-income earners. Biden argued that the government shouldn’t forgive the debt of people who went to “Harvard and Yale and Penn.” He also indicated that he thinks Congress should make changes through legislation, which would make them harder to undo. A recent speech by Education Secretary Miguel Cardona, which outlined the department’s priorities for the coming year, did not mention any upcoming cancellation of student debt.
Biden versus Trump
WHAT MATTERS: How are things different under President Biden than under President Trump?
LOBOSCO: While the Trump administration has made it harder for borrowers to qualify for some forgiveness programs, the Biden administration is making it easier.
Here are two key examples:
- Under former education secretary Betsy DeVos, she blocked the processing of borrower defense applications as she sought to rewrite the regulations, allowing a backlog of more than 100,000 applications to build up. It also changed the cancellation calculation so that some borrowers were only entitled to partial relief. DeVos was even held in contempt of court for continuing to collect some of those debts. Biden, on the other hand, reversed that partial relief calculation and reduced the backlog.
- The Trump administration has also called for an end to the civil service loan forgiveness program, eliminating it from the president’s proposed federal budget during his four-year term. Congress never passed the proposal, and as I said earlier, Biden expanded eligibility for the program.
Payments coming due
WHAT MATTERS: While we’re talking about student debt, let’s move on to payment deferral. Federal loan repayments were paused during the pandemic and are expected to resume in May. What should people in debt do?
LOBOSCO: Borrowers must receive a billing statement or other notice at least 21 days before their payment is due. It should be May 1 or later. The monthly payments of all borrowers are not due on the same day.
Borrowers who previously had automatic payments in place may need to let their loan servicing company know that they want these to continue. If he can no longer afford his monthly payment, he may be eligible for an income-based repayment plan. Under these plans, which are based on income and family size, a monthly payment can be as low as $0 per month. The Department of Education has more information online about restarting payments.
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