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October 23, 2024

Biden Administration Effectively Cancels $175 Billion Student Loans Granted Under Existing Forgiveness Programs

Image depicting college education loanPresident Joe BIden announced early this month that his administration has cancelled $175 billion student loans availed through educational loans with relief and forgiveness mechanics. A huge portion of the cancellations was given to more than one million borrowers who took out college loans under the 2007 Public Service Loan Forgiveness (PSLF) program. The latter was created in connection with the passing of the College Cost Reduction and Access Act in the same year.

firefighters as examples of public service workersThe PSLF program was meant to encourage college students to work with the government or with nonprofit entities for at least 10 years. In return, and after the said period they can apply to have the remaining balance of their student loans cancelled.

The PSLF Program Upgraded and Restored Under the Biden Administration

Unfortunately since 2017 onwards under the Trump administration, the majority of the public service employees who applied for PSLF loan relief were denied approval based on some vague and complicated eligibility rules and conditions.

Nevertheless, the Biden administration worked on the loan forgiveness issues for about two years in order to upgrade and improve the efficiency of the PSLF program. Doing so permitted cancellation of 175 billion student loans; including loans that were forgiven because they met the requirements of an income-driven payment plan. Additionally student borrowers who were cheated by their respective schools were also provided with relief in accordance with a 1994 loan forgiveness ruling.

Categories Financial Concerns
August 16, 2023

Ed Dep’s Loan Forgiveness for Borrowers with 20 Years of Repayment Derailed

The Biden administration through the Education Department is all set to discharge $39 billion worth of student loans belonging to hundreds of thousands of borrowers. It’s actually part of the Biden administration’s pursuit of debt relief measures but met with legal impediments and pushback from the GOP.

Debt Relief to Compensate Compliant Longstanding Borrowers

The Ed Dep’s federal student debt relief is deemed as a way of compensating student borrowers for the prolonged failure of the Education Department and the loan servicers contracted, to properly manage the income-driven federal repayment program. The program had promised borrowers the chance of having the entire remaining balance of their debts erased after making payments for twenty (20) or twenty-five (25) years.

However, relatively only a few of the student loan borrowers received forgiveness from the federal income-driven repayment program. Federal and state regulators found out that the loan servicers for student loans were inappropriately pushing student borrowers to take out long-term forbearances that actually do not work toward loan forgiveness. Moreover in most cases, the Education Department was remiss in properly tracking monthly payments that served as records and bases for loan forgiveness over time.

In April 2022, the Ed Dep announced that they have retroactively adjusted and updated borrower accounts. The purpose of which is to give credit to student debtors who could have made qualifying repayments under the income-driven payment program. The update had placed 804,000 student loan accounts in the threshold of twenty or twenty-five years of repayments, which automatically entitled the borrowers to loan forgiveness in accordance with the income-driven repayment program.

Conservative Filed Legal Petitions to Block the EdDep from Awarding Debt Forgiveness

Although the Education Department announced it will be carrying out the loan forgiveness discharges soon, legal cases have been filed against such actions.

Conservative groups known as the Mackinac Center for Public Policy and the Cato Institute have petitioned a federal judge to immediately issue an order to block the loan forgiveness action. The groups contend that the loan relief could be detrimental to their recruitment efforts. The two institutions argue that the Biden administration is clearly abusing its authority, since the Supreme Court had earlier struck down the broader federal student loan forgiveness plan.

Categories Financial Concerns
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