The White House recently released a memo about canceling debt for federal student loan borrowers, but the text was heavily redacted. This seven-page memo, dated April 5, 2021, was addressed to the U.S. Secretary of Education in consideration of potential student loan forgiveness by the Biden Administration. This memorandum, although heavily redacted, gives some insight into whether the administration has the authority to issue widespread student loan forgiveness.
Tag: student loan forgiveness
Biden Administration Cancels Almost $10 Billion in Student Loan Debt. Who Got Relief?
In total, the Department of Education has approved discharging $8.7 billion in student loan debt for more than 450,000 borrowers.
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That amount has included:
- $7.1 billion for borrowers who were eligible for relief because of “total and permanent disability.”
- $55.6 million in loan discharges for students who attended three trade schools that officials said misrepresented themselves to students.
- Another $1 billion for other students defrauded by their schools.
The Biden Administration has cancelled nearly $10 billion in student loan debt since January 2021, according to the U.S. Department of Education. The Department reported they have approved $9.5 billion in student loan discharges since January 2021, affecting approximately 563,000 borrowers. This has given borrowers the ability to tackle other debts, invest and increase savings.
Student Loan Payment Pause Extended to 2022
The Biden administration has announced that the moratorium on federal student loan payments would be extended through January 31, 2022. This announcement came just over a month before the pause was set to expire at the end of September. According to the Department of Education, this extension is the final one that will be issued.
The moratorium was first put in place in March 2020 after Congress passed the CARES Act. The moratorium paused payments through the end of September 2020, keeping all federal student loan interest rates at zero percent, affecting approximately 42 million federal borrowers. President Trump then issued an executive order to extend the student loan payment pause through January 2021. As soon as President Biden took office, he issued another executive order extending the pause through September 30, 2021.
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Biden Administration Cancels Additional $55.6 Million in Student Loan Debt
The Biden Administration canceled an additional $55.6 million in student loans for 1,800 students who were found to be victims of fraud. This additional amount brings the total amount of student loan debt cancelled by the Biden administration to $1.5 trillion.
Since entering office, President Biden has made it his mission to stand up for the thousands of students who were taken advantage of by for-profit colleges. This most recent effort was focused on students who attended Westwood College, Marinello Schools of Beauty, and the Court Reporting Institute. Previously, the administration had approved loan forgiveness for students who attended ITT Technical Institute, the American Career Institute and Corinthian College. This is the first time the Department of Education has approved loan forgiveness for students attending for-profit schools not including these three.
What $10,000 in Student Loan Cancellation Would Look Like
Lawmakers have been calling upon President Biden to move forward with an executive order that would cancel up to $50,000 in federally backed student loan debt. Other amounts have been considered, the lowest amount being $10,000. How this cancellation would look across the country would vary, however, depending on the state and the borrower.
According to the Student Loan Hero, $10,000 in student loan forgiveness would cost approximately $315 billion. This amount of loan forgiveness would erase outstanding student loan balances for 34 percent of all student loan borrowers, according to their review of Department of Education data.
Beware of this Student Loan Debt Relief Scam in 2021
Student loan borrowers look for ways to save on their loan payments, including having their loans forgiven. However, for the 10 million student loan borrowers who were part of the recent Navient settlement, they now find themselves at risk of falling prey to a new scam.
This recent Navient settlement came as part of a student loan forgiveness lawsuit. Navient is one of the country’s largest student loan providers, and while the settlement does not necessarily affect how much each borrower owes, scammers are targeting borrowers, by offering false claims of debt forgiveness.
New Legislation Provides Student Loan Forgiveness to Frontline Healthcare Workers
Healthcare workers on the frontlines are putting their lives at risk every day during the coronavirus (COVID-19) pandemic, which has many asking what can be done to financially help these dedicated individuals.
Rep. Carolyn Maloney (D-NY) plans to introduce new legislation that will do just that by forgiving outstanding student loan debt carried by these frontline healthcare workers. The legislation is titled The Student Debt Forgiveness for Frontline Health Care Workers Act. The hope behind this new legislation is that by forgiving student loan debt for these workers, a large financial burden will be lifted. Additionally, this incentive could possibly drive others to join the healthcare industry and continue the fight against COVID-19.
An Alarming Number of Student Borrowers Have Made No Progress on their Loan Balances
A disturbing number of student loan borrowers who began their repayment plans between 2010 and 2012 have made little to no progress towards reducing the principal balance owed on their student loans. According to a recent report from Moody’s Investor Services, 49 percent of student loan borrowers whose loan repayment plans began during that time have made no progress. Even worse, many of them have seen their balances grow.
This problem could be due to several factors, including poor job prospects and low salaries in their first jobs after graduation. Depending on the degree pursued by each borrower, it can be difficult, if not impossible, to find a viable job that will allow the borrower to make appropriate payments to pay down their student loan debt.
Senior Education Official Resigns, Calls for Massive Student Loan Debt Forgiveness
A senior official appointed by U.S. Department of Education Secretary Betsy DeVos has resigned, declaring the student loan system to be “fundamentally broken” and calling for the forgiveness of billions of dollars of student loan debt.
The official, A. Wayne Johnson, was appointed as the Chief Operating Officer of the Department of Education’s Office of Federal Student Aid. This office manages the country’s outstanding student loan debt, which stands at an estimated $1.6 trillion. During his tenure, Johnson worked in a role specifically dealing with managing how student loans are serviced.
100,000 Borrowers Rejected for Public Service Student Loan Forgiveness
Statistics have come out showing just how many borrowers who have applied for public service loan forgiveness have ended up being denied loan forgiveness. It is estimated that more than 100,000 applicants have been rejected since the program began, which has many scratching their heads asking why so many borrowers are being rejected?
According to the U.S. Department of Education, as of June 30, 2019, 90,962 student loan borrowers submitted 110,729 applications for public service student loan forgiveness. Of these applications, a total of 102,051 have been processed while 8,677 remain pending. Only 1,216 of the over 102,000 applications submitted have been approved, leaving a total of 100,835 applications being rejected. These numbers mean that less than one percent of all applications have been approved.
Digging deeper into these numbers, only 845 borrowers have received a collective $52 million in public service student loan forgiveness. The average debt discharged is $61,592. Another 726 applications have been approved under the Temporary Expanded Public Service Loan Forgiveness Program, which has given an additional 681 borrowers relief. However, a large number are still left without any recourse or assistance.
The reasons why so many applicants are being rejected vary. Fifty-five percent of them were because the borrowers failed to make all the required qualifying payments while 24 percent of them were due to missing information. Another 15 percent reportedly did not include “eligible” loans. Two percent were rejected due to employment date discrepancies, and another two percent were because the employer listed was not an eligible employer under the program.
If these issues are discovered early on, they can be remedied fairly easily. However, problems arise when the borrower does not discover this fact until years into the program.
The Public Service Loan Forgiveness Program forgives federal student loans for borrowers who are full-time employees, working more than 30 hours per week, in an eligible federal, state, or local public service job or 501(c)(3) nonprofit job. The borrower needs to make 120 eligible on-time payments, as well. Over half of borrowers who were rejected failed to meet this specific requirement.
One of the requirements under the program is the borrower must complete the Employment Certification Form and submit it to the U.S. Department of Education whenever the person begins a job in public service, when he or she switches employers, and annually to ensure that the borrower is on track. Not submitting this certification form can result in the person not remaining on the right track to qualify for the program.
Additionally, borrowers must be enrolled in an income-based federal student loan repayment plan to qualify and must make 120 required payments while enrolled in this federal student loan repayment plan. As these kinks get worked out, it is possible that the number of applicants who are approved for loan forgiveness will increase. At this time, however, the small amount that are being approved is less than encouraging.
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For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. There are ways to file for bankruptcy with student loan debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.