Delay in decision to cancel student debt worries borrowers
“Waiting, not knowing, anticipating a decision, it gives me anxiety. I know I’m not alone,” said DeMarco, a traveling nurse in Kansas City, Mo., with $68,000 in student loans.
Since taking office, Biden has fueled speculation about whether he will deliver a campaign promise to cancel part of the 1,600 billion dollars held in federal student debt. In April, the president told a meeting of Hispanic lawmakers he was open to canceling student debt, then later told reporters he would have an answer on an additional pardon “within two next weeks”.
But more than a month later, no decision has been announced.
Natalia Abrams, founder of the Student Debt Crisis Center, an advocacy group, said the delay would increase stress and anxiety. “Borrowers need to know so they can plan their financial lives,” Abrams said.
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The Washington Post reported that White House officials plan to write off $10,000 in student debt per borrower for Americans who earned less than $150,000 in the previous year, or less than $300,000 for married couples. who file jointly. People familiar with the matter say income caps are in flux as some Democratic lawmakers plead with the White House to drop the means test.
The people, who spoke on condition of anonymity because they were not authorized to discuss the deliberations, say the Biden administration is still assessing the political impact and logistics of carrying out the politics. As a result, they say, a decision is no longer imminent.
“The president understands first-hand the burden that student loan debt can place on families, and the administration continues to evaluate forgiveness options,” White House spokesman Abdullah Hasan said. “No decision has been made.”
Liberal activists and lawmakers clamor for Biden to erase some student debt before the end of the pandemic-induced loan repayment moratorium on August 31. About 41 million borrowers are benefiting from the pause in their federal student loan repayments that began two years ago under the Trump administration.
Hasan noted that Biden has kept the moratorium in place while in office and has already provided 1.3 million borrowers with a total of $25 billion in debt relief.
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Supporters say that rather than repeatedly extending the moratorium, Biden needs to relieve as many people as possible of the burden of school debt. Critics of debt forgiveness argue that lavish loan forgiveness on college graduates is an irresponsible and costly policy that does nothing to fix the ailing lending system.
With his federal student loan payments on pause since March 2020, DeMarco has paid off $42,000 in private education debt and accumulated his savings. He and his wife are keen to buy a house, but are reluctant to go ahead until they have a clearer idea of what will reach the balance of his federal loan.
Prior to the moratorium, DeMarco was handing over $1,000 a month to the Department of Education to pay off loans he got out for a Bachelor of Health Sciences from Truman State University and a Nursing degree from William Jewell College.
The moratorium has come at a crucial time. DeMarco has spent much of the past two years nursing the coronavirus patients in intensive care units across the country. The work was grueling, he said, and the last thing he needed was to worry about his loans.
“The prospect of having debt wiped out, especially after risking my life on the front line…it would be life changing,” DeMarco said. “Ten thousand may not seem like a lot with what I have, but it would help.”
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At an event hosted by the Bipartisan Policy Center on Monday, Education Undersecretary James Kvaal acknowledged that large-scale debt cancellation would help many borrowers. “At the same time,” he added, “and I think students and other broad-based advocates will tell you, we also need permanent solutions.”
Higher education experts fear that delaying an annulment decision could hamper other policy priorities of the Department for Education.
For example, the administration plans to help 7.5 million people get out of default on their federal student loans, sparing them from garnishment of wages, tax refunds and Social Security benefits. Sarah Sattelmeyer, higher education project director at the New America think tank, said the department should have a clear accounting of its delinquent loan portfolio when designing the initiative, dubbed Fresh Start.
“We need to know what’s happening with the cancellation before we can execute this policy,” Sattelmeyer said. “Whether [Biden] writes off $10,000 of debt, which wipes out about half of the default portfolio. That would make Fresh Start a very different program to do.
She also worries that dragging out a cancellation announcement could further erode borrower confidence, especially as the Biden administration seeks to reform the federal student loan system.
“If you rebuild a system and ask people to believe in it, that is detrimental,” Sattelmeyer said.
Sarah Lippitt, 36, of Tucson, said she waived the possibility of an annulment, skeptical of the president’s commitment to politics. She started coming back after seeing articles about the White House examining Biden’s leverage or weighing restrictions. His hope, however, turns to pessimism.
“It’s been difficult because they keep coming and going, and every few months they talk about it. I don’t know if they’re doing it to light up the base…but at this point I’m not very optimistic,” said Lippitt, an account manager at a nonprofit charity that owes $40,000 in loans. students.
Lippitt was also frustrated with the chain of last-minute extensions of the payment break by the Biden administration. Although she is grateful for the reprieve, she said, the uncertainty has left her in financial limbo.
“I know I get this $450 payment every month and it changes our family’s budget, what we’re going to spend, what we’re going to save,” Lippitt said. “Every time I think they’re going to reinstate it and there’s another break at the last minute, it makes planning very difficult.”
This week, Education Secretary Miguel Cardona signaled that another extension could be on the table. Sen. Jeanne Shaheen (DN.H.) questioned Cardona on Tuesday about the end of the moratorium, during a Senate Appropriations subcommittee hearing on the Department of Education’s fiscal year 2023 budget request.
“I have no further information to share with you. … I know we have a date, and it might be extended,” Cardona told lawmakers. “Borrowers will be given adequate notice.”
Abrams of the Student Debt Crisis Center is skeptical. She said Biden’s track record of keeping borrowers in the dark until the last minute doesn’t inspire confidence whether it’s a decision on moratorium or debt cancellation .
Biden “has created unnecessary confusion and stress for many families,” Abrams said. “Borrowers need to know what their future holds as soon as possible.”