President Biden has hinted that he is considering relieving at least some of the $1.7 trillion in debt owed to the federal government by more than 40 million student borrowers. However, with the final proposal still pending, the feasibility of this approach has been questioned by Ministry of Education officials and higher education experts.

Concerns have also been raised about the long-term implications of debt relief, including the need to reform the country’s highly complex student loan and service programs and system.

“It seems increasingly clear that the Biden administration intends to announce some sort of loan cancellation or forgiveness effort, but there is absolutely no information available to help people understand. even the most basic elements of what such a policy would look like,” Terry Hartle said. , senior vice president of the American Council on Education. “There is a lot of confusion and uncertainty about what could happen.”

As the current pause on student loan repayments expires in September, weeks before the midterm elections, the Biden administration has yet to make a move on one of its central campaign promises: to ease the minus $10,000 in student debt per borrower. Facing mounting political pressure from fellow Democrats and voters, Biden has indicated he is likely to announce some sort of pardon plan in the coming weeks.

Student debt cancellation has since become highly politicized, with Democrats saying the relief is a necessary measure for post-pandemic economic recovery and Republicans, on the other hand, saying the cancellation is an unnecessary use of federal resources that will give an unfair advantage to the wealthy and hurt the working class.

What Biden has done so far

According to the Department of Education, since last January, the Biden administration has forgiven about $18.5 billion in student loan debt to more than 750,000 borrowers through programs such as the Public Loan Forgiveness Program. students, cancellation of student debt for people with total and permanent disabilities and cancellation. for students who attended the now-closed, for-profit ITT Technical Institutes.

The pandemic-era pause on student loan repayments, with 0% interest accrual, has been extended four times since Biden took office. The decision provided temporary relief to borrowers with federal debt throughout the COVID-19 pandemic. The break is due to expire on August 31.

Additionally, changes that expanded qualification for the 2007 PSLF program under the Biden administration helped pardon more than 100,000 borrowers, according to Department of Education data. This policy allows certain borrowers working in nonprofit and government jobs to have their federal debt wiped off after 10 years of service or 120 monthly payments.

The administration also made changes to the income-based repayment plan and Pay As You Earn to allow some borrowers to qualify for a discount after 20 to 25 years of payment. These programs both use an income-based formula to make student loan repayments more manageable and affordable. The Ministry of Education estimated that this plan would automatically cancel the debt of at least 40,000 borrowers.

Income limits?

As the end date for the payment break approaches, progressive Democrats, including Senators Chuck Schumer of New York, Elizabeth Warren of Massachusetts and Raphael Warnock of Georgia, want Biden to use his executive power to erase at least $50,000. of debt per borrower. However, the administration said that figure is likely off the table, and reports of The Washington Post said the administration is considering implementing a discount with an income cap that could exclude borrowers who earn more than $125,000 to $150,000 a year.

According to Policy, several Ministry of Education officials said that means-tested pardons could pose several problems due to the ministry’s lack of access to the income data needed to provide automatic pardons. Annual income data is collected by the Internal Revenue Service through tax information. The Department of Education does not have access to this information under applicable law.

Therefore, an income-driven approach would likely require an application process, where borrowers provide proof of income. The department and higher education experts have expressed concerns that this approach could create a confusing bureaucratic system for borrowers.

Braxton Brewington, press secretary for the Debt Collective, an organization representing debtors, said low-income borrowers could be disproportionately excluded from means-tested schemes because they are less likely than wealthier people to file their taxes .

“Creating red tape is just going to be a disaster for those, especially it’s going to be the biggest disaster for low-income people,” Brewington said. “Irony [of] means testing, cancellation, and enforcement programs means the people you’re supposed to target will be excluded.

Brewington said the automatic relief with no income limit would allow more borrowers to take advantage of the forgiveness without bureaucratic barriers.

Additionally, the lack of communication between borrowers and the Department of Education has led to confusion over what borrowers are currently eligible for under existing rebate plans, which experts say will likely be exacerbated by the discount expansion.

A report released by the US Government Accountability Office) in March found that 11% of those who were eligible for loan forgiveness under the income-based repayment plan had not yet applied. According to the report, the Ministry of Education cited data limitations and lack of communication with borrowers as the main source of difficulty in identifying eligible borrowers.

According to a January study by the Education Data Initiative, only 6.7% of eligible student borrowers apply for loan forgiveness.

Several experts said the lack of communication between the Ministry of Education and student loan providers has been going on for a long time. Scott Buchanan, executive director of the Student Loan Servicing Center, which represents public and private student loan providers, cited the lack of guidance to providers from the Department of Education, which he said made it difficult for centers to connect loan to borrowers. with the relief to which they might be entitled in the face of a complex borrowing system.

“It’s going to be really difficult to do that. Anyone who says something easy in this program hasn’t been there for a minute. It’s incredibly complicated to deliver any of these benefits,” Buchanan said. “Especially when you make these kinds of big programmatic changes and you don’t have time to plan it, but try to do it quickly, you’re going to screw it up.”

Concerns have also been raised about the Department of Education’s ability to handle an influx of paperwork if an application process is needed for loan forgiveness. According to Policythe Department of Education has already struggled to serve borrowers during federal loan repayment freezes due to staff cuts.

“The Ministry of Education is the largest consumer bank in the country. The problem is they weren’t staffed like a bank,” Buchanan said.

A spokesman for the Ministry of Education said Inside Higher Education“The ministry’s review of large-scale debt cancellation is still ongoing.”

The need for reform

Many higher education officials have said that while the forgiveness will bring temporary relief to borrowers, broad reforms are needed to simplify student loan programs and address administrative issues to increase transparency between borrowers, the Ministry of Education and loan officers.

“The absence of the conversation has something to do with how we’re going to reform the system so that we’re not back in that exact same position in a year, five years or 10 years from now,” said Justin Draeger, President and CEO of the National Association of Student Financial Aid Administrators. “Forgiveness without student loan reform would be a pretty big mistake.”

“I think this kind of targeted relief is needed sooner rather than later, but if we’re looking at blanket debt forgiveness, doing so without coming up with a comprehensive package of solutions on student loan reform strikes me as politically expedient but stupid” , he continued.

The reforms cited include simplifying student loan repayment so that borrowers can better decide which plan is best for them.