Policymakers, pundits and courts have debated the legality of student-debt forgiveness over the past few years. But amid the back-and-forth, the Biden administration has moved forward with canceling billions in student loans.
This debt forgiveness is distinct from the plan President Joe Biden announced last year to cancel up to $20,000 in student debt for a wide swath of borrowers. The Supreme Court’s conservative majority struck that effort down earlier this year, saying the Department of Education had exceeded its executive authority in authorizing the relief. If it had gone through, that debt relief would have been an entirely new program.
By contrast, the roughly $127 billion in debt cancellation for 3.6 million borrowers that the Biden administration has announced so far is authorized under laws that existed before Biden came into office. Advocates and borrowers had complained for years that often under these programs forgiveness was so rare that it was essentially only available in theory.
What the Biden administration is doing through its efforts, which officials have called “targeted” debt relief, is smoothing out the path for borrowers to access this forgiveness they were already entitled to under the law. It’s still a drop in the ocean compared to the $1.7 trillion of student debt outstanding, but for those who receive the debt relief, these cancellations can be life-changing.
In many cases, borrowers have waited years to have their debt wiped away; some borrowers who have been promised debt forgiveness through these announcements are still waiting to have their debt canceled — though it remains unclear exactly how many.
Still, by pushing forward with the debt relief Biden and his administration have acted differently than officials in previous administrations, said Mike Pierce, the executive director of the Student Borrower Protection Center, an advocacy group. They “really took seriously” the promises that the law made to student loan borrowers.
Officials “recognized that they weren’t being kept and took extraordinary actions to actually deliver debt relief,” Pierce said. “It’s the government keeping its promises in a way that it hasn’t in the past, which is very different from putting in place a new debt relief program.”
Right now the Biden administration is in the midst of taking a second stab at broad-based debt cancellation.
Some borrowers still waiting on relief
Despite the wide swath of borrowers who have received life-changing relief through these efforts, there are still challenges. For one, some borrowers have received information from the Department of Education indicating their debt has been canceled, but their balances haven’t been wiped away. In other cases, borrowers who at least appear to meet all of the qualifications for relief under these programs are waiting for paperwork to go through, attorneys and advocates say.
A significant portion of the $127 billion in debt relief has been carried out, but it remains unclear exactly how many of the 3.6 million borrowers who were promised relief have actually had their debt wiped out, Pierce said.
The Department of Education didn’t immediately provide details on how many borrowers who are part of the announcements have had their loans discharged.
“We know that there are borrowers out there who have done everything right and have been told that their debts are going to be canceled, but are nonetheless getting student-loan bills.”
Are you waiting on promised student debt forgiveness? We want to hear from you. Email [email protected].
Both the Department of Education and servicers have noted that funding challenges have made many servicing functions difficult, which could include processing discharges. Congress didn’t provide the Department of Education with its full funding request, which means that the agency and servicers are operating with less money than is needed to operate efficiently. In response, servicers have cut staff and call center hours.
In the meantime, the Department has taken steps to hold borrowers harmless in situations where delays in paperwork processing are impeding their access to benefits. The agency has directed servicers to put borrowers in a type of administrative forbearance where interest doesn’t accrue and time in this status counts towards various forgiveness programs.
Here are the categories of borrowers who have been part of these announcements:
Borrower defense and closed school discharge:
The largest number of borrowers who have received relief under the Biden administration’s initiatives are those who were scammed by their schools or attended schools that closed suddenly. So far, the Biden administration has announced $22.5 billion in relief for 1.3 million borrowers in this category.
Federal student loan borrowers have had the right to have their debt canceled in cases where their schools misled them since the 1990s. But the law, known as borrower defense to repayment, was rarely used until 2015. That year, former for-profit college students, organized by activists, began clamoring for relief in the wake of the collapse of Corinthian Colleges, a major for-profit college chain.
The Obama administration created a process aimed at streamlining borrower defense applications. During the Trump administration, progress on these applications essentially stalled and officials faced lawsuits over the delays. Over the course of the Biden administration officials have made several announcements cancelling the debt en masse of borrowers who attended certain schools accused of wrongdoing, like Corinthian.
In addition, the Department of Education agreed to settle a class-action lawsuit that will provide at least $6 billion in relief to borrowers. Under the deal, borrowers who filed a borrower defense claim are entitled to have their debt canceled if they attended certain for-profit colleges where the Department found a “strong indicia regarding substantial misconduct.”
“The implementation of these discharges has been somewhat slow,” said Eileen Connor, the president and director of the Project on Predatory Student Lending, referring to announced cancellations for borrowers who were scammed by their schools. Connor is representing borrowers covered by the class action settlement and works with former for-profit college students impacted by multiple debt relief announcements.
“Probably just doing so much all at once is tough,” Connor said. In addition to implementing all of these debt relief programs, the student loan system is in the midst of returning an unprecedented 28 million borrowers to repayment after a three-year pause and launching a new repayment plan.
“Once you make a policy determination the work isn’t done, you have to still follow through with it,” she said. “Historically it has been and clearly remains an issue in the student loan system, where it really is the devil is in the details.”
A fix to income-driven repayment:
The student loan system offers a safety-valve of sorts for borrowers who fall on hard times. Under this program, called income-driven repayment, borrowers make monthly payments on their debt that are based on their income, not their balance. After 20 or 25 years of making these payments, which are meant to be more affordable than payments borrowers would make under a mortgage-style plan, borrowers are supposed to have the remainder of their debt canceled.
The problem: For years, the debt relief at the end of those programs didn’t appear to be happening. As of 2021, 2 million Americans had been paying their student loans for at least 20 years. That, advocates said, was in large part because servicers steered borrowers towards forbearance, a status where payments are paused, but that doesn’t count towards the number of payments required for debt forgiveness.
In 2022, the Department of Education announced it had found that servicers had placed borrowers into forbearance in violation of the agency’s rules, jeopardizing their progress towards forgiveness. The agency also said it would review borrowers’ accounts to see if they were inappropriately placed in forbearance and adjust their accounts so those periods count towards forgiveness.
So far, those adjustments have resulted in more than 855,000 borrowers receiving nearly $42 billion in relief.
Some borrowers need to take action before the end of the year to be eligible for the account adjustment. Borrowers with commercially-held Family Federal Education Loans need to consolidate their debt into direct loans before December 31, 2023 to get access to relief under the income-driven repayment fix.
Public Service Loan Forgiveness:
Under this program federal student loan borrowers working for the government and certain nonprofits are entitled to have their debt canceled after at least 10 years of payments.
But during the first few years borrowers were eligible for debt cancellation under the initiative, few were actually able to access relief due to paperwork challenges and technicalities. In some cases borrowers were in ineligible repayment plans. In other cases, they had federal student loans, but a certain type of federal student loan that was ineligible for PSLF.
The Biden administration aimed to address this primarily through two initiatives. So far, these efforts have resulted in announced relief for roughly 715,000 borrowers totaling $51 billion.
One was a waiver officials announced in 2021 that allowed borrowers to have certain types of payments count towards PSLF that had typically been excluded. These included payments made in ineligible repayment plans or payments that borrowers made slightly before or after their due date. The waiver period ended in October of 2022.
Still, many borrowers who would have benefited from the waiver will get additional credit towards PSLF as part of the income-driven repayment account adjustment. As part of that review, officials are adjusting accounts so eligible borrowers receive credit towards Public Service Loan Forgiveness that should have previously been counted.
Borrowers who have federal family education loans need to consolidate their debt into direct loans before the end of the year to be eligible for these adjustments.
Total and permanent disability discharge:
Borrowers who have a disability that is so severe they won’t be able to work again are entitled to have their federal student loans forgiven. But for years, many borrowers struggled to gather the paperwork necessary — for example, a doctor’s note certifying the extent of their disability — to access relief.
In some cases, borrowers with a disability were having their Social Security Disability benefits garnished over defaulted student loans. In 2021, the Biden administration announced that it would employ a data match with the Social Security Administration that would identify borrowers eligible for a discharge. Because it administers disability benefits, the Social Security Administration has access to the information that would indicate whether a borrower qualifies for debt relief.
So far, this data match has resulted in announced discharges for 513,000 borrowers totalling $11.7 billion.
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