Delaying retirement, putting off buying a home and having children, and losing faith in the promise of higher education: These are some of the consequences borrowers told Department of Education officials they face because of their student debt.
The borrowers shared their experiences with student loans as part of a virtual hearing Tuesday, kicking off the regulatory process for the Biden administration’s second attempt at mass student-loan forgiveness.
In June, the Supreme Court struck down President Joe Biden’s plan to cancel up to $20,000 in student loans for borrowers earning less than $125,000. Hours after the court handed down its decision, Biden vowed to take another stab at mass student-debt forgiveness — but this second try will run through a process that takes at least several months. Tuesday’s hearing, which provided an opportunity for the public to submit comments, marked the first major step in that undertaking.
Many of the borrowers who spoke during the hearing Tuesday urged the Department of Education to use its authority to broadly cancel student debt.
“There have been many times where this debt has felt like an albatross around my neck combined with indentured servitude,” one borrower, who said his name was John Smith, told officials. He described how his original $65,000 student-loan balance had ballooned to roughly $99,000 after periods of job loss during the Great Recession, the pandemic and “longer periods of low pay.”
The borrower applauded the Biden administration’s new plan to cut down on borrowers’ monthly payments, saying it would help him afford his student-loan bill. Still, he said, “more action is necessary to ensure my fellow borrowers are able to be in a position where they can survive, where they can prosper.”
A preview of potential obstacles
In addition to borrowers’ stories, the hearing also provided a preview of the kind of obstacles the Biden administration might face in bringing a broad debt-cancellation policy to fruition. The debt-cancellation plan the Supreme Court struck down in June was based on the Department of Education’s authority under the HEROES Act, a 2003 law that allows the agency to waive or modify student loans in the case of a national emergency.
The Biden administration argued the HEROES Act gave the Secretary of Education the power to cancel student debt in response to the pandemic. But the court’s conservative majority said the debt-cancellation plan exceeded the power Congress granted the agency through the HEROES Act.
Biden’s second attempt at mass student-debt relief is grounded in the Higher Education Act. That law, which governs the federal student-loan program, allows the Department of Education to “compromise, waive or release” any right to collect on student loans. Advocates have urged the department for years to use that authority to cancel student debt.
During the hearing, some opponents of the Biden administration’s initial debt-relief plan reiterated their opposition to mass student-loan cancellation, calling it illegal. Mark Chenoweth, the president and general counsel of the New Civil Liberties Alliance, which has been backed by the conservative Charles Koch Foundation, said of mass debt relief that “such gratuitous conduct is simply not the prerogative of the executive.”
Karen Harned, the chief legal officer of the Job Creators Network’s legal-action fund, said the organization doesn’t believe in student-debt forgiveness “except in some extreme outlier situations.”
The Job Creators Network, an advocacy group founded by Bernard Marcus, the co-founder of Home Depot and a backer of former President Donald Trump, backed one of the lawsuits that made it to the Supreme Court challenging the Biden administration’s initial debt-forgiveness plan. The court’s justices threw out the suit in a unanimous decision, saying the plaintiffs — two student-loan borrowers who wouldn’t have received the full benefit of the debt-cancellation plan — lacked standing, meaning the right to sue over the policy.
“What the department is proposing today, we think, falls outside of the department’s statutory authority under the Higher Education Act,” Harned said Tuesday. She added that the rulemaking process “will result in more forgiveness that we think is illegal and once again will be challenged in the courts.”
Advocates ask department to move quickly
As part of this second attempt at loan forgiveness, the Biden administration is going through a process called negotiated rulemaking. In the coming weeks, the Department of Education will convene stakeholders to discuss the agency’s authority to cancel student debt under the Higher Education Act.
After those meetings, the department will release a proposed rule on debt cancellation. They’ll take feedback from the public and, after analyzing it, release a final rule. Courts likely won’t entertain any legal challenges to the plan until that process wraps up.
During the hearing Tuesday, advocates urged the department to consider including a diverse slate of borrowers at the negotiating table, including first-generation college students, borrowers with Parent PLUS loans and borrowers who never finished college. They also pushed the department to use as broad a reading as possible of its authority to cancel student debt under the Higher Education Act.
Braxton Brewington, the press secretary for the Debt Collective, a debtor activist organization that has been pushing for mass student-debt cancellation for more than a decade, called it “ridiculous … that borrowers should have to negotiate for debt relief with anyone.”
“All student debt should be canceled; none of it should exist; education should be a right, not a privilege,” he added.
Yael Shavit, the chief of the consumer-protection division for the Massachusetts attorney general’s office, said, “We encourage the department to recognize the secretary’s broad authority to cancel student debt under the Higher Education Act.”
That sentiment is based in large part on her office’s experience representing student-loan borrowers and witnessing “the suffering of countless individuals and families,” she said, and “the failures of the student-loan system” more broadly, which have resulted in borrowers facing obstacles when they try to access affordable repayment plans or debt forgiveness they’re entitled to under the law.
Advocates also asked the Department of Education to move quickly with its student-debt-cancellation plan, given that payments, interest and collections on student loans are scheduled to resume this fall after a more than three-year pause. Biden administration officials have said they’re moving as quickly as possible, but that it will take at least months for the negotiated-rulemaking process to play out.
“We are facing a disaster situation in which the student-loan system restarts for 40 million people without the relief that most of them are depending on and, frankly, feel that they deserve,” said Cody Hounanian, the executive director of the Student Debt Crisis Center, an advocacy organization. “We are urging you, the Department of Education, to take immediate action to cancel student-loan debt. That relief should be comprehensive, and it should be accessible to all.”
Struggles to afford housing, food as student-loan payments resume
Virginia Spindler shared with officials the challenges her family, which includes her husband and multiple daughters, will face when student-loan payments resume.
“We took a break from payments during the pandemic out of necessity — survival, in fact,” she said. “We celebrated every extension because we could breathe again,” she added, referencing the pandemic-era payment pause that was extended several times. “If payments resume, our family may have issues with housing and food.”
Spindler said during the hearing that her family has a combined $237,000 in student debt. It means that she and her husband, who are both in their mid-60s, will need to delay enjoying their golden years.
“At a time when most people are thinking of retirement, that won’t be possible for us,” Spindler said. “We will be paying on loans, it looks like.”
An undercurrent running through many borrowers’ comments was the way in which parents, counselors and the federal government pushed them toward higher education, while the promise of college these trusted sources touted remained elusive.
“What parents don’t want their children to graduate from a prestigious university?” Spindler said while describing how her family wound up with so much student-loan debt. “Though we were of modest means, we encouraged our youngest daughters to accept academic scholarships. … We sold our house to allow our daughters to go to school.”
During the pandemic, Spindler said, health challenges pushed her onto disability benefits and the family lost their savings. Now, in part because of their student debt, she and her husband can’t think about buying another home or getting a decent car.
“Families like ours are counting on help,” she said.
Manuel Galindo, an organizer with the Debt Collective working on debt in the criminal-justice system, told officials that education was a top priority for his parents, who immigrated from El Salvador in the late 1980s.
“My father who has my same name cannot read or write,” Galindo said. “My family instilled in me the need for education as a way to escape oppression.”
But as he went through college, Galindo said, he started to realize that “my parents’ dream of seeing me achieve a higher level of education was going to be tampered [with] by thousands and thousands of dollars of debt.”
Galindo, who said he has about $29,000 in student loans, urged the Biden administration to completely wipe out student debt. “Stop trying to stratify who deserves cancellation or not,” he said.
Salvatore Cottone, a rising junior at American University, expressed a similar sentiment. He said the Pell grant, which the federal government provides to low-income students to attend college, allowed him to “dream big.”
Still, even with those funds, he’s had to take on tens of thousands of dollars in federal student-loan debt. Recently, he’s grown concerned about how that debt could impact his future. Now he’s pushing the Biden administration to cancel student debt en masse.
“It is not just a financial decision,” he said. “It is an investment in the mental health of an entire generation.”
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