While progressive Democrats in Congress have yet to pass a universal education loan forgiveness bill, the Department of Education has nevertheless forgiven billions of dollars in federal student loan debt since Joe Biden became president. As well as without new statutory authority, the federal government is slated to forgive increasingly more education loan debt later on, because of the Biden administration's expansive interpretation of the Education Department's existing authorities, as well as a law signed by George W. Bush way back in 2007 that mandates loan forgiveness for certain borrowers.
Let's start with the federal student loan debt forgiveness for low-income and disabled borrowers, which the Department of Education says has erased \”$9.5 billion, affecting over 563,000 borrowers,\” since January 1, 2022. That sum stops working roughly as follows:
- $1.1 billion in federal student loan debt forgiveness for 115,000 borrowers under a policy called the \”extended closed school discharge.\” This course of action benefits former attendees of the now-shuttered for-profit college ITT Technical Institute who \”did not complete their degree or credential and left ITT on or after March 31, 2008.\”
- $1.5 billion in student loan debt forgiveness for 92,000 borrowers under \”borrower defense to repayment,\” that allows for the discharge of federal loans if borrowers can provide evidence their school \”misled\” them regarding their employment prospects or even the transferability of school credits, or maybe it mischaracterized loans as grants, or if the college \”engaged in other misconduct violating certain state laws.\”
- $7.1 billion in \”total and permanent disability discharges\” for borrowers who are considered disabled by the Social Security Administration. Based on the Education Department's website, \”this includes $5.8 billion in automatic student loan discharges to 323,000 borrowers and reinstating $1.3 billion in loan discharges for an additional 41,000 borrowers.\”
Yes, that looks like $9.7 billion. But there is likely some overlap between your groups.
There is also an interesting wrinkle towards the disability discharge announcement. The training Department pr release says that 98 percent of the 41,000 borrowers who're having their loan discharge reinstated initially lost their discharge simply because they \”did not submit the requested documentation, not because their earnings were too high.\” To prevent their discharges from being revoked in the future, \”the Department will indefinitely stop sending automatic requests for earnings information despite the nation's emergency ends. This continues an exercise the Department announced in March 2022 throughout the nation's emergency. Next, the Department will propose eliminating the [3-year] monitoring period entirely within the upcoming negotiated rulemaking which will come from October.\”
The above actions could be traced to the Biden administration's interpretation of a portion of the Advanced schooling Act of 1965 that authorizes the secretary of education to \”enforce, pay, compromise, waive, or release any right, title, claim, lien, or demand, however acquired, including any equity or any right of redemption.\” The training Department under President Mr . trump took a far more limited view of that authority, though it did use the law in an unprecedented way when it suspended payments and interest on federal student education loans at the onset of the COVID-19 pandemic. (Read my analysis of the debate over that authority here.)
Aside from individuals with disabilities and former attendees of for-profit colleges, a completely different type of federal student loan borrowers can also be receiving federal student loan forgiveness, thanks to George W. Bush and the College Cost Reduction and Access Act of 2007.
The College Cost Reduction and Access Act states that anyone with a Federal Direct Loan who makes 120 qualifying payments after October 1, 2007, while utilized by a nonpolitical 501(c)3 nonprofit or perhaps a government agency, will have the remainder of their direct loan forgiven within program called Public Service Loan Forgiveness. Regardless how large the loan is. In case your employer qualifies, your loan type qualifies, and also you make 120 payments on time, the remaining is forgiven without any taxes on the forgiven amount.
According to some Department of Education spokesperson,
From July 2022 through June 2022, the cumulative quantity of borrowers receiving Public Service Loan Forgiveness (PSLF) has increased from 2,860 to eight,334, and also the cumulative total amount forgiven has increased from $201 million to $756 million.
From July 2022 through June 2022, the cumulative number of borrowers receiving Temporary Expanded PSLF (TEPSLF) has grown from 1,943 to 3,724, and the cumulative total amount forgiven has increased from $83 million to $166 million.
While $756 million and $166 million are much less than $9.5 billion, the more important figure, vis a vis the larger debate over education loan forgiveness, is the per-borrower forgiveness amounts. Using the numbers listed above,
- beneficiaries of borrower defense and the closed school discharge have received, typically, $12,560 in federal debt forgiveness per borrower.
- disabled borrowers have obtained, typically, $19,505 in federal debt forgiveness per borrower
- TEPSLF beneficiaries have received, typically, $50,702 in federal debt forgiveness per borrower
- PSLF beneficiaries have obtained, on average, $90,712 in federal debt forgiveness per borrower.
Those latter numbers are why I believe PSLF (that is a nondiscretionary entitlement program) and, to a lesser extent, TEPSLF (that is constrained through the appropriations process) tend to be more significant to the larger education loan debate, even if for-profit attendees and disabled borrowers have snagged the majority of the headlines.
Given the high loan default rate among for-profit college borrowers and also the truly awful business practices of some for-profit colleges, those low-income borrowers really are a sympathetic group. While I have previously argued that creating education loan debt dischargeable in bankruptcy would significantly help toward properly aligning incentives and bringing down advanced schooling costs, discharging an undesirable person's federal student loan in bankruptcy has the same effect on the public fisc as forgiving it. Exactly the same argument pertains to the permanently disabled. With the federal government all but displacing the private education loan market during the last decade, bankruptcy versus forgiveness is really a distinction without a difference.
PSLF recipients are not nearly as sympathetic. They've good jobs in government and at nonprofits. They are well-educated. While some job types command significantly higher salaries in the for-profit world, many master's and bachelor's degree holders could make more in combined salary and benefits employed by the federal government. Terminal degree holders could make more in the private sector, but they are even the most highly compensated public sector workers.
The PSLF program, meanwhile, was created to ensure that all of these borrowers pay less than possible towards their principal balance by using \”income-driven repayment\” (IDR) rather than the standard 10-year repayment scheme. What this means is what you pay every month is really a small percentage of your income, rather than based on the life of your loan. For years, the Education Department has given presentations to educational funding administrators showing that PSLF is sensible only if you are using IDR, as there'd be no debt to forgive after Ten years of normal repayment. In addition, PSLF applicants received an added bonus from the Education Department throughout the pandemic: While all federal education loan payments and interest accumulation happen to be frozen since March 2022, and will also be through a minimum of January 2022, PSLF applicants reach count every month within this period like a qualifying payment even when they did not can even make a payment.
And while there are very few PSLF beneficiaries, there soon will be. When the very first cohort of borrowers reached eligibility on October 1, 2022, education loan watchers expected a flood of forgiveness. In July 2022, the Education Department published a request comment in the Federal Register proclaiming that \”to date, nearly 98 percent of student loan borrowers who've requested PSLF didn't receive forgiveness during the time of their application.\”
But the training Department is working, with the support of Democrats in Congress, to change that. From October 1, 2022, to April 1, 2022, $452.7 million in student loan forgiveness visited 5,467 approved PSLF applicants. Which comes to $82,804 per borrower. We're now up to 8,334 people, $756 million, and $90,712 in forgiveness per borrower.
Those first two numbers are virtually sure to increase. PSLF applicants should submit an application towards the Education Department annually, so that the department will easily notice borrowers whether their employer qualifies for PSLF and how many payments they've made toward forgiveness. The Education Department received 391,333 of these forms from November 2022 to April 2022. Of that number, 168,197 forms met the factors for PSLF.
So while student loan forgiveness to the worst-off borrowers might be commanding the headlines, America's white-collar government and nonprofit personnel are quietly obtaining a massive reprieve from the debt they took on to advance their careers. And more is probably on the way.
It's likely only a few time until millions of private-sector workers begin to wonder why you have to become poor or work with the federal government or perhaps a nonprofit in order to get your loans forgiven. And that we can partially thank George W. Bush for helping in order to increase that contradiction.
