Democrats want loan cancellation corrections
Congress created the Public Service Loan Forgiveness program in 2007 to cancel remaining student loan debt after borrowers have put in 10 years as public servants.
But many people have been unable to access this benefit due to complex rules, implementation failures and bureaucracy, the lawmakers say in a letter to Secretary Cardona.
Forgiveness approval rates through the program have been below 2.5% since the first round of relief became available more than three years ago, say the letter's signers, including Virginia Sen. Tim Kaine, New York Sen. Kirsten Gillibrand and Rep. John Sarbanes, of Maryland.
It’s anyone's guess when Biden will decide what to do about a broader proposal to forgive $50,000 in student loan debt per borrower. Cardona has been investigating whether the president has the power to do that.
In the meantime, the members of Congress want the Education Department to fix the existing loan cancellation program in four ways:
- Let all federal loans qualify. Certain federal student loan borrowers have been able to convert their loans, including Federal Family Education Loans, to seek public service loan forgiveness. But many borrowers miss the opportunity, the lawmakers say.
- Make all repayment plans eligible. At least 1.4 million borrowers are unknowingly enrolled in repayment plans that disqualify them from forgiveness, according to the members of Congress. A 2018 program to help borrowers in the wrong repayment plans has had low approval rates.
- Waive employment restrictions. Many public service workers lost their jobs due to the pandemic and are still out of work. When borrowers have completed their 10 years of service while repaying their student loans, they should still be eligible for forgiveness — even if they’re not currently in public-sector work, the legislators say.
- Borrowers should qualify automatically. Currently, borrowers must submit information about their employment to determine if they’re eligible for the program. The lawmakers want data-sharing agreements established to automatically identify public service workers with federal student loan debt.
Cardona has acknowledged that the system needs to be improved.
"We have to do more in the agency to make sure we’re providing pathways to affordability for our students," the secretary said during a recent House subcommittee hearing.
Calls for relief grow louder — and so do critics
Massachusetts Sen. Elizabeth Warren and several of her Democratic allies also have reached out to Cardona, demanding that his department take proactive steps to reach out to borrowers as the pandemic pause on loan payments and interest is set to end in September.
Biden’s $1.9 trillion coronavirus rescue bill that passed in March — the one that has provided $1,400 stimulus checks — included $91 million to be spent on outreach to student loan borrowers.
Warren says she wants to see the Education Department do more than just send "blanket emails and form letters." The senator has been one of the most outspoken champions of widespread student loan forgiveness.
A movement by students urging the president to cancel federal student loans by executive order also continues to grow. The number of signatures on a Change.org petition has gone well beyond 1 million.
But other voices are growing more skeptical.
This week, the editorial board of the Los Angeles Times questioned how a president could responsibly forgive $50,000 per borrower — at a cost of some $1 trillion — with just the stroke of a pen.
"A one-time payment to a specific group now would leave out many others who need help," the editorial says. "Consider the graduates who have paid off their loans but are far behind in trying to catch up financially. What about help for them?"
What to do if you need student debt relief ASAP?
If you've been patiently waiting for Biden to provide some relief from student loan debt but aren't convinced it'll happen, consider other options to gain some financial wiggle room.
First, you could look into refinancing your student loans. Interest rates on private student loans have hit record lows, so refinancing could cut your payment substantially.
But refinancing out of a government loan would disqualify you from federal relief, if it ever does come.
Interest rates on mortgages have tumbled, too. If you own your home, you could consider refinancing your mortgage into a cheaper rate. Some 13 million homeowners still have an opportunity to save an average $283 through a refi, the mortgage technology and data company Black Knight recently said.
Finally, check out ways to grow your income without stretching your budget. One popular app helps you earn returns in the stock market simply by investing your "spare change."