In early July, President Joe Biden’s US Department of Education forgave nearly $ 56 million in student loan debt for some 1,800 borrowers, bringing the administration’s total to about $ 1.5 billion written off.
While this is a victory for many borrowers, it’s not a sign that large-scale student debt cancellation will necessarily come anytime soon, experts say.
This is because the last round of debt cancellation was specifically carried out as part of the “borrower repayment defense” program. The Borrower Defense was created to protect people from scams by schools engaging in wrongdoing or breaking certain laws, such as falsely claiming guaranteed employment or falsely telling students that credits would be transferred to other colleges.
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It is separate from the Biden administration’s efforts to determine whether the president can legally write off student loan debt by executive order.
“These are apples and oranges,” said Betsy Mayotte, president and founder of The Institute of Student Loan Advisors, a nonprofit organization.
Play catch up
Yet headlines about canceled student loan debts have surfaced in recent months, adding to the confusion and excitement of borrowers. There has been a slight increase in canceled loans by borrower defense lately because the Biden administration is making up for lost time, according to Mayotte.
The updated program rules were supposed to come into effect under former President Donald Trump, but have been delayed. Then, the old administration issued its own regulations in July 2020, months before Trump stepped down.
“They made it almost impossible for anyone to get help and put all pending requests on hold or blocked,” Mayotte said.
That changed when Biden took office in 2021. He relaunched the program and extended assistance to nearly 92,000 borrowers in just a few months, according to the Ministry of Education.
“There is a catching up going on on this front, and it is likely to continue,” said David Bergeron, a higher education expert who served as Acting Assistant Secretary for Postsecondary Education and Assistant Assistant Secretary for Policy, the planning and innovation. in the United States Department of Education during the Obama administration.
What’s next for a general student loan forgiveness
Of course, the Biden administration is still working on a larger forgiveness of student loan debt that would help millions of people struggling with repayment.
Currently, Biden is awaiting a note from Department of Education officials that will outline their thoughts on the legality of the president forgiving student loan debt through executive action.
“The government is working throughout the process to get it done the right way,” said Will Sealy, co-founder and CEO of Summer, a company that helps borrowers simplify and save on student debt.
If Biden cancels some of the student loan debt through executive action, it is likely to be challenged in court and could lead to more problems for borrowers if not confirmed. , according to Mayotte.
“I understand why he doesn’t go ahead with the executive order until he’s sure that if challenged he would win,” she said of Biden’s reluctance to go ahead on debt cancellation by itself.
Even though some lawmakers such as Senate Majority Leader Chuck Schumer, DN.Y., and Senator Elizabeth Warren, D-Mass., Have asserted that the president can legally write off student loan debt by executive order, all experts are not so sure and want to minimize the potential damage to borrowers.
“The biggest risk for borrowers is that they are thrown into this legal black hole,” Bergeron said.
If the Education Department does not believe Biden has the legal authority to cancel loans through an executive order, such a move will need to be approved by Congress, he said.
In the meantime, borrowers should be aware that loan repayments are expected to resume on October 1 after being suspended for more than a year. This means people have to prepare to make monthly payments again, and if they’ve had a significant change in income, consider applying for an income-based repayment plan, Sealy said.
And, according to Sealy, people who were previously in such a plan will need to recertify. Starting this process as soon as possible is the best way to avoid any delays as millions of borrowers return to repayment, he said.
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