- Handful of student-loan borrowers got debt wiped out in court since reforms Business Insider
- If you can’t afford your federal student loan bills, you’ve got a 12-month grace period if you don’t pay. Here’s what that means Fortune
- The Stock Market Is No Fun When Student Loan Payments Are About to Restart The Wall Street Journal
- Borrowers Face Major Problems As Student Loan Payments Resume In Weeks Forbes
- Student Loans Payment Resume: Key dates you must consider now that student loan payments are restarting Marca English
- View Full Coverage on Google News
Tag Archives: StudentLoan
The Student-Loan Freeze Is Ending. Prepare to Pay Up. – The Wall Street Journal
- The Student-Loan Freeze Is Ending. Prepare to Pay Up. The Wall Street Journal
- As the Student Loan Payment Pause Ends, Here’s What to Know The New York Times
- Debt ceiling vote could lead to return of student loan repayment NBC4 Columbus
- ‘Cruel and reckless’: Student loan payments are set to resume shortly as part of President Biden’s debt deal — but experts warn it could push Americans off a ‘student loan cliff’ Yahoo Finance
- How to prepare for the end of the student loan payment pause KENS 5: Your San Antonio News Source
- View Full Coverage on Google News
2,600 student-loan borrowers to get $11 million in debt relief: CFPB – Business Insider
- 2,600 student-loan borrowers to get $11 million in debt relief: CFPB Business Insider
- CFPB Orders Repeat Offender Portfolio Recovery Associates to Pay More Than $24 Million for Continued Illegal Debt Collection Practices and Consumer Reporting Violations Consumer Financial Protection Bureau
- CFPB orders Portfolio Recovery Associates to pay $24 million American Banker
- Portfolio Recovery Associates Under Fire for Misconduct Bankrate.com
- U.S. watchdog orders Virginia debt collector to pay $24 million for illegal practices Yahoo Canada Finance
- View Full Coverage on Google News
Student-Loan Borrowers With Spousal Debt Blocked From Forgiveness
- Law prohibits student-loan borrowers with spousal loans to separate them into direct loans.
- This blocks them from qualifying for Biden’s debt cancellation of $10,000 to $20,000 for federal borrowers.
- A bill recently passed the Senate that would allow those borrowers to separate their loans.
Millions of federal student-loan borrowers will soon see up to $20,000 cut from their debt balances — but a small group that consolidated their debt decades ago are out of luck.
In 2006, Congress shuttered the spousal joint consolidation loan program, which allowed married couples to combine their student debt balances with the idea that a single monthly payment with one interest rate would be more affordable.
But under current law, the separation of those loans is prohibited, meaning that if a couple divorces — or even in the case of domestic violence — both borrowers have to continue paying off the debt together.
That’s particularly prohibitive following President Joe Biden’s recent announcement of up to $20,000 in student-loan forgiveness for federal borrowers making under $125,000 a year. Only borrowers with federally-held loans are eligible for the one-time broad relief. While borrowers with some privately-held federal loans — like those in the FFEL program — can consolidate their balance into direct student loans to access the debt cancellation, borrowers with spousal loans cannot separate their loans, and therefore, are blocked from Biden’s loan forgiveness.
An FAQ on debt relief posted to studentaid.gov emphasized that “FFEL Joint Consolidation Loans, often referred to as spousal consolidation loans, are not eligible for consolidation into the Direct Loan program under current law.”
Federal borrowers will have until December 2023 to apply for Biden’s loan forgiveness through a form that will become live in early October, so it’s up to Congress to pass a law before then that would allow for the separation of those loans for the 776 borrowers who still have them.
Virginia Sen. Mark Warner sponsored the Joint Consolidation Loan Separation Act of 2021, which would allow borrowers to separate their spousal loans. It passed the Senate in June, and is now sitting in the House awaiting final passage. But not only is the broad student-loan forgiveness deadline weighing on those borrowers — those who are also public servants are in an even bigger time crunch to separate their loans.
Last year, the Education Department announced reforms to the Public Service Loan Forgiveness (PSLF) program, which is intended to forgive student debt for government and nonprofit workers after ten years of qualifying payments. Included in the reforms was a temporary waiver through October 31, 2022 that would allow any past payments to count toward forgiveness progress, including those previously deemed ineligible — but in order to qualify, the loan type must be a direct federal loan. Since spousal loan borrowers cannot separate their loans to consolidate them, they currently cannot benefit from the PSLF waiver expiring in under two months.
Insider previously spoke to Russell Case, a borrower who consolidated his loans with his wife but was not aware doing so would block him from PSLF relief.
“I understand people need to pay back their debt. I get that part,” Case said. “But if the government promises debt forgiveness for public servants after ten years, and we find out after the fact our loans don’t qualify, that’s my biggest problem.”
Biden’s Half-Trillion-Dollar Student-Loan Forgiveness Coup
President Joe Biden announces a federal student loan relief plan that includes forgiving up to $20,000 for some borrowers and extending the payment freeze at the White House on Aug. 24.
Photo:
Bonnie Cash – Pool via CNP/Zuma Press
Well, he did it. Waving his baronial wand, President Biden on Wednesday canceled student debt for some 40 million borrowers on no authority but his own. This is easily the worst domestic decision of his Presidency and makes chumps of Congress and every American who repaid loans or didn’t go to college.
The President who never says no to the left did their bidding again with this act of executive law-making, er, breaking. The government will cancel $10,000 for borrowers making less than $125,000 a year and $20,000 for those who received Pell grants. The Administration estimates that about 27 million will be eligible for up to $20,000 in forgiveness, and some 20 million will see their balances erased.
But there’s much more. Mr. Biden is also extending loan forbearance for another four months even as unemployment among college grads is at a near record low 2%. Congress’s Cares Act deferred payments and waived interest through September 2020, but
Donald Trump
and Joe Biden have extended the pause for what will now be nearly three years.
The Administration is claiming, again, that this will be the last extension and is needed to help borrowers prepare to resume payments. But even if the Administration lets the forbearance end in December, about half of borrowers won’t have to make payments since their debt will be canceled.
Most of the rest will only make de minimis payments because Mr. Biden is also sweetening the income-based repayment plans that Barack
Obama
expanded by fiat. Borrowers currently pay only up to 10% of discretionary income each month and can discharge their remaining debt after 20 years (10 if they work in “public service”).
Democrats said these plans would reduce defaults. They haven’t. Federal student debt has ballooned because many borrowers don’t make enough to cover interest and principal payments, so their balances expand. Student debt has nearly doubled since 2011 to $1.6 trillion, though the number of borrowers has increased by only 18%.
Now Mr. Biden is cutting undergrad payments to a mere 5% of discretionary income. The government will also cover unpaid monthly interest for borrowers so their balances won’t grow even if they aren’t paying a penny. This will mask the cost to taxpayers of the Administration’s rolling loan write-off. Student-loan debt won’t appear to swell even as it does. What a fabulous accounting trick.
The Penn Wharton Budget Model estimates that canceling $10,000 for borrowers earning up to $125,000 will cost about $300 billion. The Pell grant addition could increase this by as much as $270 billion. The four-month freeze on payments will cost $20 billion on top of the roughly $115 billion it already has.
The payment plan revisions could eventually add hundreds of billions of dollars more. An analysis commissioned by the Trump Education Department estimated that taxpayers would lose $435 billion on federal student loans, largely because borrowers in these payment plans on average were expected to repay only half of their balances. Now they will repay even less.
Worse than the cost is the moral hazard and awful precedent this sets. Those who will pay for this write-off are the tens of millions of Americans who didn’t go to college, or repaid their debt, or skimped and saved to pay for college, or chose lower-cost schools to avoid a debt trap. This is a college graduate bailout paid for by plumbers and
FedEx
drivers.
Colleges will also capitalize by raising tuition to capture the write-off windfall. A White House fact sheet hilariously says that colleges will “have an obligation to keep prices reasonable and ensure borrowers get value for their investments, not debt they cannot afford.” Only a fool could believe colleges will do this.
***
It’s important to appreciate that there has never been an executive action of this costly magnitude in peacetime. Not Mr. Obama’s immigration amnesties, not his Clean Power Plan, not Mr. Trump’s border-wall fund diversion. Nothing comes close to this half-trillion-dollar or more executive coup.
Congress authorized none of Mr. Biden’s loan relief and appropriated no funds for it. Progressives say the Higher Education Act of 1965 lets the Education Secretary “compromise” (i.e., modify) student debt. But the Federal Claims Collection Act of 1966 sets very limited terms and strict procedures for such “compromise.”
Even Mr. Biden said in December 2020 it was “pretty questionable” whether he had authority to cancel debt this way. The Supreme Court recently underscored in West Virginia v. EPAthat Congress must provide clear authorization to agencies taking action on major questions. Canceling so much debt is beyond major to a mega-ultra-super question.
With the cancellation precedent, progressives will return to this vote-buying exercise every election year. The only antidote will be if Democrats conclude this gambit boomeranged politically by mobilizing an opposition coalition of Americans who are tired of being played for saps by progressives. The test arrives in November.
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Appeared in the August 25, 2022, print edition as ‘A Half-Trillion-Dollar Executive Coup.’
Biden Planning Student-Loan Announcement Wednesday
White House officials are planning for President Biden to make an announcement on Wednesday about his proposal for dealing with student-loan debt, according to people familiar with the matter.
The president and his senior aides have for months been weighing whether to cancel some federal student loan debt. Mr. Biden’s top advisers have discussed several proposals, including eliminating $10,000 in federal student-loan debt for borrowers making less than $125,000 a year, the people said.
The White House has kept the details of the decision closely guarded. Only a small group of Mr. Biden’s top aides have been informed of his plans, some of the people said.
As of Tuesday evening, senior Biden administration officials were still ironing out the details of the announcement, according to some of the people familiar with the discussions. Those people said they expected Mr. Biden to opt for $10,000 in debt cancellation with a $125,000-a-year income cap, but cautioned that those figures could change.
The president is also expected to extend a pandemic pause on federal student-loan payments.
Mr. Biden is scheduled to return to the White House on Wednesday from Delaware, where he is on vacation with his family. The president has said he would announce a decision on student loans by Aug. 31.
The White House declined to comment on the specific timing of the announcement or provide further details. A spokesman reiterated that the president would make his decision before the end of the month.
A move to forgive $10,000 in student debt under certain income thresholds would fall short of progressive Democratic demands for full student-debt cancellation or for canceling $50,000 per borrower, but it could apply to the majority of the 40 million people who hold a total of $1.6 trillion in student-loan debt.
Mr. Biden spoke by phone on Tuesday night with Senate Majority Leader
Chuck Schumer
(D., N.Y.) to discuss the issue, and he separately held a joint call with Sens. Elizabeth Warren of Massachusetts and Raphael Warnock of Georgia, according to people with knowledge of the conversations. All three Democrats have been encouraging Mr. Biden to forgive student debt.
Republicans have opposed broad student-debt forgiveness, saying such a move would be unfair to those who have already paid off their loans or never went to college, and could worsen inflation.
A report released Tuesday from the Penn Wharton Budget Model estimated that a one time maximum debt forgiveness of $10,000 per borrower with incomes of less than $125,000 a year would cost around $300 billion.
Last month, more than 100 Democratic senators and House members from across the party’s ideological spectrum asked Mr. Biden to extend the loan-payment pause beyond its Aug. 31 expiration, citing continued economic hardships. Mr. Biden cited similar reasoning for extending the pause previously, most recently in April.
“Resuming student loan payments would force millions of borrowers to choose between paying their federal student loans or putting a roof over their heads, food on the table, or paying for child care and healthcare,” the Democratic members wrote.
Republicans have opposed continuing the pause, arguing that it constitutes “de facto loan forgiveness.” Senior House Republicans unveiled a bill this month that would end the pause, as well as overhaul other aspects of the federal student-loan portfolio. The bill isn’t expected to go anywhere while Democrats control Congress and the White House.
The White House has left borrowers, loan servicing contractors and the Education Department itself in limbo as Mr. Biden mulled whether to extend the pause. Last month, the administration told loan servicers to refrain from sending out billing notices or other communications related to restarting payments.
Loan servicers are contracted by the federal government to manage student loan payments. They communicate with borrowers about how much they owe, where and how to send payments, and answer questions borrowers have about repayment programs. Typically, they send out billing notices at least 30 days prior to payments starting up, so that borrowers can plan ahead.
On Monday, a group of loan servicers urged the administration to come to a decision, and said that any move this close to the deadline raised the chances of “incidents of borrower miscommunication,” according to a letter seen by The Wall Street Journal.
“You should be aware that any announcement at this late date, less than ten days before the scheduled resumption of September 1, risks operational disruptions,” wrote Scott Buchanan, the head of the Student Loan Servicing Alliance, an industry group.
Write to Andrew Restuccia at andrew.restuccia@wsj.com, Gabriel T. Rubin at gabriel.rubin@wsj.com and Tarini Parti at Tarini.Parti@wsj.com
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Student-Loan Borrowers Have ‘a Lot of Tools’ to Pay Off Debt: Betsy DeVos
- Former Education Secretary Betsy DeVos criticized Biden’s student-loan forgiveness plans.
- She said borrowers have plenty of options to pay back their debt without that relief.
- Biden’s administration has previously criticized DeVos over her handling of student loans.
A former US Secretary of Education hopes that President Joe Biden puts a halt to his student-loan forgiveness plans.
Betsy DeVos, who served in the Education Department under former President Donald Trump, told conservative podcast The Daily Signal on Tuesday that she didn’t think Trump had the authority to cancel student debt broadly, and she hopes Biden will “follow the law” and arrive at the same conclusion.
“When we talk about this notion of forgiving student loans, what we’re really talking about is benefiting those who don’t necessarily need it,” DeVos said. “And the ones who are going to be ultimately paying for it are those who’ve never attended college, who didn’t take out student loans, taxpayers who chose not to go to higher education and take out student loans, or frankly, many taxpayers who have gone, who have faithfully paid off their student loans.”
“And so, it’s a matter of fairness,” DeVos added. “It’s not fair to go and just give massive student loan forgiveness.”
Biden is reportedly considering forgiving $10,000 in student debt for federal borrowers making under $150,000 a year, and the announcement will likely happen close to when student-loan payments are set to resume after August 31. DeVos’ remarks on student-loan relief are similar to those of many Republican lawmakers who have slammed broad forgiveness, saying the policy would hurt the economy, cost taxpayers, and benefit those who need it the least.
DeVos also said that rather than forgiving student debt, “there’s a whole bunch of different income-based repayment plans” borrowers can use, along with the college scorecards that show potential costs and earnings for a particular field of study.
“So, there’s a lot of tools for students to use, and I would encourage all students to do that as they’re doing their due diligence,” DeVos said.
Income-driven repayment plans, though, have been flawed for decades. While the idea of the plans are to give borrowers affordable monthly payments based on their incomes with the promise of loan forgiveness after at least 20 years on repayment, an NPR investigation revealed in April that student-loan companies were failing to track payments borrowers made on the plans, pushing them far off the forgiveness route.
Biden’s Education Department has also criticized DeVos’ handling of the student-loan portfolio, particularly when it came to targeted student-loan relief for borrowers defrauded by for-profit schools. The relief, known as borrower defense to repayment, was supposed to discharge debt for those borrowers once they submit a claim, but DeVos ran up a huge backlog of those claims that resulted in a 99% denial rate.
Despite Republican pushback, many Democratic lawmakers are keeping pressure on Biden to go big on student-loan forgiveness to benefit those struggling the most. New York Rep. Alexandria Ocasio-Cortez wrote on Instagram over the weekend that “an arbitrary number” of relief won’t do.
“People get addicted to splitting things down the middle but there are policies where a halfway approach is kind of a waste as it’s not much better than nothing, and resources are better spent elsewhere,” she said. “We push so that people can actually experience the benefits of a policy.”
Student-Loan Processor Navient to Cancel $1.7 Billion of Debts
A former unit of student loan giant Sallie Mae said it would cancel $1.7 billion in private student debt for about 66,000 borrowers to resolve claims that it engaged in deceptive lending practices.
Navient Corp.
NAVI 0.37%
, a student loan servicer that split off from Sallie Mae in 2014, agreed to the sum in a settlement with 40 state attorneys general. The loans are private loans, so the losses will be covered by Navient’s investors rather than the federal government.
Nearly all the canceled loans originated at Sallie Mae from 2002 to 2010, at a time when student debt soared, on its way to becoming the second-highest form of household credit after mortgages. Sallie Mae was at the forefront of that boom, both as the biggest originator of private loans as well as the biggest lender under a federal program that guaranteed student loans.
The loans primarily went to borrowers with poor credit, and who attended schools with shaky records, including many for-profit schools, according to a website run by the settlement administrator. All of the loans forgiven in the agreement were in default.
“For too long, Navient contributed to the national student debt crisis by deceptively trapping thousands of students into more debt,” said New York Attorney General
Letitia James.
As part of the agreement, Navient continued to deny the claims or that the company has harmed any borrowers. “The company’s decision to resolve these matters, which were based on unfounded claims, allows us to avoid the additional burden, expense, time and distraction to prevail in court,” said
Mark Heleen,
Navient’s chief legal officer.
Navient has faced numerous lawsuits in recent years that alleged the company engaged in unfair and deceptive conduct against borrowers, including steering those with federal loans toward plans that would allow them to stop making payments but in which interest continued to accrue, rather than toward plans in which monthly payments are tied to borrowers’ income.
Last March, a Seattle-area judge ruled that the company had broken a consumer protection law in a case brought by Washington’s attorney general.
“Navient repeatedly and deliberately put profits ahead of its borrowers—it engaged in deceptive and abusive practices, targeted students who it knew would struggle to pay loans back and placed an unfair burden on people trying to improve their lives through education,” Pennsylvania Attorney General
Josh Shapiro
said.
The agreements resolve all six outstanding state lawsuits against Navient, the company said. As part of the settlement, the company will make a one-time payment of approximately $145 million to the states.
In addition to loan cancellation and some restitution for borrowers with private loans, Navient will pay $95 million to about 350,000 federal loan borrowers—or about $260 each—who were placed into certain types of forbearance programs that caused them to accumulate more debt rather than entering income-based repayment plans, the states said.
States will distribute restitution to borrowers within their jurisdictions. Massachusetts, for example, will receive more than $6 million, including $2.2 million in restitution for more than 8,300 federal loan borrowers, state Attorney General
Maura Healey
said.
Federal loan borrowers eligible for restitution will be notified by mail this spring, with checks going out in the middle of the year, according to the settlement administrator’s website. Private borrowers who qualify for discharge will be notified by July.
Private loans without federal backing make up less than 10% of the total $1.7 trillion student-loan industry. About 43 million people owe $1.6 trillion in federal student debt, Education Department data show. About 5.2 million of those federal borrowers are in default. Those borrowers, unless they also held private student loans, aren’t affected by Thursday’s settlement.
Navient recently announced its exit from federal student-loan processing. It had been one of the primary federal contractors, serving around six million borrowers. Its accounts were transferred to a new contractor,
Maximus,
whose role was approved by the Education Department.
The Education Department also has taken steps to forgive billions in debt held by disabled borrowers, as well as borrowers who went to institutions that federal regulators say practiced deceptive recruiting practices, such as ITT Technical Institute. The piecemeal moves have resulted in $11.5 billion in canceled debt for around 600,000 borrowers over President
Biden’s
first year in office. Student loan payments have been suspended by the government during the pandemic, with the latest extension now set to expire on May 1.
The Biden administration is in the midst of restructuring its student-loan processing system. In November it announced it was ending its relationship with private collection agencies that had been tasked with recovering payments from federal student-loan borrowers in default to improve collections and provide borrowers with more support.
The Consumer Financial Protection Bureau has been suing Navient since 2017 over allegations that it steered borrowers into postponing payments instead of entering lower-cost, income-driven repayment plans. The CFPB has said the practice cost borrowers $4 billion in interest expense. Navient has disputed the government’s claims.
—Melissa Korn contributed to this article.
Write to Gabriel T. Rubin at gabriel.rubin@wsj.com
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