A crash course in student debt forgiveness

So far, the administration’s actions have largely focused on students who have been defrauded by now closed schools, like Corinthian. But these measures have also sharpened the debate over whether the rising cost of higher education is an excessive burden on young adults. Opponents say simply forgiving students debt is moral hazard and penalizes people who have already paid theirs.

Our conversation, conducted via email, is below.

WHAT MATTERS: What is this latest move by the Biden administration and how many people does it affect?

LOBOSCO: Wednesday’s action is the Biden administration’s biggest move to write off student debt yet, totaling $5.8 billion for 560,000 borrowers.

This will affect all borrowers who attended Corinthian College at any time in its existence, dating back to 1995, and who still have outstanding federal student loan debt.

Some former Corinthian students were previously eligible for student loan forgiveness, but the new measure will ensure that all borrowers will automatically receive debt relief. They will not have to intervene.

How is it possible?

WHAT MATTERS: How is the administration able to simply erase this debt? Why didn’t Congress need to weigh in?

LOBOSCO: The Department of Education has long had the power — granted by Congress in the Higher Education Act — to cancel federal student loan debt held by borrowers who were misled by their colleges or who were enrolled in schools that have engaged in other misconduct in violation of certain state laws.

But the department rarely used that power until 2015, when Corinthian Colleges and several other for-profit schools suddenly closed in the face of federal and state investigations into their practices. Many schools have been found to have misled potential students with inflated placement numbers and the transferability of their credits to other schools.

At that time, the Obama administration streamlined the process, known as borrower defense against repayment, which made it easier for such borrowers to file forgiveness applications with the Department of Education. The agency was inundated with requests and the Trump administration, which fought to change the policy, stopped processing requests for more than a year. More than 100,000 applications were pending when Biden took office.

Since then, the Ministry of Education has reduced the backlog, speeding up the process by granting forgiveness to groups of borrowers at a time.

What is a for-profit college?

WHAT MATTERS: What is the difference between a for-profit college and other colleges, which are also very expensive?

LOBOSCO: The big difference is that for-profit colleges are all about making money, unlike public and private non-profit colleges and universities.

Not all for-profit colleges are bad. They tend to confer certificates for trade-related professions that prepare students to enter the job market quickly. In this regard, they attract a lot of non-traditional students – like parents and military veterans who want to learn skills that make them marketable to new employers.

But many for-profit colleges left thousands of students with degrees that didn’t help them get better-paying jobs and saddled them with student debt.

How have for-profit colleges changed?

WHAT MATTERS: What is the state of for-profit colleges right now? How has this industry evolved in recent years?

LOBOSCO: For-profit college enrollments in 2020 has been about half of what it was in 2010, when more than 2 million students were enrolled, according to the College Council.

Corinthian Colleges – which operated schools under the names Everest, Heald College or WyoTech – enrolled more than 110,000 students on 105 campuses at its peak in 2010. It sold most of its campuses in 2014 and closed the rest in 2015.

A year later, another for-profit college, known as ITT Technology, also suddenly closed after facing state and federal investigations into its recruiting tactics.

What’s going on with debt cancellation in general?

WHAT MATTERS: It’s just an effort. What does the broader debt cancellation effort look like? How much student debt has been canceled and how much is left?

LOBOSCO: Under the Biden administration, the Department of Education said it approved the cancellation of $25 billion in student debt for 1.3 million borrowers as of this week.

Nearly $8 billion in rebates provide relief to 690,000 borrowers who were misled by their colleges. Over $8.5 billion has been automatically canceled for more than 400,000 borrowers who are permanently disabled and who previously qualified for debt relief but did not apply.

The administration also temporarily expanded eligibility for what’s called the Public Service Loan Forgiveness Program — which forgives remaining federal student loan debt after a public sector worker completes 10 years of eligible payments. The expansion resulted in the cancellation of $6.8 billion for more than 113,000 borrowers.

The Biden administration has also made changes to income-driven repayment plans, bringing millions of borrowers closer to forgiveness.

What about massive debt cancellation?

WHAT MATTERS: Canceling the debt of people who have been defrauded is one thing. Many Democrats want to see debt cancellation for people who also earned legitimate degrees. Where is this effort?

LOBOSCO: Many Democrats and advocacy groups continue to call on Biden to globally forgive up to $50,000 for each of the 43 million borrowers who have federal student loan debt.

To date, Biden has resisted that pressure and instead taken a piecemeal approach to canceling student debt by expanding existing remission programs.

In April, Biden said he was considering writing off student loan debt more broadly — though he also doubled down on his resistance to writing off up to $50,000 per borrower.

During the election campaign, he proposed canceling a minimum of $10,000 in student debt per person in response to the pandemic, as well as canceling all federal student debt related to college and university undergraduate tuition. public two- and four-year terms for these borrowers. earn up to $125,000 per year.

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