Coming Soon: President Biden’s Decision on Debt Cancellation Now Expected in Late Summer
By Hugh T. Ferguson, NASFAA Senior Staff Reporter
Reports are now indicating that President Joe Biden will be making a decision on student loan debt cancellation through executive authority “later this summer.” While the White House had been previewing its consideration of the move in recent weeks, it is now being reported by The Wall Street Journal that the decision will likely be tied to an announcement concerning the impending expiration of the current pause on loan payments and interest accrual.
It’s unclear whether Biden will bring more clarity to big questions surrounding the framework and implementation of student loan debt cancellation, but in the coming weeks the administration will need to make an announcement concerning the ongoing moratorium on student loans, slated to expire at the end of August. Though an extension has yet to be confirmed, Department of Education (ED) Secretary Miguel Cardona indicated in recent remarks that a new end date could be offered.
ED officials have reiterated that they will be prepared for a transition to repayment and are waiting for a final decision from the White House. In recent remarks, ED Under Secretary James Kvaal said the department is examining previous periods of smaller scale loan pauses to prepare for the end of the moratorium and ensure borrowers will be protected.
Throughout the ongoing payment pause, NASFAA has stressed the importance of ED implementing a smooth and successful transition plan for borrowers before resuming repayment.
“Clear, targeted communication is crucial to ensure borrowers are not blindsided by the eventual resumption of student loan payments,” said NASFAA Vice President of Public Policy and Federal Relations Karen McCarthy. “If not properly managed and messaged, many borrowers may quickly fall into delinquency or default. That’s why the department must take steps to ensure borrowers are informed, that servicers have time to communicate with borrowers and rehire staff to handle the resumption of payments, and that there are ample resources to help counsel struggling borrowers.”
Members from both parties have questioned ED on plans to transition borrowers back into repayment, Sen. Jeanne Shaheen (D-N.H.) asked Cardona to weigh in on when borrowers can be expected to resume repayments to which the secretary reiterated the department's commitment to implement a long on-ramp period to get borrowers prepared for repayment.
On June 8, Rep. Virginia Foxx (R-N.C.), ranking member of the House Committee on Education and Labor, requested more details from ED on its planning, expressing serious doubts that the administration is in fact ready to implement additional changes to the student loan portfolio.
“Action is a comprehensive, smooth operation that follows careful planning and thoughtful consideration about all aspects of an initiative, from communications to implementation,” Foxx wrote. “I am gravely concerned the Department will further harm borrowers and taxpayers if it acts on student loan forgiveness, in part because of its inability to follow through on its grandiose proposals.”
Congressional Democrats have meanwhile pressured the administration to continue with the moratorium until at least 2023, which could give the administration more time to mull over debt cancellation and potential action on reforming the student loan system.
On this front, NASFAA has also provided policymakers with a report, in partnership with more than 20 organizations, urging for comprehensive student loan reform aimed at fixing a broken system that leaves too many students and parents buried in student loan debt.
“As the president and Congress debate and consider widespread debt forgiveness, we call attention to the noticeable absence and urgently needed policy reforms that will prevent borrowers from being in this same exact position in the future,” said NASFAA President and CEO Justin Draeger.
With many questions left in the air, Republicans have continued to balk at Biden’s effort to implement what they refer to as “illegal” widespread student loan forgiveness and have raised a number of issues concerning the student loan portfolio.
Foxx , has recently accused the administration of using potential loan forgiveness as a guise for “retroactive free college” that would force taxpayers to foot the bill for rising higher education costs.
“While this elitist handout may win over his radical progressive base, it’s a slap in the face to taxpayers, especially those who never went to college or spent years paying off their own loans,” Foxx said in recent remarks on the House floor. “Make no mistake, blanket loan forgiveness is simply retroactive free college.”
Republicans have also introduced legislation that would prohibit Biden from canceling any amount of student loan debt through executive authority.
Throughout this extensive deliberation period, ED has utilized the overarching pause in the repayment period to push through other changes, such as the limited waiver expanding the eligibility requirements of the Public Service Loan Forgiveness (PSLF) program and changes to income-driven repayment (IDR) plans.
ED has also continued to use borrower defense discharges to alleviate targeted debts for defrauded students and used its negotiated rulemaking process to bring about more long-term reforms to the system and continues to develop a Notice of Proposed Rulemaking (NPRM) concerning borrower defense to repayment regulations, after a negotiated rulemaking process concluded this past winter.
While these targeted actions have been significant, much of the focus has, and will likely continue to be tied to the potential of debt cancellation.
“It's massively important to hundreds of thousands of people and everyone's reaction was like, eh, it's a bit of a letdown,” said Jon Fansmith, the American Council on Education's assistant vice president for government relations, during a recent episode of Off The Cuff discussing the administration’s continued implementation of targeted relief. “They have definitely shot themselves in the foot in terms of getting the credit they actually deserve for what they've done.”
Stay tuned to Today’s News for more developments on the student loan portfolio.
Publication Date: 6/9/2022
Cathy B | 6/14/2022 8:50:57 AM
I agree with Linda T 100%. This is exactly what makes sense. It is the capitalization of the interest that causes the inability to pay back the growing mountain of loans. If students are only responsible for repaying what they have borrowed, the loans could be paid off more easily. Limiting the amount of interest charged (for example: the interest cannot exceed more than 20% of the original loan) would also help.
Linda T | 6/9/2022 5:20:06 PM
It would be far more equitable to cancel all interest accumulated on loans so far, allow for true refinancing to reduce the interest rate, and eliminate capitalization entirely going forward - students should pay back what they borrow, but for too many, capitalizing resulted in a doubling of the original loan debt, making it nearly impossible to pay off without mortgage size monthly payments.
You must be logged in to comment on this page.