In a series of moves since the start of his presidency, US president Joe Biden has cancelled virtually $3 billion of student loan debt that had been plaguing tens of thousands of Americans. In the American system of higher education, student loans can be given through federal programs for the amount needed by the student, in addition to grants, scholarships and other ways to get funding for tuition. The issue with this is that it prices out many people, and the interest added on top of the loans often prolongs the process of paying off the loans, and leads many people to default on them. The idea is that it is worthwhile to get a degree, and that paying off a loan in small increments every month will not be that much given the degree’s potential to double or even triple the salary of what otherwise would be a capable person forced to work for minimum wage in entry level jobs that don’t have much upward mobility due to educational requirements.
The US government has attempted to come up with many short term solutions to patch up their problem with budget deficits, mainly as a result of tax evasion schemes by millions of people and corporations, and a trade imbalance with dozens of countries around the globe. As a result of this system, the US government does not possess the money required for progressive reform in the area of higher education costs, either reducing what it costs to go to public universities and collages, or completely eliminating tuition. The main proponents against this scheme are those of the conservative, Capitalist nature, who see it as a slap in the face both to the innovation of educators to create better content and programs who are motivated by money, but also in the fact that they fear footing a higher tax bill as a result of another short term solution that fails to address other issues of where the money can be gotten from, such as tax evading corporations and continually open loopholes thanks to constitutional arguments. When something is a hot button issue or not enough unified consensus can be reached, governments have found the best way to implement something is through several stages and generations. This includes educational reform, which has become increasingly left leaning in the American mainstream political sphere since the end of the Cold War.
In the first move, the US Department of Education announced it would fully cancel loans for 72,000 student loan borrowers who had previously had their loans already partially cancelled. This move built upon the one done during the Trump administration, in which partial cancelations were cited due to reasons where fraud or school closure had occurred – considered to be extenuating circumstances. In the US there exists a federal law called the borrower defense repayment that provides debt cancellation if the school was found to have been involved in shady dealings and swindled students out of money, or was forced to close down.
Thanks to the Obama administration, this rule was implemented in 2016 as a sort of consumer protection guarantee as the legal vacuum preceding it still held student loan borrowers who had borrowed and were yet defrauded or had their schools suddenly close liable to pay off the loan regardless of their eventual circumstances. These eventual circumstances also included not finding gainful employment after attending a school of a seedy nature.
Meanwhile, former US Secretary of Education Betsy DeVos cited the rules as being “too generous”, claiming that too much would be forgiven and that taxpayers would be the ones having to pay for it. It’s interesting to note that in spite of her opinion, she was sued by attorney generals from 22 states and from the District of Columbia in federal court over her decision to restrict the amount of student loan forgiveness people would receive. In DeVos’s defense, she was “only trying to strike a balance between taxpayers and the needs of students” by amending the rules for loan forgiveness.
DeVos defended her position stating that her strategy would save taxpayers $11 billion over a period of a decade. In addition to this, there was inconvenience for students who did not receive automatic relief, rather, had 3 years to prove their misfortune in order to qualify for relief under her rules.
US Secretary of Education Miguel Cardona has come up with new rules that will allow those who have suffered financial harm as a result of malversations to claim full student debt forgiveness in a more “streamlined” manner. The fact that this is already in the works is a sign of more to come, slowly inching towards greater educational reforms as a whole. The problem with the historical system is that only 32 borrowers had received full student debt forgiveness, when it came to issue of geared for income metrics being used to assess their eligibility for a full cancelation. The department of education is also guaranteeing students who have had their credit scores damaged as a result of the shenanigans will be able to repair them, and will become eligible once again for further federal student loans where under the old rules they weren’t. There is no reason that a student should have to live with further consequences such as the inability for debt relief when they had been wronged by circumstances out of their control, such as the misconduct of their educational institution.
There have been some instances where student loans have been cancelled through bankruptcy, as with any other debt erasure that happens during the bankruptcy process. Some servicers such as Navient, whom services around $300 billion in federal student loans, have faced increasing scrutiny for engaging in shady practices and misleading borrowers on some details, from the Biden administration.
A new stimulus package revealed by the Biden administration called the American Rescue Plan of 2021 does not really include student debt cancellation, but it does add a sort of quirky implementation where student debt forgiveness becomes tax free from now until December 31, 2025. This means that if Congress or the president decides to cancel student loan debt entirely or you manage to receive an income driven loan repayment plan, you won’t owe any taxes on the forgiven amount. While the $1 billion amount is no small peanuts, and is done to target a demographic that have been victims of unfair circumstances where the state is responsible for their compensation, remedy and protection, there are other student loan cancellation programs on the way.
Biden’s platform wants to cancel $1.7 trillion worth of student loans for 45 million Americans, but that number is incredibly high that it wasn’t mentioned in his federal budget for the fiscal 2021 year. The point here being made is that it’s on the way – albeit in small increments. The $3 billion figure of loan cancellation plans so far being unrolled is just 0.1 percent of the total amount owed in the United States.
This is just the beginning. Today, a form of educational reform has arrived in the US.
