About 9 million Americans with student loans who had applied for the Biden administration’s student-debt forgiveness program mistakenly received emails last month that said their applications had been approved.
The messages were part of updates the Department of Education issued in November to inform 16 million debt relief applicants that they had been approved to have up to $20,000 forgiven. But an additional 9 million people received emails saying they had received loan forgiveness when they had not been approved for relief because the process was halted due to legal challenges, according to officials. And others who hadn’t yet applied for the student loan relief program also received the email.
The error was made by Accenture Federal Services, a contractor with the Education Department, which sent the emails on November 22 and 23. The mistake may only compound confusion among some borrowers about the debt-relief program, which for now remains in limbo due to several legal challenges, with the Supreme Court earlier this month agreeing to hear one of the cases.
About 26 million people had applied for the loan relief effort prior to the court rulings that have effectively stopped the Biden administration’s ability to accept new applications. In the meantime, the Biden administration has extended the pause on student debt repayments, which were slated to resume in January, until as late as June 30, 2023, to give borrowers more breathing room while the legal challenges move forward.
On December 8, the Job Creators Network, a conservative group, said it submitted a request to the Supreme Court to hear a second case relating to the loan-relief program. It is asking the high court to reject the Biden administration’s request to stay a lower court decision that blocks the loan-forgiveness plan.
In its request, the Job Creators Network is asking the Supreme Court to hear its case on the same day it hears the other legal challenge to the program, which stems from a case brought by six Republican-led states that are arguing the Biden administration is overstepping its executive powers with the loan-relief program.
The Job Creators Network had sued in October, arguing the Biden administration violated federal procedures by failing to seek public input on the program.
“Corrective action”
“Communicating clearly and accurately with borrowers is a top priority of the Department,” a spokesperson for the Education Department said in an email to CBS MoneyWatch. “We are in close touch with Accenture Federal Services as they take corrective action to ensure all borrowers and those affected have accurate information about debt relief.”
The email subject line incorrectly informed 9 million recipients: “Your Student Loan Debt Relief Plan Has Been Approved.” However, the text of the letter was accurate, letting those recipients know that the determination of their eligibility would continue “if and when we prevail in court.”
Corrected emails will be sent to those recipients and those who received the email in error within the next few days.
In a statement to CBS MoneyWatch, Accenture blamed the issue on “human error.”
“Accenture Federal Services regrets the human error that led to an email being sent to a number of student loan debt relief applicants with an inaccurate subject line,” the firm said. “Working closely with the Department, Accenture Federal Services will review quality control measures to support accurate and timely communications to applicants in the Student Loan Debt Relief program.”
The Supreme Court has agreed to take up the case concerning President Biden’s plan to cancel hundreds of billions of dollars in student loan debt. The court will hear oral arguments in February.
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For almost a decade, the government took hundreds of dollars each month out of the paychecks of a Florida woman named Michelle to recoup old student loans that were unpaid and overdue. The process, called garnishment, is legal, and the U.S. Department of Education can order it for someone’s wages, tax returns and Social Security to force repayment on defaulted loans.
Michelle’s garnishment began in 2008. As a public school teacher in Orlando, who asked to be identified by her first name only because this story involves her personal finances, she struggled for the next eight or nine years to make ends meet while supporting her two children.
“I almost lost my house and everything over this because I just couldn’t afford it,” she said. And with roughly $800 per month suddenly gone, Michelle recalled at times facing impossible decisions day to day: “I’ve got to consider, ‘Do we get this meal or do we keep the lights on? Which is more important right now?’”
After the garnishment period ended, Michelle believed that her student debts were paid in full. But, this past spring, she started receiving notices about a different loan, which she borrowed through the now-defunct Perkins Loan Program while pursuing an undergraduate degree at the University of Florida.
The program offered low-interest federal loans to undergraduate and graduate students with “exceptional financial need,” according to the Department of Education, and is now being phased out since officially closing in September 2017. Michelle applied for loan forgiveness through the Perkins program after graduating from the University of Florida in 1997, and later satisfied the teaching service requirements to get it.
So, when Michelle opened a letter from her alma mater in July suggesting that her Perkins loan repayments were “severely past due,” she was stunned. Even more confounding than the bill itself was the amount it said she still owed the school: $955,000.02.
“I actually went into depression. I went into hiding. I didn’t know how to make sense of it because it was so long ago,” said Michelle. “So now, I’m like, I’m about to retire and I’m about to lose everything.”
Michelle turned out to be wrong. Thanks in large part to an internet stranger with decades of expertise who eagerly offered to help sort through the student loan debacle, her situation changed almost overnight.
Michelle’s daughter posted the letter to Reddit — a site that Michelle said she had visited “maybe twice” in her life before — in a section dedicated to discussions about student loans. The site’s users quickly tagged one member — Betsy Mayotte, the president and founder of an organization called The Institute of Student Loan Advisors, which provides a range of free services to borrowers like Michelle.
Michelle received a letter from the University of Florida, dated July 22, 2022, which suggested the unpaid balance on her student loans was almost $1 million.
courtesy Michelle via Reddit
Mayotte is a regular in the site’s r/StudentLoans subreddit, where people share personal experiences and tips as they navigate daunting repayment schedules amid changing debt relief policies under the Biden Administration, and frequently uses it to connect with people who need advice about their loans. In a comment on the original post from Michelle’s daughter, another user calls Mayotte the “GOAT,” which stands for greatest of all time.
Mayotte, having worked before with Perkins loan borrowers who had been blindsided by unexpected bills, stepped in as a liaison between Michelle and the University of Florida. The original amount was quickly determined to be a mistake. A spokesperson at the University of Florida attributed the error to a technical issue at ECSI, a company that universities hire to act as a loan servicer for former students repaying balances through the Perkins program.
While the university said in a statement that it could not comment on Michelle’s case specifically, citing records protection laws for students, the school noted that “no student at the University of Florida has ever owed” nearly $1 million in student loans.
“However, in July, the University of Florida learned that the computer system used by the company that handles billing for the university issued statements with erroneous amounts to borrowers for many schools, including UF,” the statement continued. A university spokesperson later said ECSI planned to issue new statements “reflecting the correct balances” within a week of the error coming to light.
A spokesperson at ECSI confirmed the calculation issue and acknowledged in a statement that the company “sent letters to a small number of borrowers reflecting incorrect amounts owed on their loans” over the summer.
“These letters were promptly corrected and we apologize for any inconvenience this may have caused,” the spokesperson said.
By the end of August, Michelle had received at least one of several amended statements that would ultimately come by mail from the University of Florida. The new balance still ran quite high, about $8,000, and while Michelle said she “felt better, of course, because that wasn’t a million,” she also suspected the revised number, which did not match the balance reflected in her online account, was incorrect.
After graduating with her bachelor’s degree, Michelle had applied for loan cancellation through a teaching program offered to Perkins loan recipients. It promised to cancel a portion of the borrower’s loan for every academic year spent teaching in certain schools, or certain subject areas. For example, someone who taught in a school serving students from low-income families, or taught special education, math, science or foreign language classes would be eligible for complete loan forgiveness.
Michelle fulfilled the requirements in various teaching positions held over the course of five years. She submitted the records necessary to confirm her eligibility for relief under the Perkins program guidelines, and assumed the loan was forgiven. But, when Mayotte again reached out to the university with questions about Michelle’s updated balance, she was told that Michelle’s records never arrived.
“They said they never received it,” said Mayotte. She noted that, in her experience, miscommunication is common between Perkins loan borrowers and their loan servicers, despite company policies that technically require loan servicers to send borrowers monthly notifications about their bills, especially when they are past due. Unlike other federal student loans that are managed by vendors or servicers affiliated with the Department of Education, Perkins loan servicers have historically been the universities themselves, which then outsource loan servicing tasks to a third party.
“I see all the time, people that say, ‘I haven’t had a bill for my Perkins loan in 10 years, 20 years,’” said Mayotte. “It makes it really difficult for the borrower. You know, a lot of times it’s a legit bill. But if it isn’t, what consumer keeps records for 20 years to be able to push back on that?”
ECSI did not become a loan servicer for the University of Florida until the early 2000s, years after Michelle submitted her forgiveness paperwork to the school, and the company spokesperson said it “had no involvement” in the record-keeping process that determined whether or not she was granted relief.
“Nevertheless, we were happy to assist the institution with the issues they had with this borrower and rectify the loan forgiveness,” the spokesperson said.
Michelle, “thankfully,” per Mayotte, was able to prove her eligibility for retroactive relief through the Perkins loan teaching program. Her final balance: $408, which, she said, was paid in full as of two weeks ago.
“The only word I had was amen when I got that letter,” Michelle said. “I couldn’t process it completely. I was just grateful.”
Although Michelle’s exorbitant student loan balance was a mistake, Mayotte said she has worked with a couple of clients before who really do owe close to $1 million for money borrowed to go to school.
A recent report published by the Education Data Initiative points to the ongoing student debt crisis in the U.S., which has proven difficult to remedy despite President Biden’s promised loan forgiveness plan — now on hold, per court order, and potentially headed to the Supreme Court. Student debt currently totals $1.745 trillion nationwide, according to the report, which places the average federal loan debt balance at just under $38,000. But, with Biden’s forgiveness plan stalled, the administration recently announced that it is extending the pause on student debt repayments until June of next year.
“Education, when financed by student loans, does not live up to its mantra as the ‘great equalizer,’” said Michelle in an email, adding that borrowers, particularly those who go on to work in the public sector, often “grow old with the burdens of student loans and are sometimes never, ever fully able to make future plans, to upgrade lifestyle, to save, to invest, or retire on time. The pay is generally too low — paycheck to paycheck — and the life cycle of loans last entirely too long.”
About 16 million borrowers who had applied for the Biden administration’s student loan forgiveness program received letters starting last weekend letting them know that they’ve been approved for debt relief.
However, the letter states that a number of lawsuits “have blocked our ability to discharge your debt at present.” The approvals come after two courts blocked the plan, placing legal barriers before a federal program that had promised to forgive up to $20,000 in student debt for about 40 million eligible Americans.
“Your application is complete and approved, and we will discharge your approved debt if and when we prevail in court,” Secretary of Education Miguel Cardona said in the letter.
About 26 million people had applied for the loan relief effort prior to the court rulings, which have effectively stopped the Biden administration’s ability to accept new applications. The Biden administration is appealing those decisions, but it’s unclear whether the cases will be decided.
On Tuesday, the Biden administration said it is extending the pause on student debt repayments. That freeze had been slated to expire on December 31, which meant borrowers would have started repayments in January. With the latest extension, the pause will now be pushed back until no later than June 30, 2023.
“I’m confident that our student debt relief plan is legal. But it’s on hold because Republican officials want to block it,” President Biden wrote on Twitter. “That’s why [Education Secretary Miguel Cardona] is extending the payment pause to no later than June 30, 2023, giving the Supreme Court time to hear the case in its current term.”
The letter from the Education Department said it will update applicants “when there are new developments.”
Loan payments
The letters are helping “folks understand a bit better why they haven’t had their debts forgiven yet,” noted Mike Pierce, executive director of the advocacy group Student Borrower Protection Center. “That doesn’t completely do away with the very real economic anxiety that people with student loans feel at this moment.”
The irony of getting approval for loan forgiveness while also being told that the plan might not move forward due to legal challenges wasn’t lost on recipients, who took to social media to comment on the mixed messages.
“Getting the student loan forgiveness approval letter, but saying we really can’t forgive your loans at this time is peak 2022,” one person wrote on Twitter.
The Department of Education sent the letter to 16 million people who applied to have up to $20,000 in student debt forgiven, telling them they received a green light — at least from the Biden administration. The letters don’t inform the borrowers how much of their loans had been erased, however.
But because of the court rulings, debt forgiveness can’t move forward unless the Biden administration is victorious with its legal challenges. The Education Department will “quickly process their relief once we prevail in court,” White House Press Secretary Karine Jean-Pierre has said.
I applied for forgiveness but haven’t gotten a letter. Why?
The Biden administration had approved 16 million applications prior to the court rulings, and those people are receiving alerts about that now. Some of those applicants may not have received the emails in the initial alert, but could receive an alert in their inbox soon, according to a November 19 tweet from Cardona.
“Beginning today, applicants and others seeking relief through the Biden-Harris Administration’s Student Debt Relief Plan will begin receiving updates. Don’t worry if you don’t get an email today — more are coming,” Cardona said in a tweet.
But the other 10 million people who applied but hadn’t been approved prior to the court rulings may be in for a longer wait. “The Biden administration is in a tough spot right now — they aren’t allowed to approve applications until something changes in the court,” Pierce noted.
And the roughly 14 million eligible borrowers who have yet to apply are no longer able to do so via the Education Department’s online application, which has been shut down in response to the court rulings.
When could I see debt relief?
It’s unclear because that depends on the timing of the Biden administration’s appeals, Pierce noted.
Advocacy groups for student debt relief on Tuesday applauded the White House’s decision to extend the repayment pause until June 2023, which will give eligible borrowers financial breathing room over the next few months as the legal challenges move forward.
“This extension means that struggling borrowers will be able to keep food on their tables during the holiday season — and the coming months — as the Administration does everything it can to beat back the baseless and backward attacks on working families with student debt,” Pierce said in a Tuesday statement.
About 16 million borrowers who had applied for the Biden administration’s student loan forgiveness program received letters over the weekend letting them know that they have been approved for debt relief.
However, the letter states that a number of lawsuits “have blocked our ability to discharge your debt at present.” The approvals come after two courts blocked the plan, placing legal barriers before a federal program that had promised to forgive up to $20,000 in student debt for about 40 million eligible Americans.
“Your application is complete and approved, and we will discharge your approved debt if and when we prevail in court,” Secretary of Education Miguel Cardona said in the letter.
About 26 million people had applied for the loan relief effort prior to the court rulings, which have effectively stopped the Biden administration’s ability to accept new applications. The Biden administration is appealing those decisions, but it’s unclear whether the cases will be decided.
On Tuesday, the Biden administration said it is extending the pause on student debt repayments. That pause had been slated to expire on December 31, which meant borrowers would have started repayments in January.
With the latest extension, the pause will be pushed back until no later than June 30, 2023.
“I’m confident that our student debt relief plan is legal. But it’s on hold because Republican officials want to block it,” President Joe Biden wrote on Twitter. “That’s why [Education Secretary Miguel Cardona] is extending the payment pause to no later than June 30, 2023, giving the Supreme Court time to hear the case in its current term.”
Loan payments
The letters are helping “folks understand a bit better why they haven’t had their debts forgiven yet,” noted Mike Pierce, executive director of the advocacy group Student Borrower Protection Center. “That doesn’t completely do away with the very real economic anxiety that people with student loans feel at this moment.”
The irony of getting approval for loan forgiveness while also being told that the plan might not move forward due to legal challenges wasn’t lost on recipients, who took to social media to comment on the mixed messages.
“Getting the student loan forgiveness approval letter, but saying we really can’t forgive your loans at this time is peak 2022,” one person wrote on Twitter.
The Department of Education sent the letter to 16 million people who applied to have up to $20,000 in student debt forgiven, telling them they received a green light — at least from the Biden administration. The letters don’t inform the borrowers how much of their loans had been erased, however.
But because of the court rulings, debt forgiveness can’t move forward unless the Biden administration is victorious with its legal challenges. The Education Department will “quickly process their relief once we prevail in court,” White House Press Secretary Karine Jean-Pierre has said.
I applied for forgiveness but haven’t gotten a letter. Why?
The Biden administration had approved 16 million applications prior to the court rulings, and those people are receiving alerts about that now. Some of those applicants may not have received the emails in the initial alert, but could receive an alert in their inbox soon, according to a November 19 tweet from Cardona.
“Beginning today, applicants and others seeking relief through the Biden-Harris Administration’s Student Debt Relief Plan will begin receiving updates. Don’t worry if you don’t get an email today — more are coming,” Cardona said in a tweet.
But the other 10 million people who applied but hadn’t been approved prior to the court rulings may be in for a longer wait. “The Biden administration is in a tough spot right now — they aren’t allowed to approve applications until something changes in the court,” Pierce noted.
And the roughly 14 million eligible borrowers who have yet to apply are no longer able to do so via the Education Department’s online application, which has been shut down in response to the court rulings.
When could I see debt relief?
It’s unclear because that depends on the timing of the Biden administration’s appeals, Pierce noted.
Advocacy groups for student debt relief on Tuesday applauded the White House’s decision to extend the repayment pause until June 2023, which will give eligible borrowers financial breathing room over the next few months as the legal challenges move forward.
“This extension means that struggling borrowers will be able to keep food on their tables during the holiday season — and the coming months — as the Administration does everything it can to beat back the baseless and backward attacks on working families with student debt,” Pierce said in a Tuesday statement.
The Biden administration started contacting students who have been approved for student loan debt relief, CNN reported on Saturday. The move comes on the heels of the administration’s request for the Supreme Court to lift the nationwide injunction on the loan relief program.
According to emails acquired by CNN, Department of Education Secretary Miguel Cardona sent emails on Saturday to those who have been approved for loan debt relief. The administration’s student loan debt relief program has been facing numerous legal challenges since its launch last month, which Cardona addressed in the emails.
“Unfortunately, a number of lawsuits have been filed challenging the program, which have blocked our ability to discharge your debt at present. We believe strongly that the lawsuits are meritless, and the Department of Justice has appealed on our behalf,” Cardona said in the emails to students approved for the loan relief, CNN reported.
The highly-anticipated student loan forgiveness program offers $10,000 of federal student debt cancellations to qualified loan borrowers. But the government stopped accepting applications on Nov. 10 after a Texas federal judge struck down the plan, deeming it “unconstitutional.”
“We believe strongly that the Biden-Harris Student Debt Relief Plan is lawful and necessary to give borrowers and working families breathing room as they recover from the pandemic and to ensure they succeed when repayment restarts,” Cardona said in a recent press release.
According to the Associated Press, the 8th Circuit Court of Appeals issued a nationwide injunction of the plan earlier this week after six Republican-led states challenged the plan. The Department of Justice filed a request on behalf of the Biden administration on Friday asking the Supreme Court to lift the hold on the plan while the legal proceedings play out.
“The Eighth Circuit’s erroneous injunction leaves millions of economically vulnerable borrowers in limbo, uncertain about the size of their debt and unable to make financial decisions with an accurate understanding of their future repayment obligations,” Solicitor General Elizabeth Prelogar said in the request sent to the court.
Prelogar urged the court to accept the appeal, warning that a continuous hold on the program could cause borrowers’ uncertainty to extend into the next two years.
Data shows that 43.4 million people face student loan debt. According to the Department of Education, 26 million people have submitted applications for Biden’s loan forgiveness program. In August, Biden announced the plan, which fulfilled a promise he made during his presidential campaign.
The plan incited praise from thousands of people following its launch in October. But in the months leading up to the launch, criticism also ensued from Republicans who labeled the plan to be an unfair handout.
The Biden administration said Thursday it will make it easier for student borrowers in financial distress to discharge their loans in bankruptcy.
Currently, it’s hard for people who declare bankruptcy to get their student debt erased, with debtors having to prove in a separate proceeding that paying their college loans would impose an “undue hardship.” One study found that only 0.1% of people with student loans who filed for bankruptcy protection even tried to get their higher education debt discharged.
Department of Justice officials said the new rules will make it easier for borrowers who didn’t think they could get relief through bankruptcy to find out whether they can get their loans discharged. Typically, a court reviews the borrower’s past, present and future financial circumstances to determine if the person is facing undue hardship. But under the new rule, the borrower will instead complete an attestation form, based on which the government will determine whether to recommend discharge.
“Today’s guidance outlines a better, fairer, more transparent process for student loan borrowers in bankruptcy,” Associate Attorney General Vanita Gupta said in a statement. “It will allow Justice Department attorneys to more easily identify cases in which we can recommend discharge of a borrower’s student loans.”
Stalled forgiveness
The government’s overhaul of the process comes amid several setbacks in the Biden administration’s plan to forgive up to $20,000 in student debt per borrower. Two courts have now blocked that plan, and as a result the Department of Education has stopped taking applications for debt relief. Before the application was shut, about 26 million people had applied for forgiveness.
It’s unlikely the new bankruptcy guidelines for student debt will create a surge in discharge attempts because borrowers still have to prove they are in financial distress to qualify, noted Jaret Seiberg, an analyst with Cowen.
“This is not going to open the door for mass discharge of federal student loans in bankruptcy,” Seiberg wrote in a research note. “Borrowers must still demonstrate an undue hardship to get relief. It is not enough to just file for bankruptcy.”
Under the new rules, the government will calculate a borrower’s expenses against their income. If the expenses are equal or higher than income, the government will determine that the borrower lacks a present ability to pay.
Next, the government will judge whether that inability to pay is likely to continue in the future, taking into account age, disability, chronic injury, unemployment history or a lack of a degree, the Biden administration said. About 40% of borrowers are people who enrolled in college but didn’t graduate.
The Biden Administration’s plan to provide up to $20,000 in loan relief for student borrowers is now halted after a federal judge in Texas blocked the program and declared it “unlawful,” raising questions and financial uncertainty for the roughly 40 million Americans who qualify for debt forgiveness.
Already, 26 million people have applied to the program since the application went live in October. But after the ruling on Thursday, the Biden administration stopped taking applications for its student debt forgiveness program.
While the administration plans to appeal, the ruling prompts questions about what may happen next as legal challenges unfold, and as borrowers face a financial deadline with the student debt repayment hiatus slated to expire in December and repayments set to restart in January. If the appeal is not decided by then, millions could be on the hook for repayments that they may not have anticipated.
“Student debt is one of the largest financial stressors facing Americans right now, and it’s been an extremely confusing time for borrowers,” noted Kristen Carlisle, general manager of Betterment at Work.
Here’s what experts believe will come next for Biden’s debt-relief program — and steps borrowers can take.
What happens next in the legal process?
The Biden administration said it plans to appeal the ruling, but the legal process could take weeks to play out. The Fifth Circuit Court of Appeals will hear the case, with Height Securities noting in a Friday research report that the court has “arguably become one of the most conservative appeals courts in the country.”
After the appeals court decision, either side is likely to appeal to the Supreme Court, where Justice Samuel A. Alito, a conservative, would first review the case, Height Securities said.
The typical appeals process takes six months, but the courts have been expediting this case because of its significance, higher education expert Mark Kantrowitz noted. It’s possible the case could be resolved before January, when debt repayment is scheduled to restart, but it’s not a certainty.
It’s also not certain if the case will be resolved in favor of the Biden administration, which is also facing additional legal challenges to the loan relief program, Kantrowitz noted.
Should I plan on repaying my loans in January?
Yes. Given the uncertainty of the timing of the appeals process, it would be prudent for borrowers to plan for full repayment starting in January. In other words, borrowers should be prepared to pay back their debts without the forgiveness promised by the Biden administration, Kantrowitz said.
While there’s still a chance the plan could move forward, borrowers may not want to risk getting caught in a financial crunch in case the appeal drags on or it isn’t resolved in favor of the Biden administration.
“Worst case scenario, they will have to start making repayments,” Kantrowitz said. “I’d recommend they start planning for it regardless.”
I haven’t applied yet for loan relief. What can I do?
At the moment, there’s not much you can do if you haven’t applied for the program: The Biden administration has stopped taking applications for its student debt forgiveness program, citing the judge’s ruling.
About 26 million people have applied so far, but about 38 million to 40 million people may be eligible for the program, according to various estimates. That means 12 to 14 million people have yet to apply for relief.
Those borrowers may be most at risk of facing repayment in January, Kantrowitz said. That’s because the Department of Education and loan services need about 4-6 weeks to process the applications. So, even if the court case resolves in favor of the Biden administration before the end of November, it’s possible that these borrowers will run out of time to get their applications processed before January.
“They would probably have one month of repayment before the forgiveness applies,” Kantrowitz said.
Could the debt repayment hiatus be extended?
That’s one option for the Biden administration, in case the legal road drags on or the courts rule against the loan-relief program, Kantrowitz said.
“President Biden could extend it through the remainder of his term,” Kantrowitz said of the debt-repayment hiatus. “There’s very little that can be done about it. After all, it’s been extended seven times already with the HEROES Act justification, and nobody has filed a lawsuit claiming he doesn’t have the authority.”
Even so, the Biden administration declared the previous hiatus extension, made in August, as the “final student loan pause extension.” If the administration does decide to extend it one more time, past actions indicate the effort could come down to the wire. For instance, the August extension was announced about a week before the pause was set to expire on August 31.
How should I prepare for repayment?
Check which servicer is currently holding your debt because there have been changes during the pandemic, such as Navient exiting the student loan program.
Be aware of how much you’ll owe in January without debt relief from the Biden program. With that knowledge, you can start carving out some extra money in your budget, Kantrowitz said.
Lastly, Kantrowitz recommends setting up an automatic payment system so you don’t run the risk of late payments.
“For one, you are less likely to be late and to deal with the potential for confusion the the restart of repayment,” he said. “The call centers are likely to get a lot of calls” as repayment begins.
The Biden administration has stopped taking applications for its student debt forgiveness program, citing a Thursday ruling from a federal judge in Texas that declared the program “unlawful.”
On Friday, the Department of Education’s student debt relief website displayed a message informing borrowers that “student loan debt relief is blocked.” It added, “Courts have issued orders blocking our student debt relief program. As a result, at this time, we are not accepting applications. We are seeking to overturn those orders.”
The Education Department said it will hold the applications for the roughly 26 million people who have already applied for forgiveness.
The application’s closure marks a departure from the Education Department’s previous stance following an October court ruling that put a temporary stay on the program in response to an emergency motion brought by attorneys for several Republican-led states. After that ruling, the Biden administration continued to keep the application open because the stay only halted the discharge of debts. It had encouraged borrowers to apply nonetheless.
The Texas ruling “vacates the entire program, so they can’t have borrowers continue to apply,” noted higher education expert Mark Kantrowitz, who said he estimates there are about 38 million people eligible for the debt relief program. “For the 12 million who haven’t yet submitted applications, they can’t submit applications now.”
Judge: “Unlawful”
The ruling from U.S. District Judge Mark Pittman, who was appointed by former President Donald Trump, was in response to a lawsuit from a conservative group called the Job Creators Network Foundation, which argued the Biden administration violated federal procedures by failing to seek public input on the program.
Pittman declared the program “unlawful,” citing the 2002 Higher Education Relief Opportunities For Students Act (HEROES), which gives the Education Department the ability to grant waivers to financial aid recipients.
“Whether the program constitutes good public policy is not the role of this Court to determine,” Pittman wrote in his decision. “In this country, we are not ruled by an all-powerful executive with a pen and a phone.”
The Biden administration said it plans to appeal the ruling, but the legal process could take weeks to play out. The Fifth Circuit Court of Appeals will hear the case. That circuit has “arguably become one of the most conservative appeals courts in the country,” Height Securities noted in a Friday research report.
After the appeals court decision, either side is likely to appeal to the Supreme Court, where Justice Samuel A. Alito, a conservative, will first review the case, Height Securities said.
Whatever the outcome, it could take time for the legal process to unfold, Kantrowitz noted. That could create a financial crunch for many borrowers because the student debt repayment hiatus expires in December, which means repayments will resume in January.
If the case is resolved in favor of the Biden administration before year-end, it’s possible some of the 26 million people who applied before the application was shut down could get their debt waived before January. But the 12 million people who haven’t yet submitted applications could be on the hook for repayment in early 2023 because the Department of Education and loan servicers may not have enough time to process new applications before January, Kantrowitz added.
FORT WORTH, Texas (AP) — A U.S. judge in Texas on Thursday blocked President Joe Biden’s plan to provide millions of borrowers with up to $20,000 apiece in federal student-loan forgiveness.
District Court Judge Mark Pittman, an appointee of former President Donald Trump based in Fort Worth, said the program usurped Congress’ power to make laws.
The debt forgiveness plan would cancel $10,000 in student loan debt for those making less than $125,000 or households with less than $250,000 in income. Pell Grant recipients, who typically demonstrate more financial need, would get an additional $10,000 in debt forgiven.
The cancellation applies to federal student loans used to attend undergraduate and graduate school, along with Parent Plus loans.
This is a developing story. Please check back for updates.
A federal judge in Texas on Thursday blocked President Joe Biden’s student-loan forgiveness plan, which was already on hold after the 8th Circuit Court of Appeals issued a temporary stay last month.
A conservative group called the Job Creators Network Foundation filed a lawsuit in federal court in Fort Worth in October aruging the Biden administration violated federal procedures by failing to seek public input on the program.
U.S. District Judge Mark Pittman, who was appointed by former President Donald Trump, declared the program “unlawful.”
Thursday’s order is the latest in a series of legal challenges to the Biden administration’s program, which was launched in October. The White House said last week that close to 26 million Americans have provided information to the Department of Education to have their debt potentially forgiven.
Mr. Biden announced in August the debt relief plan, which can forgive up to $20,000 of debt for Americans making less than $125,000 individually or $250,000 per couple.
The 8th Circuit Court of Appeals in October put a temporary stay on the program in response to an emergency motion brought by attorneys for several Republican-led states after a lower court ruled that their September lawsuit to stop the debt forgiveness program lacked standing.
About 40 million Americans with student debt are now in limbo following an appeals court’s stay on Friday that put a halt — for now — to President Biden’s student loan forgiveness program.
Already, 22 million people have applied to the program — designed to forgive as much as $20,000 in student debt per borrower — since the application went live earlier this month. But on Friday, the 8th Circuit Court of Appeals issued a temporary stay in response to an emergency motion brought by attorneys for several Republican-led states.
The ruling has prompted questions about what the stay means for borrowers — especially those who have already applied for debt relief — and what may happen next as legal challenges unfold. The court’s roadblock may increase financial anxiety for borrowers especially as the student debt repayment hiatus, instituted during the pandemic, expires in December. That means repayments are set to begin again in January.
“It’s such a rollercoaster for borrowers emotionally,” noted Laurel Taylor, CEO of Candidly, a student debt and savings service.
Even so, she said, “The best thing borrowers can do for themselves now is apply” for the debt forgiveness program.
Secondly, Taylor added, “Prepare for the worst case scenario, which is repayments beginning on January 1.”
On Monday, the Biden administration said in a response that the states had failed to prove they would be hurt by the debt relief program, according to USA Today. It also argued that any limitation to the program should be handed down in the states that are suing, which would impact about 2.8 million people with student loans.
What does the stay mean?
The temporary hold was placed after a lower court ruled that the September lawsuit from the GOP states lacked standing.
In their appeal of that lower court ruling, the plaintiffs — which include Iowa, Kansas, Missouri, Nebraska, South Carolina and Arkansas — said the forgiveness program will irreparably harm their states’ student loan programs.
The stay is not based on the merits of that case, but allows for further briefings on the issue.
“The stay prohibits the administration from discharging any debt until the court rules on the appellants’ motion for a preliminary injunction pending appeal, but it does not prohibit the administration from collecting or reviewing applications,” noted Heights Securities analyst Benjamin Salisbury in a Monday research note.
Is the debt-relief application still open?
Yes, because the stay only halts the discharge of debts. The application for debt relief remains open, with the U.S. Department of Education noting on its site, “We encourage you to apply if you are eligible.”
“We will continue to review applications. We will quickly process discharges when we are able to do so and you will not need to reapply,” the Education Department said.
What happens next with the courts?
Both sides in the lawsuit will respond to the court by Tuesday, October 25, Salisbury said in his note. The case “is expected to be reviewed swiftly,” he added.
No matter the outcome, it’s unlikely to be the last step in the legal process, he noted.
“No matter the decision of the Eighth Circuit Appeals Court, we expect either side to appeal to the Supreme Court, with the decision to be reviewed first by Justice Brett M. Kavanaugh,” he wrote.
Where does this leave borrowers?
For the moment, in limbo, experts say.
In the meantime, borrowers can take several steps. As mentioned above, experts recommend that borrowers apply for debt relief, if they haven’t already.
But be prepared to restart your payments in January based on your current outstanding balance, Taylor of Candidly said.
Because the government paused repayments during the pandemic, it’s been more than two years since borrowers had to make payments on their debt, she pointed out.
“We have been in a moratorium, so my fear is that borrowers won’t understand that on January 1 they do have to enter back into repayment,” she said. “Have a plan and a strategy around that.”
How should I prepare for repayment?
Check which servicer now holds your debt because there have been changes during the pandemic, such as Navient exiting the student loan program.
Secondly, get a handle on how much you’ll owe in January without debt relief from the Biden program, Taylor said.
“Number one is having the fundamentals down: How much do I owe, who do I owe?” she added.
Next, review your budget. The typical monthly repayment is about $400, and during the pandemic, families got used to deploying that money elsewhere, she added. “Budgeting is critical. Find out what you can pay and allocate” that money to the repayments, she said.
Lastly, explore income-based repayment programs, which can help lower your monthly payments based on your discretionary income, Taylor recommended.
And keep an eye out for the Biden administration’s new income-based repayment plan, which was announced at the same time as the student-debt forgiveness plan but which didn’t get as much attention at the time, she added.
This new income-based plan will limit the monthly amount that borrowers pay to 5% of their discretionary income, from 10% currently. And program will increase the amount that is considered non-discretionary income to about $31,000 from about $20,000, protecting more of a person’s income from going to debt repayment.
The Justice Department on Monday defended the legality of President Joe Biden’s student loan forgiveness plan, while a court weighs in on an effort by six Republican-led states to block the action.
The 8th Circuit Court of Appeals on Friday temporarily blocked Biden’s plan while it considers an appeal from Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina, which are challenging a district court’s ruling that threw out their case.
The Justice Department wrote a brief to the court, arguing the lawsuit is “based on speculation about possible downstream economic effects” of the action, and called on the court to allow the administration to continue its work on the program in the meantime, according to CNN.
The department added that Education Secretary Miguel Cardona was within his right to act invoke the 2003 Higher Education Relief Opportunities for Students Act “to prevent pandemic-induced harm to lower-income student-loan borrowers.”
The act, which was passed in response to the Sept. 11, 2001, terrorist attacks, allows the education secretary to alter student financial assistance programs in the event of “a war or other military operation or national emergency.”
“Congress hardly could have expressed more clearly its intent to give the Secretary maximum flexibility to ensure borrowers are not worse off financially because of a national emergency,” the Justice Department added.
The six states lost the original lawsuit, as U.S. District Judge Henry Edward Autrey ruled they had not demonstrated the plan would cause them direct harm.
“The Court lacks jurisdiction to hear this case,” the judge said.
The states had argued Biden’s plan is “not remotely tailored to address the effects of the pandemic on federal student loan borrowers,” as required under the 2003 law the administration used to justify the debt relief.
Cardona on Saturday posted a video on Twitter, addressing the legal challenges the administration has faced and calling out Republicans who have taken issue with student loan forgiveness but benefited from debt forgiveness of the Paycheck Protection Program loans during the pandemic.
“As you know, we faced more than half a dozen lawsuits, many from places that accepted PPP loan relief last year. But we’re not deterred. We’ll keep fighting for you and pushing through,” Cardona said.
Amid some Republicans trying to block our student debt relief program, we are moving full speed ahead, preparing for implementation so we can deliver relief to borrowers who need it most. pic.twitter.com/g3SMEhbSQz
The White House on Monday said 22 million student borrowers had already applied for the relief as of Friday.
White House press secretary Karine Jean-Pierre repeated that the court’s administrative stay order does not prevent people from continuing to apply for the program.
“The order also does not reverse the lower court’s dismissal of the case or suggest that the case has any merit at all. It merely prevents debt from being discharged until the court makes a decision,” she said.
Asked if Biden would consider re-extending the pause on student loan payments, which is set to expire in January, Jean-Pierre said she wouldn’t get drawn into hypothetical scenarios.
“We’re just going to let the process play out,” she said.
Under Biden’s plan, student borrowers making up to $125,000 would be eligible for $10,000 of relief. Pell Grant recipients could get up to $20,000.
Supreme Court Justice Amy Coney Barrett on Thursday blocked an appeal by the Wisconsin-based Brown County Taxpayers Association which also sought to challenge the student debt relief program.
About 40 million Americans with student debt are now in limbo following an appeals court’s stay on Friday that has blocked President Biden’s student loan forgiveness program.
Already, 22 million people have applied to the program — designed to forgive as much as $20,000 in student debt per borrower — since the application went live earlier this month. But on Friday, the 8th Circuit Court of Appeals issued a temporary stay in response to an emergency motion brought by attorneys for several Republican-led states.
The ruling has prompted questions about what the stay means for borrowers — especially those who have already applied for debt relief — and what may happen next as legal challenges unfold. The court’s roadblock may increase financial anxiety for borrowers especially as the student debt repayment hiatus, instituted during the pandemic, expires in December. That means repayments are set to begin again in January.
“It’s such a rollercoaster for borrowers emotionally,” noted Laurel Taylor, CEO of Candidly, a student debt and savings service.
Even so, she said, “The best thing borrowers can do for themselves now is apply” for the debt forgiveness program.
Secondly, Taylor added, “Prepare for the worst case scenario, which is repayments beginning on January 1.”
What does the stay mean?
The temporary hold was placed after a lower court ruled that the September lawsuit from the GOP states lacked standing.
In their appeal of that lower court ruling, the plaintiffs — which include Iowa, Kansas, Missouri, Nebraska, South Carolina and Arkansas — said the forgiveness program will irreparably harm their states’ student loan programs.
The stay is not based on the merits of that case, but allows for further briefings on the issue.
“The stay prohibits the administration from discharging any debt until the court rules on the appellants’ motion for a preliminary injunction pending appeal, but it does not prohibit the administration from collecting or reviewing applications,” noted Heights Securities analyst Benjamin Salisbury in a Monday research note.
Is the debt-relief application still open?
Yes, because the stay only halts the discharge of debts. The application for debt relief remains open, with the U.S. Department of Education noting on its site, “We encourage you to apply if you are eligible.”
“We will continue to review applications. We will quickly process discharges when we are able to do so and you will not need to reapply,” the Education Department said.
What happens next with the courts?
Both sides in the lawsuit will respond to the court by Tuesday, October 25, Salisbury said in his note. The case “is expected to be reviewed swiftly,” he added.
No matter the outcome, it’s unlikely to be the last step in the legal process, he noted.
“No matter the decision of the Eighth Circuit Appeals Court, we expect either side to appeal to the Supreme Court, with the decision to be reviewed first by Justice Brett M. Kavanaugh,” he wrote.
Where does this leave borrowers?
For the moment, in limbo, experts say.
In the meantime, borrowers can take several steps. As mentioned above, experts recommend that borrowers apply for debt relief, if they haven’t already.
But be prepared to restart your payments in January based on your current outstanding balance, Taylor of Candidly said.
Because the government paused repayments during the pandemic, it’s been more than two years since borrowers had to make payments on their debt, she pointed out.
“We have been in a moratorium, so my fear is that borrowers won’t understand that on January 1 they do have to enter back into repayment,” she said. “Have a plan and a strategy around that.”
How should I prepare for repayment?
Check which servicer now holds your debt because there have been changes during the pandemic, such as Navient exiting the student loan program.
Secondly, get a handle on how much you’ll owe in January without debt relief from the Biden program, Taylor said.
“Number one is having the fundamentals down: How much do I owe, who do I owe?” she added.
Next, review your budget. The typical monthly repayment is about $400, and during the pandemic, families got used to deploying that money elsewhere, she added. “Budgeting is critical. Find out what you can pay and allocate” that money to the repayments, she said.
Lastly, explore income-based repayment programs, which can help lower your monthly payments based on your discretionary income, Taylor recommended.
And keep an eye out for the Biden administration’s new income-based repayment plan, which was announced at the same time as the student-debt forgiveness plan but which didn’t get as much attention at the time, she added.
This new income-based plan will limit the monthly amount that borrowers pay to 5% of their discretionary income, from 10% currently. And program will increase the amount that is considered non-discretionary income to about $31,000 from about $20,000, protecting more of a person’s income from going to debt repayment.
“I’d love to go back to school and finish the degree if possible,” a former student told me on LinkedIn. I had been on maternity leave, so I hadn’t heard this student had left school. I thought he had successfully switched majors.
I remembered him saying how important it was to him to finish after investing three years into his degree. Instead, he’d joined a coding boot camp that cost much less than university tuition. I wondered then if he became another of the many who got the student loan debt but not the degree.
President Joe Biden’s student loan forgiveness applications recently opened, allowing up to $10,000 of federally held loans to be forgiven per borrower (or $20,000 for Pell Grant recipients). This is expected to affect up to 43 million people.
This is good news. But all the attention on student loan debt only serves to highlight that the majority of students are expected to graduate owing a substantial amount of money.
Since the 1937 Student Personnel Point of View asserted that university employees serve the “whole student,” higher education staff have entered the profession with hopes of bettering the lives of students. Despite the low pay and sometimes long hours, higher education staff are continually encouraged to persist “for the students.”
I trained for this profession in graduate school, knowing the pay was low but wanting to make a difference. My hope was that I would be able to help students navigate the university, just as higher education staff had helped me when I was in undergrad.
At first, the gratification of helping students was the only motivator I needed, but during the pandemic I started to hear from more and more students who were struggling to graduate because of academic and financial difficulties. This is when I began to question how much help I was really giving.
In my role as a career counselor, I helped students process their decisions about choosing a major and career. I worked at a university with a high population of first-generation, low-income students, and I found a huge amount of satisfaction in helping these students achieve economic mobility.
I spoke with some students who, though they were the first in their families to go to college, could expect to graduate with qualifications to be an engineer, where the starting salary is close to $70,000.
However, I also met with students facing a crossroads, like the students who needed to change majors years into their undergraduate experience ― and address the accompanying debt. Like the student on LinkedIn, they expressed anxiety over lengthening their time to graduation while accumulating more student loans, and dread over the prospect of not getting a degree at all.
While some managed to move to a more fitting major, others realized that switching was not a feasible option. Thus, instead of graduating with a degree to help them increase their qualifications for a career, they left the university prematurely and saddled with debt.
Some students take leaves of absence from school for medical or family emergencies, and are not able to return. For those who do persist to graduation, many can still expect to have some amount of debt. A degree does not guarantee economic mobility in the way my students once believed.
Seeing students leave with neither degree nor ability to pay back their loans unsettled me. As someone whose job was funded by student fees, I felt the weight of my paycheck on the backs of these departing students, and I began to question why I was doing this work at all.
While in my role, I had the privilege of helping students find jobs post-graduation, but I felt at a loss to help those I met with who ultimately decided to leave the university. I found myself wishing I had a path forward for them that did not mean lengthening time to graduation or putting them in a position where leaving school felt like their only option.
So when I found myself weighing the cost of day care for my newborn and the benefit of returning to the work I’d loved, the scales tipped in a way I did not expect. I gave my notice, and I am not sure if I will return.
We must confront the reality that a student’s return on investment is not what it once was. The gratification of helping students is what motivated me, more than the paycheck or benefits. But there are limits to my ability to help in a system that makes substantial debt an inevitable part of affording college for the majority of students.
With the recent news attention to the student loan crisis, I realize that we can no longer unambiguously claim to be serving the “whole student” when we know our students accumulate tens of thousands of dollars of debt, with up to 40% of students having no degree to show for it.
Our students need help. We say we want students to achieve economic mobility, and yet we start many of them off in their careers, degree or no degree, with a net negative wealth.
While student loan forgiveness and income-based repayment plans are a step in the right direction, students are graduating with an average $28,950 in loans, a number that increases yearly by 1.961%. Instead of increasing the amount of loans a student receives in their financial aid package, Dartmouth replaced loans with alternate funds: scholarship and grant money funded by an $80 million endowment. Endowments that focus on lowering the out-of-pocket cost for students, and significantly limiting the offering of loans, would be another path toward improving the system and allowing us to live up to our charges as Student Personnel.
While we are given the responsibility of guiding students through their own financial journeys, many of us struggle financially ourselves, sometimes to pay back our own student loans for the graduate degrees required to work in many of our roles. Meanwhile, we’re told to “measure our time in students’ lives, not hours,” as a professor in my masters program once told me.
To continue in the profession, I need to have hope that the system will allow students the chance to succeed ― financially and otherwise.
The recent loan forgiveness policy is giving us some hope, but more drastic measures to reduce the out-of-pocket cost to students would have an even greater impact. Only then can we begin to believe that our work is “for the students” again. And perhaps both my former student and I can find ourselves on campus again, too.
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The Biden administration is likely to reinstitute the Gainful Employment (GE) rule, a federal regulation which aims to kick low-value higher education programs off federal student aid. Critics of GE point out, quite correctly, that the rule is unfair because it exempts degree programs at public and private nonprofit colleges. Some argue that Congress should apply GE to all of higher education. While this would be a step in the right direction, “GE for all” would still fall short of protecting students from low-quality higher education, particularly at the graduate level.
How Gainful Employment tries to hold programs accountable
As currently proposed, GE would subject higher education programs to a two-part test; programs must pass both “prongs” to continue receiving federal funding. One part compares program completers’ earnings to those of the median early-career high school diploma holder in the same state. This provision is more applicable to short-term certificate programs. As I explain in a previous post, the test unfairly penalizes some postsecondary certificate programs that provide their students with a moderately positive return on investment.
But for the degree programs that would be newly subject to GE if Congress applied it to all programs, the second part of the test is the more relevant. To run the second part, the Department of Education estimates degree completers’ annual loan payments, assuming borrowers with bachelor’s and master’s degrees repay over 15 years. For a program to continue receiving federal funding, students’ estimated loan payments must be less than 8% of their median annual earnings.
However, the Biden administration’s version of GE includes an “escape hatch” for high-debt programs such as master’s degrees. The Department of Education also divides estimated annual loan payments by students’ median discretionary income, which is equal to median annual income minus $18,735. If this ratio is below 20%, the program passes the test even if the “standard” payment-to-earnings ratio exceeds 8%.
Most low-quality master’s degrees would survive “GE for all”
Consider the master’s degree in journalism at Columbia University. My estimates of return on investment in higher education figure that students who complete this program are worse off by over $90,000, since the increase in lifetime earnings resulting from this degree is not enough to compensate students for the cost of tuition and time spent out of the labor force. This is a perfect example of a program that taxpayers should no longer fund.
Students in Columbia’s journalism program graduate with median debt of $72,000, which translates to an annual loan payment of $6,771. With median annual earnings of $56,000, the standard payment-to-earnings ratio is 12%, greater than the 8% failing threshold. But the loan payment-to-discretionary earnings ratio is 18%, less than the 20% passing threshold for this metric. This program passes the GE rule despite the fact that the Department of Education estimates loan payments will consume 12% of students’ annual income.
Master’s degrees are among the worst investments in higher education. Two in five master’s degrees leave their students worse off financially, according to my estimates. But thanks partially to the discretionary earnings “escape hatch” in GE, just 6% of master’s degrees would lose their federal funding if GE were applied to all programs.
These facts suggest that an accountability agenda for federally-funded higher education programs must be more than “GE for all.”
Policymakers should address the master’s degree bubble
Master’s degrees are one of the most important contributors to the problems in our student loan system. Graduate degrees account for a rising share of federal student loans. (43% in 2020 versus 33% in 2010) and graduate borrowers are expected to repay a lesser share of their loan obligations than undergraduates. Moreover, enrollment in master’s degree programs is rising as universities exploit loose federal student loan subsidies to make some easy cash. Addressing the student loan crisis must include addressing graduate student lending.
As I argue in a new report, policymakers could make two incremental changes to the GE framework to improve its power to target low-value graduate degrees. First, annual loan payments for master’s degrees should be calculated with an amortization period of 10 years, down from the current 15. This is more justified given the short duration of master’s degree programs; it would also increase estimated annual loan payments and lead more master’s degree programs to fail GE. Second, policymakers should drop the discretionary earnings “escape hatch” and require programs to prove their value on the basis of the standard payment-to-earnings ratio alone. Both of these changes would revoke federal funding for more master’s degrees programs without financial value.
However, a bolder agenda would end the federal role in graduate student lending entirely. The argument for government control of student loans rests on the idea that 18-year-old undergraduates without credit histories would not be able to secure non-usurious education loans on the private market. But this argument does not apply to 20-something graduate students. A fully private market for graduate loans would provide more accountability for low-value master’s degrees, since private lenders would refuse to finance programs where students have little chance of paying back their loans.
More accountability for federally-funded colleges and universities is welcome, but the Biden administration’s proposed Gainful Employment rule is flawed. As it stands now, GE would unfairly penalize trade schools while letting low-quality master’s degree programs off the hook. Policymakers should desire the opposite: we should enable students to pursue high-quality vocational programs but limit subsidies for expensive master’s degrees that feed credential inflation and confer few useful skills. “Gainful Employment for all” is rooted in laudable instincts. But the details need work.
It has become clear that many of the colleges and universities that the federal government funds do not provide their students with a strong enough return on investment to repay their loans. Without stronger accountability for taxpayer-funded higher education, there is no hope of solving the student loan crisis for the long term. Fortunately, policymakers on both sides of the aisle are actively considering how to ensure that federal funding only flows to higher education programs with decent earnings outcomes.
The Biden administration proposes reviving “Gainful Employment”
Earlier this year, the Department of Education released a proposed framework for a “Gainful Employment” (GE) regulation that aims to terminate low-value programs’ access to federal grant and loan funding. Programs subject to GE—which include postsecondary certificate programs and degree programs at proprietary colleges—would have to prove two things in order to maintain access to funding. First, their graduates’ ratio of typical loan payments to median earnings must be below a certain threshold. Second, their graduates must earn more the median early-career high school diploma holder in the same state.
It’s encouraging that the Biden administration is thinking about ways to hold taxpayer-funded programs accountable for their outcomes. But higher education accountability policy has high stakes. Programs which fail the Gainful Employment rule are extremely likely to shut down without federal funding. Even small changes to GE’s design have the capacity to reshape American higher education.
Most criticism of GE rightly focuses on its limited scope. Only degree programs at proprietary colleges, along with certificate programs at any school, are held accountable under the rule. This leaves students who are seeking degrees at public and private nonprofit colleges unprotected, despite the fact that these students represent the vast majority of college enrollment. This double standard is the most fundamental problem with GE as proposed.
Problems with the GE framework
But aside from GE’s well-documented double standard problem, there are other issues with the framework that have received less attention, as I explore in a new research paper. Foremost among these is the rule’s treatment of postsecondary certificate programs enrolling mostly women.
GE aims to measure whether a higher education program leaves its students financially better off. Thus, the rule compares the earnings of people who complete a given postsecondary education program to those of early-career high school graduates. On its face, this test seems appropriate. Why should a program receive federal funding if it cannot raise its graduates’ earnings above those of the typical high school diploma holder?
But the comparison is not quite apples-to-apples. As Kristin Blagg points out, most people with only a high school diploma are male. But graduates of key certificate programs such as medical assisting are up to 90% female. A gender earnings gap exists within all educational strata: men typically earn more than women with the same level of education. In fact, men with only a high school diploma earn more than women with some college experience but no four-year degree. The proper counterfactual for a predominantly female certificate program is not the median high school graduate, but a predominantly female group of high school graduates.
My organization, the Foundation for Research on Equal Opportunity, has published an analysis of return on investment for postsecondary certificate programs. The analysis compares students’ earnings to demographically similar high school graduates rather than all high school graduates. It finds that many predominantly female programs provide their graduates with a real, albeit modest, increase in lifetime earnings. But because the women who complete these programs tend to earn less than (mostly male) early-career high school graduates, the programs are likely to fail GE and have their federal funding revoked should the rule go into effect.
By my calculations, almost 70% of postsecondary certificate programs in medical assisting will fail GE as written, along with 60% of certificate programs in dental support services. But the majority of failed programs in both of these fields still increase their students’ lifetime earnings by a substantial margin.
Fixing the GE rule
GE could thus inadvertently deprive tens of thousands of lower-income women of promising pathways to upward mobility. At a time when students are increasingly skeptical of the four-year-college model, policymakers should encourage vocational programs, not shut them down. Medical assisting in particular can be a career stepping-stone to high-paying jobs such as registered nursing. Moreover, defunding 70% of medical assisting programs could have a catastrophic impact on the health care system.
Fortunately, there’s an easy fix: lower the earnings threshold in GE to 85% of its current level. Programs would fail GE if their graduates’ earnings are below 85% of the median early-career high school diploma holder in their state. This modification would allow most certificate programs that provide real financial value for their students to continue receiving federal support. However, the threshold is still high enough to terminate truly low-value or scam programs.
The Biden administration’s enthusiasm for higher education accountability is welcome. But with such high stakes, it’s important to get the details right. A simple modification to the proposed GE framework would dramatically improve its effectiveness as an accountability tool. An effective GE rule would also provide a starting point from which Congress could develop a more comprehensive accountability system and apply it to all programs.
The federal Department of Education launched a website Friday night allowing those with outstanding student loans to begin submitting applications for debt relief.
The department is accepting applications in the beta, or test, launch “to help us refine our processes ahead of the official form launch,” said a statement on the site.
The site will allow loan forgiveness applicants to begin signing up before the website is formally unveiled later this month, possibly as early as next week, when the forms will begin to be processed. The operation is slated to run through Dec. 31, 2023.
Applications for loan forgiveness are available at StudentAid.gov, which was functioning Friday night.
The portal will be available on and off during the beta test, according to The Washington Post, which was the first to report it.
President Joe Biden announced his student debt relief program in August.
Pell Grant recipients, who make up the majority of borrowers, would be eligible for an additional $10,000 in debt relief. The overall plan is expected to help more than 40 million people with outstanding student loans.
It took us far too long to get to this point, so I implore the Biden administration to do everything in its power to prevent the student loan debt forgiveness movement from already entering its flop era.
In August, to my pleasant surprise, President Joe Biden announced the cancellation of up to $20,000 in student loan debt for certain borrowers ― fulfilling a campaign pledge that people like me had noted did not feel like a priority of hisadministration.
“People can start to finally crawl out from under that mountain of debt to get on top of their rent and utilities, to finally think about buying a home or starting a family or starting a business,” Biden said at the White House in remarks detailing the plan. “And by the way, when this happens, the whole economy is better off.”
That amount is still arguably kind of cheap compared to, say, the annual defense budget, but to Biden’s credit, it’s nonetheless historical. More importantly, it’s designed to benefit Black people who hold student loan debt — people who are already bombarded by other systemic social and economic disparities.
Biden’s plan to forgive at least $20,000 in individual debt may not cure everyone’s financial woes, but it will change so many lives for the better — as long as it actually works out as designed.
On Tuesday, the White House unveiled a preview of the application for people with federal loans who qualify for Biden’s plan, but there is reason to worry about how this rollout will go.
For starters, when Biden unveiled his plan, the White House said it would “advance racial equity.” And that declaration is now the subject of a lawsuit seeking to stop debt forgiveness from happening.
The suit, filed by the Wisconsin-based Brown County Taxpayers Association last week, claims that Biden’s plan violates the 14th Amendment’s equal protection clause because there is an “explicit racial motivation” on the administration’s part. The group also argues that the plan violates the constitutional separation of powers by usurping “the constitutional authority of Congress” and the Administrative Procedures Act, which determines how federal agencies develop and issue regulations.
“By creating and implementing a federal program with an improper racial motive, Defendants violated the Constitution’s guarantee of equal protection of the laws, which among other things, prohibits federal spending based on race,” the lawsuit claims.
The plaintiffs’ stated goal is to promote “individual freedom and citizen responsibility; limited government that is fiscally responsible, transparent, and accountable to the people; and economic policy that encourages free markets.”
That’s Republican jargon for “tax cuts and write-offs for the wealthy are cool, but poor people need to stop looking for government handouts and get stock tips.”
The week before that suit was filed, six Republican-led states sued the administration with the same goal of blocking the debt relief plan from going into effect ― their argument being that it’s “patently unfair,” and that anyway Biden lacks the authority to execute it.
Arkansas Attorney General Leslie Rutledge, who is leading the group of haters, said in an interview: “It’s patently unfair to saddle hard-working Americans with the loan debt of those who chose to go to college. The Department of Education is required, under the law, to collect the balance due on loans. And President Biden does not have the authority to override that.”
Since these suits have been filed, the Biden administration has already scaled back the parameters of who qualifies for relief ― meaning millions of borrowers are now ineligible for forgiveness.
The White House hasn’t explicitly said it’s acting in response to the lawsuits, but the connection feels obvious. And indeed, perhaps it’s a good idea to minimize potential liabilities as these various suits seek the attention of a Supreme Court dominated by conservatives. For now, though, the Biden administration should concentrate on the best ways to implement the program. Based on how things are going thus far, their efforts could use some focus.
Are the servers ready? Please don’t let this be a harbinger of Obamacare all over again.
Meanwhile, there is a loan relief FAQ page up, and according to White House officials, the application itself will be “simple and straightforward.”
It won’t require documents and will be made widely accessible, officials say. However, there is not yet a timetable for when the application will be made available.
Education Secretary Miguel Cardona tweeted last month that the application would be ready in early October.
“We don’t have an announcement to make on the launch date,” a White House official said on a call with reporters, according to a USA Today article published Tuesday.
White House press secretary Karine Jean-Pierre was asked about the delay during a press briefing on Tuesday.
“It’s taking some time, but the Department of Education is very much focused on this, and as soon as we have information on when that date will be for application signup, we will share that,” she said.
It will be Mariah Carey holiday music time before you know it. Time is of the essence. What are they doing over there?
And there is not enough pushback from the White House and Democrats about these Republican-led suits trying to obstruct the administration’s plan.
They want young people and nonwhites to vote at “presidential election year” levels for the upcoming midterms, and there is no messaging around the fact that Republicans are trying to block student loan forgiveness? We’re close to the holiday shopping season. How is it that I can keep hearing about this bipartisan infrastructure bill every five seconds, but not about Republicans hating debt forgiveness and abortion?
Free advice for the president and his fold: Figure out how to better inform people that while you can’t control gas prices, you can erase your miserable student loan payment plan if Republicans get out of your way.
It’s a winning argument, as long as it’s used ― and as long as there’s a functional website with an actual application for Americans to complete.
Teachers, government workers and people employed by nonprofits have only days remaining to apply for a one-time waiver that could help them erase or reduce their student debt.
The so-called “limited Public Service Loan Forgiveness waiver” was designed by the Biden administration last year to fix a major problem with a long-running program designed to ease the college debt of public servants. Under the waiver, public sector workers can apply to receive credit for past repayments that haven’t previously qualified for loan relief.
The deadline for applying for the waiver is October 31 — which means public workers have only about three weeks remaining to secure the relief.
President Biden’s student-loan relief effort, which will erase up to $20,000 in student debt for qualified borrowers, has received significant attention, but there’s been less of a spotlight on the administration’s efforts to help public servants with their college debt burdens.
The Public Service Loan Forgiveness program was set up in 2007 with a noble goal: To forgive the student debt of Americans who work in public service jobs — as teachers, government employees or in nonprofits — for at least 10 years. But the program became notorious for its byzantine regulations, as well as misleading guidance from some loan-servicing companies that hampered the ability of many public servants to get relief.
For instance, a 2018 report from the Government Accountability Office, a government watchdog, found that while 1 million people had applied for the program, only 55 people at that time had actually received debt relief.
One reason for the dismal results: People who had consolidated their student loans learned that their payments didn’t count toward the program, leaving them out of luck.
What does the waiver do?
The waiver reverses some of the restrictions on which types of loans and payments qualify for the program.
The Department of Education says that “any prior period of repayment will count as a qualifying payment, regardless of loan program, repayment plan or whether you made the payment in full or on time.”
For instance, people who consolidated their loans will now be able to count their payments toward the program. The Biden administration estimates this will help 550,000 workers who previously hadn’t qualified due to loan consolidation.
Previously, some loan payments were disqualified if they were off by even a penny or paid a day or two late, the Education Department said last year. The waiver means that those payments will now count toward the program.
Still, there is one major type of loan that doesn’t qualify for the waiver: Parent PLUS loans. These are loans taken out by parents of students to pay for their children’s education. Only loans taken out by students qualify for the waiver.
How many people have qualified for the waiver so far?
Almost 190,000 public servants have had their student loans forgiven through the waiver, according to lawmakers citing government data.
Many more borrowers could qualify for the program, but may not be aware of the waiver.
How do I find out if I qualify?
The Department of Education has a website where you can learn about the program’s requirements, which remain complicated.
One important restriction is that you’ll have to have worked for a qualifying employer, such as a public school or government agency, to get approval for the waiver. Only payments that were made while you were working for a qualified employer will count.
For instance, if you worked as a public school teacher for one year, but then switched to a for-profit school, only the repayments made while you worked for the public school will count toward the loan forgiveness.
The latter was created in 2018 to help people who were mistakenly enrolled in the wrong repayment plan and thus didn’t qualify for the Public Service Loan Forgiveness program.
Could the waiver be extended?
The Department of Education says the waiver will only be available until October 31, but a group of lawmakers are asking the administration for more time.
On Thursday, dozens of lawmakers asked U.S. Education Secretary Miguel Cardona to extend the waiver until July 1, 2023.
In an October 6 letter to Cardona, the lawmakers, including House Majority Leader Chuck Schumer, a Democrat from New York; and Senator Elizabeth Warren, a Democrat from Massachusetts, asked for more time, noting that the data “indicates that only a fraction of the public servants who are eligible for PSLF have utilized the waiver.”
