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Tag: Student Loans

  • ‘I’m paycheck to paycheck.’ I make $350K a year, but have $88K in student loans, $170K in car loans and a mortgage I pay $4,500 a month on. Do I need professional help?

    ‘I’m paycheck to paycheck.’ I make $350K a year, but have $88K in student loans, $170K in car loans and a mortgage I pay $4,500 a month on. Do I need professional help?

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    I’m the first of my generation to own a home and the first to earn this much annually and don’t want to mess this up. How, specifically, can a financial adviser help me?


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    Question: By the end of 2022, I will have made $350,000 before taxes as the sole breadwinner and head of household. This is a great starting point and I’m very aware how blessed we are to be in this position, but I’m always looking ahead on how to improve. I currently have $88K left in student loans (originally close to $150K) and very little credit card debt (less than $2K with more than $25K available). I have two auto loans totaling $170K for two electric vehicles at 5% interest.

    I’ve recently been offered a $200K HELOC at 9%, which would help me bring down some of my monthly payments and do some small home repairs and improvements, but I want to make the right moves. And I’ve also been presented with a few long-term real estate investment opportunities that are rental properties out of state and are currently bringing it 10-12% ROI.  But my biggest concern is that after taxes, 401(k) contributions, bills, savings and mortgage ($4,500), on paper I’m paycheck to paycheck. I’d like to use this HELOC to consolidate debt while also participating in some of these investment opportunities. I’m the first of my generation to own a home and the first to earn this much annually and don’t want to mess this up. How, specifically, can a financial adviser help me? (Looking for a new financial adviser too? This tool can help match you with an adviser who might meet your needs.)

    Answer: You have a few questions to tackle here, so let’s go one by one. The first being the HELOC. Yes, HELOCs can be a good way to consolidate debt, but the rate you’re being offered isn’t favorable, as average HELOC rates are a little over 6%. “I would ask if 9% is the best rate you can get, because it appears a bit high,” says Chris Chen, certified financial planner at Insight Financial Strategists. What’s more, “I would like you to consider the potential impact that our Fed policy and inflation are having on interest rates, as HELOCs usually have variable interest rates and we’re in an environment with rising rates. You may start at 9% and end up significantly higher,” says Chen. 

    What’s more, your student loans, car loans and mortgage are all likely less than 9%, so it’s not likely that consolidation via a HELOC would save you money. “You may want to start somewhere different, like the snowball method, where you focus on one loan, usually the smallest one, and direct all of your resources to pay off that loan while maintaining payments on the others,” says Chen. This method could work to finish off your student loans and maybe one of your car loans, to start with. 

    Have an issue with your financial adviser or have questions about hiring a new one? Email picks@marketwatch.com.

    As for those real estate investments, what do you really know about those returns? “With regards to real estate investments, I assume that the 10% to 12% ROI you speak of is the income that you would be getting from the investment. If so, that’s very high and often when you get a return that is significantly higher than the norm, there’s something else that makes the investment less desirable. Be careful,” says Chen. (Looking for a new financial adviser too? This tool can help match you with an adviser who might meet your needs.)

    Certified financial planner Kaleb Paddock says you may actually want to work with a money coach before you work with a financial adviser. Whereas a financial adviser assists with developing investment strategies and long-term financial plans, a money coach offers a more educational experience and focuses on shorter term goals for money management. “A money coach will help you with paying off all of your debts, maximize your cash flow and help you create systems and processes to direct your money proactively,” says Paddock. 

    While having a high income is great, there’s a concept called Parkinson’s Law, which essentially states that your spending will always rise to meet your income no matter how high that income rises, explains Paddock. “Working with a money coach will help you defeat Parkinson’s Law, eliminate your debt and then enable you to supercharge your investing and life planning with a financial adviser,” says Paddock.

    A financial adviser could help too, and Danielle Harrison, certified financial planner at Harrison Financial Planning, says to look for one who does comprehensive financial planning and can help you create a more holistic plan for your money. “They can assist you in the creation of both short and long-term goals and then help you by giving guidance on the financial decisions and opportunities you are presented with,” says Harrison.

    A financial adviser would also help you take a long-term approach to your money and help you create a spending plan where you don’t feel like you’re living paycheck to paycheck on a $350,000 salary. “Everyone has blind spots when it comes to their finances, so finding a competent financial partner can be invaluable,” says Harrison. (Looking for a new financial adviser too? This tool can help match you with an adviser who might meet your needs.)

    Have an issue with your financial adviser or have questions about hiring a new one? Email picks@marketwatch.com.

    *Questions edited for brevity and clarity.

    The advice, recommendations or rankings expressed in this article are those of MarketWatch Picks, and have not been reviewed or endorsed by our commercial partners.

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  • Supreme Court Justices Keep Student Loan Cancellation Blocked For Now

    Supreme Court Justices Keep Student Loan Cancellation Blocked For Now

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    WASHINGTON (AP) — The Supreme Court on Thursday said the Biden administration program to cancel student loans will remain blocked for now, but the justices agreed to take up the case in late winter.

    The court’s decision to hear arguments relatively quickly means it is likely to determine whether the widespread loan cancellations are legal by late June.

    The administration had wanted a court order that would have allowed the program to take effect even as court challenges proceed. But as a fallback, it suggested the high court hold arguments and decide the issue.

    Biden’s plan promises $10,000 in federal student debt forgiveness to those with incomes of less than $125,000, or households earning less than $250,000. Pell Grant recipients, who typically demonstrate more financial need, are eligible for an additional $10,000 in relief.

    The Congressional Budget Office has said the program will cost about $400 billion over the next three decades.

    More than 26 million people already applied for the relief, with 16 million approved, but the Education Department stopped processing applications last month after a federal judge in Texas struck down the plan.

    The Texas case is one of two in which federal judges have forbidden the administration from implementing the loan cancellations.

    In a separate lawsuit filed by six states, a three-judge panel of the 8th U.S. Circuit Court of Appeals in St. Louis also put the plan on hold, and that case before the Supreme Court.

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  • Student loan payments may not resume until August. Here’s what borrowers need to know

    Student loan payments may not resume until August. Here’s what borrowers need to know

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    President Joe Biden and Secretary of Education Miguel Cardona.

    The Washington Post | The Washington Post | Getty Images

    It’s been almost three years since people with federal student loans have had to make a payment on their debt, and the Biden administration recently announced that borrowers have even more time.

    In March 2020, when the coronavirus pandemic first hit the U.S. and crippled the economy, the U.S. Department of Education suspended federal student loan payments and the accrual of any interest, providing borrowers extra breathing room during an especially hard financial period.

    Resuming the bills for more than 40 million Americans has proven to be a massive and tricky task, and the holiday on the payments has now spanned two presidencies and been extended eight times.

    Even before the public health crisis, when the U.S. economy was enjoying one of its healthiest periods in history, problems plagued the federal student loan system, with about 25% — or more than 10 million borrowers — in delinquency or default.

    Experts say hardship rates are likely to only increase with the setbacks of the pandemic, the current sharp rise in prices on everyday goods and the fact that borrowers have gotten used to a budget sans student loans.

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    White House officials had hoped to ease the transition back into life with student loan payments by first forgiving a large swath of the debt.

    Yet not long after President Joe Biden announced his plan to cancel up to $20,000 in student loans for millions of Americans, a number of conservative groups and Republican-backed states attacked the policy in the courts. Two of these lawsuits have been successful in at least temporarily halting the relief, and the Education Department closed its loan cancellation application portal this month.

    With so much still up in the air, the Biden administration has pushed back the due date on student loan bills again.

    “It would be deeply unfair to ask borrowers to pay a debt that they wouldn’t have to pay, were it not for the baseless lawsuits brought by Republican officials and special interests,” Education Secretary Miguel Cardona said in a statement.

    Here’s what borrowers need to know about getting more time.

    So when exactly will payments resume?

    It’s a little complicated.

    With previous extensions of the payment pause, the Education Department provided one date for when student loan bills would resume.

    This time, it left things a little more open-ended, saying that the bills will restart only 60 days after the litigation over its student loan forgiveness plan resolves and it’s able to start wiping out the debt.

    Therefore, the soonest the bills could become due again would be late January, if the legal challenges clear up by the end of November, although that’s unlikely.

    If the Biden administration is still defending its policy in the courts by the end of June or if it’s unable to move forward with forgiving student debt by then, it said, the payments will pick up at the end of August.

    So borrowers have at least two more months without the bills and at most nine.

    What if I was behind on my student loans?

    The U.S. government has extraordinary collection powers on federal debts and it can seize borrowers’ tax refunds, wages and Social Security checks if they fall behind on their student loans.

    During the extended payment pause, however, the Education Department is also ceasing all collection activity, it said.

    Borrowers in default on their student loans should also look into the recently announced “Fresh Start” initiative, in which they’ll have the opportunity to return to a current status.

    Should I still hold off on refinancing?

    Higher education expert Mark Kantrowitz had previously recommended that, despite the chance of picking up a lower interest rate, federal student loan borrowers should refrain from refinancing their debt with a private lender while the Biden administration deliberated on how to move forward with forgiveness. Refinanced student loans wouldn’t qualify for the federal relief.

    Now that borrowers know how much in loan cancellation is coming — assuming the president’s policy survives in the courts — borrowers may want to consider the option now, Kantrowitz said. With the Federal Reserve expected to continue raising interest rates, he added, you’re more likely to pick up a lower rate with a lender now than later.

    Still, Kantrowitz added, it’s probably a small pool of borrowers for whom refinancing is wise.

    It would be deeply unfair to ask borrowers to pay a debt that they wouldn’t have to pay, were it not for the baseless lawsuits brought by Republican officials and special interests.

    Miguel Cardona

    Secretary of the U.S. Department of Education

    He said those include borrowers who don’t qualify for Biden’s forgiveness — the plan excludes anyone who earns more than $125,000 as an individual or $250,000 as a family — and those who owe more on their student loans than the Biden administration plans to cancel. Those borrowers may want to look at refinancing the portion of their debt over the relief amounts, Kantrowitz said.

    Betsy Mayotte, president of The Institute of Student Loan Advisors, warned borrowers to first understand the federal protections they’re giving up before they refinance.

    For example, the Education Department allows you to postpone your bills without interest accruing if you can prove economic hardship. The government also offers loan forgiveness programs for teachers and public servants.

    “Refinancing can generate a lower interest rate than federal student loan rates,” Mayotte said. “But your rate doesn’t matter if you lose your job, have sudden medical expenses, can’t afford your payments and find that defaulting is your only option.”

    What should I do with the extra cash during the pause?

    Boy_anupong | Moment | Getty Images

    With headlines warning of a possible recession and layoffs picking up, experts recommend that you try to salt away the money you’d usually put toward your student debt each month.

    Certain banks and online savings accounts have been upping their interest rates, and it’s worth looking around for the best deal available. You’ll just want to make sure any account you put your savings in is FDIC-insured, meaning up to $250,000 of your deposit is protected from loss.

    And while interest rates on federal student loans are at zero, it’s also a good time to make progress paying down more expensive debt, experts say. The average interest rate on credit cards is currently more than 19%.

    Could it make sense to still pay my student loans?

    If you have a healthy rainy-day fund and no credit card debt, it may make sense to continue paying down your student loans even during the break.

    With interest temporarily suspended, any payments will go directly toward your debt’s principal, potentially shortening your repayment timeline, said Anna Helhoski, a student loan expert at NerdWallet.com.

    “You could continue making payments each month by contacting your servicer, or save the money and make a lump sum payment on your highest-interest loan before interest accrues again when repayment restarts,” Helhoski said.

    There’s a big caveat here, however. If you’re enrolled in an income-driven repayment plan or pursuing public service loan forgiveness, you don’t want to continue paying your loans.

    That’s because months during the government’s payment pause still count as qualifying payments for those programs, and since they both result in forgiveness after a certain amount of time, any cash you throw at your loans during this period just reduces the amount you’ll eventually get excused.

    One more possibility: If you find yourself in a financially comfortable position and it doesn’t make sense for you to continue paying down your student loans, you may want to donate the extra cash.

    You can make sure an organization is reputable using tools such as the Better Business Bureau’s Wise Giving Alliance or Charity Navigator, Helhoski said. If the charity is registered as a 501(c)(3), you’ll even be eligible for a tax break.

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  • Biden Grants Reprieve on Student Loans. Get Ready to Resume Payments Anyway.

    Biden Grants Reprieve on Student Loans. Get Ready to Resume Payments Anyway.

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    Student-loan borrowers got a break this week, but that doesn’t mean they can spend more for the holidays.

    The Biden administration on Wednesday extended a pause on student loan payments, yet borrowers should prepare for the eventual resumption of payments by saving the amount they would otherwise owe, experts advise.

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  • Biden Pauses Student Loan Payments While Debt Relief Plan Is Tied Up In Court

    Biden Pauses Student Loan Payments While Debt Relief Plan Is Tied Up In Court

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    President Joe Biden announced Tuesday that his administration is extending its pause on student loan payments through June 30, 2023, in light of Republicans waging a court battle over his debt forgiveness program.

    “It isn’t fair to ask tens of millions of borrowers who are eligible for relief to resume their student debt payments while the courts consider the lawsuit,” Biden said in a video statement.

    Biden began rolling out his highly anticipated student loan relief plan last month, offering to forgive $10,000 in student loans to individuals earning below $125,000 a year, or to people whose households earn below $250,000 annually. But after several Republican-led states filed lawsuits to block the program from going forward, a conservative federal appeals court issued a stay temporarily stopping the Biden administration from acting on the plan while the courts consider the lawsuit.

    That was just days after people started applying for debt relief, creating mass confusion for borrowers.

    “Callous efforts to block student debt relief in the courts have caused tremendous financial uncertainty for millions of borrowers who cannot set their family budgets or even plan for the holidays without a clear picture of their student debt obligations, and it’s just plain wrong,” Secretary of Education Miguel Cardona said in a statement Tuesday.

    It would be “deeply unfair to ask borrowers to pay a debt that they wouldn’t have to pay, were it not for the baseless lawsuits brought by Republican officials and special interests,” he continued.

    Biden’s administration also asked the U.S. Supreme Court last week to step in and lift the lower court’s injunction on the loan relief program.

    The appeals court’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 wrote in the request.

    The Supreme Court has yet to issue a decision.

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  • What borrowers need to know while student loan forgiveness is in limbo

    What borrowers need to know while student loan forgiveness is in limbo

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    Olga Ryazantseva | Istock | Getty Images

    After applying for student loan forgiveness, some borrowers are receiving what looks like good news from the U.S. Department of Education.

    “We reviewed your application and determined that you are eligible for loan relief under the Plan,” according to a letter sent out by Education Secretary Miguel A. Cardona.

    Yet the notice goes on to say that “Unfortunately, a number of lawsuits have been filed challenging the program, which have blocked our ability to discharge your debt at present.”

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    Not long after President Joe Biden announced his sweeping plan to cancel up to $20,000 in student debt for millions of Americans, a number of conservative groups and Republican-backed states attacked the policy in the courts. Two of these lawsuits have been successful in at least temporarily halting the relief, and the Education Department closed its loan cancellation portal this month.

    The Biden administration believes its plan is legal and will prevail in the courts, but for now, the financial future of millions of Americans remains uncertain.

    Here’s what we know about the legal delays to the policy.

    Delays could drag on for months or more

    In a recent filing with the Supreme Court, the Biden administration warned that the legal battles over its forgiveness plan could drag into 2024 if the cases weren’t decided on an expedited basis.

    However, such a long delay is unlikely, said higher-education expert Mark Kantrowitz.

    He pointed out that the Education Department hopes its loan servicers will apply the relief to people’s accounts within two weeks after it gives it the green light to do so. That means if it’s allowed to continue forgiving student debt, it can act quickly and other legal challenges “will be rendered moot.”

    Around 26 million borrowers have already applied for the forgiveness. Those who haven’t done so yet shouldn’t fret, Kantrowitz said. The government will just reopen its application portal again if its plan succeeds in the court.

    Loan payment pause may be extended again

    The Biden administration is reported to be considering extending the payment pause on student loan bills yet again. That relief policy has been in effect since the start of the coronavirus pandemic.

    It would be the eighth time borrowers have been given more time to pause payments, but it may be the White House’s only option with so much still in the air, experts say.

    “Restarting repayment now will be messy because the Biden Administration has promised forgiveness to tens of millions of borrowers who will be upset about having to make payments on loans that they expected to be forgiven,” Kantrowitz said.

    Indeed, a top official at the Education Department recently said student loan default rates could dramatically spike if its loan forgiveness plan is thwarted, “due to the ongoing confusion about what they owe.”

    Borrowers have other aid options

    Those unnerved by the possibility of student loan forgiveness falling through may take some comfort in a number of other options that may offer help.

    The Biden administration recently announced a new repayment plan for certain struggling borrowers that would cap monthly bills at 5% of their discretionary income. It should go into effect next July, Kantrowitz said. (Use one of the calculators at Studentaid.gov or Freestudentloanadvice.org to find the repayment plan most affordable for you.)

    The Public Service Loan Forgiveness program, which allows those who work for the government and certain nonprofits to get their debt cleared after a decade, is also getting a number of improvements.

    If you’re unemployed or dealing with another financial hardship, you can put in a request for an economic hardship or unemployment deferment. Those are the ideal ways to postpone your federal student loan payments, because interest doesn’t accrue under them.

    If you don’t qualify for either, though, you can use a forbearance to continue suspending your bills. Just keep in mind that interest will rack up and your balance will be larger — possibly much larger — when you resume paying.

    And for those in the most difficult situations, it may soon be easier to discharge your student debt in bankruptcy.

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  • What to know if you’ve applied for student loan forgiveness

    What to know if you’ve applied for student loan forgiveness

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    NEW YORK — President Joe Biden’s plan to provide up to $20,000 in federal student loan forgiveness has been blocked by two federal courts, leaving millions of borrowers wondering what happens next. The administration plans to appeal. Here’s what to know if you’ve applied for relief:

    WHAT HAPPENS NOW?

    While the application for relief has been taken down from the Federal Student Aid website, applications that have already been filed are on hold while the appeal works its way through the courts.

    “Courts have issued orders blocking our student debt relief program,” the Education Department said on its site. “As a result, at this time, we are not accepting applications. We are seeking to overturn those orders.”

    A federal judge in Texas ruled that the plan overstepped the White House’s authority. Before that, a federal appeals court in St. Louis put the plan on temporary hold while it considers a challenge from six Republican-led states.

    Still, advocates believe the administration will succeed in court.

    “We’re really confident they’re going to find a way forward to cancel people’s debt,” said Katherine Welbeck at the Student Borrower Protection Center.

    Experts say student loan forgiveness has the potential to end up before the Supreme Court, meaning this could be a lengthy process.

    WHEN DO PAYMENTS RESUME?

    Most people with student loan debt have not been required to make payments during the coronavirus pandemic, but payments are set to resume, along with the accrual of interest, in January.

    Biden previously said the payment pause will not be extended again, but that was before the courts halted his plan. He’s now facing mounting pressure to continue the pause while the legal challenges to the program play out.

    WHAT IF I ALREADY APPLIED FOR RELIEF?

    More than 26 million people applied for cancellation over the course of less than a month, according to the Education Department. If you’re one of them, there’s nothing more you need to do right now.

    About 16 million people already had their applications approved, according to the Biden administration. Yet because of court actions, none of the relief has actually been delivered.

    The Education Department will “quickly process their relief once we prevail in court,” White House Press Secretary Karine Jean-Pierre said.

    WHAT IF I HAVEN’T YET APPLIED FOR RELIEF?

    For those who have not yet applied, the application for debt cancellation is no longer online. But there are still steps people can take to make sure their debt is canceled, should the appeal be successful, according to Welbeck.

    “People should still check their eligibility,” she said. “As news changes, people should look out for updates from the Department of Education.”

    You can sign up to receive the latest from the Federal Student Aid website here.

    WHO QUALIFIES, SHOULD THE APPEAL SUCCEED?

    The debt forgiveness plan announced in August 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, for a total of $20,000.

    Borrowers qualify if their loans were disbursed before July 1.

    About 43 million student loan borrowers are eligible for some debt forgiveness, with 20 million who could have their debt erased entirely, according to the administration.

    ARE THERE OTHER PATHWAYS TO CANCELLATION?

    For those who have worked for a government agency or a nonprofit organization, the Public Service Loan Forgiveness program offers cancellation after 10 years of regular payments, and some income-driven repayment plans cancel the remainder of a borrower’s debt after 20 to 25 years, according to Welbeck.

    “Borrowers should make sure they’re signed up for the best income-driven repayment plan possible,” Welbeck said. In July, the administration will be reviewing and adjusting some of the accounts enrolled in these plans. You can find out more about those plans here.

    Borrowers who have been defrauded by for-profit schools may also apply for borrower defense and receive relief on that account, Welbeck said.

    SHOULD I RESUME PAYMENTS WHEN THE PAYMENT PAUSE IS LIFTED?

    Advocates, including the Student Borrower Protection Center, are still urging the president to extend the pandemic-era payment freeze, arguing that students are entitled to the promised cancellation before the January repayment date arrives.

    That said, Welbeck recommends logging on to your account, making sure you know who your servicer is, your due date, and whether you’re enrolled in the best income-driven repayment plan, as you resume making payments.

    The Student Borrower Protection Center is holding regular webinars on how to follow the changing policy in the coming months. You can sign up for those here.

    If your budget doesn’t allow you to resume payments, it’s important to know how to navigate the possibility of default and delinquency on a student loan. You can read more about those here. Both can hurt your credit rating, which would make you ineligible for additional aid.

    If you’re in a short-term financial bind, you may qualify for a deferment or a forbearance. With either of these options, you can talk to your servicer about ways to temporarily suspend your payments. You can learn more about those options here.

    WHAT ELSE SHOULD I KNOW?

    Watch out for scams and get information only from trusted sources such as the Federal Student Aid site of the Department of Education.

    IS IT POSSIBLE THE DEBT WON’T BE CANCELLED?

    Yes. The issue of debt forgiveness is now before the courts.

    The administration is not saying whether or not it’s exploring other options for canceling debt if it loses its appeals. But advocates point to other ways the debt might be forgiven, including through the Higher Education Act.

    HOW DO I PREPARE FOR STUDENT LOAN PAYMENTS TO RESTART?

    Betsy Mayotte, President of the Institute of Student Loan Advisors, encourages people not to make any payments until the pause has ended.

    “I’ve been telling people to pretend they’re paying their student loan, but to put it into an interest-bearing account for now if you’re able,” she said. “Then you’ve maintained the habit of making the payment, but earning a little bit of interest as well. There’s no reason to send that money to the student loans until the last minute of the zero percent interest rate.”

    Mayotte recommends that borrowers use the loan simulator tool at StudentAid.gov or the one on TISLA’s website to find the repayment course that best fits their needs. Once you plug in your information, it tells you what your monthly payment would be under each available plan, as well as what the long-term costs amount to.

    “I really want to emphasize the long-term,” Mayotte said. “Oftentimes I see people who might be having a financial struggle. They’ll find a lower monthly repayment option, and then, ‘Set it and forget it.’”

    Mayotte encourages people to switch to higher payments if their financial situation stabilizes, so the loan doesn’t end up costing more in the long run.

    Other useful tips that can shave costs for borrowers:

    — If you sign up for automatic payments, the servicer takes a quarter of a percent off your interest rate, according to Mayotte.

    — Income-driven repayment plans aren’t right for everyone. That said, if you know you will eventually qualify for forgiveness under the Public Service Loan Forgiveness Program, it makes sense to make the lowest monthly payments possible, as the remainder of your debt will be cancelled once that decade of payments is complete.

    — Re-evaluate your monthly student loan repayment at tax time, when you already have all your financial information in front of you. “Can you afford to increase it? Or do you need to decrease it?” Mayotte said. “Always look at your long-term student loan management strategy.”

    — Break up payments into whatever ways work best for you, whether that means two installments during the month, so it’s not a large lump sum at the end or the beginning, or setting aside cash in envelopes for designated purposes.

    “Even if it’s an extra $5 or $20 a month, that’s a good strategy,” Mayotte said. “If they can afford to pay a little more per month — the more you pay and faster you pay, the less you’ll pay in the long run.”

    Mayotte gave one example of a borrower with debt from higher education in the six figures. She was recently married, and she and her husband and kids decided to save every five dollar bill in a cookie jar to go towards the loans.

    “That added up to a few more hundred dollars each quarter,” Mayotte said. “Everybody has a different financial personality. There are those who are really good at budgets. There are people who need to play games and trick themselves. And people shouldn’t judge each other people’s financial personalities.”

    —-

    The Associated Press receives support from Charles Schwab Foundation for educational and explanatory reporting to improve financial literacy. The independent foundation is separate from Charles Schwab and Co. Inc. The AP is solely responsible for its journalism.

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  • Supreme Court again declines to block Biden’s student loan relief plan

    Supreme Court again declines to block Biden’s student loan relief plan

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    Supreme Court nominee and U.S. Court of Appeals Judge Amy Coney Barrett on Capitol Hill in Washington, October 21, 2020.

    Ken Cedeno | Reuters

    The Supreme Court on Friday rejected a second request to block the Biden administration’s student loan debt relief program.

    Justice Amy Coney Barrett denied an emergency application to block the program brought Tuesday by the Pacific Legal Foundation, a conservative legal group, on behalf of two borrowers in Indiana.

    On Oct. 20, Barrett rejected a similar request from the Brown County Taxpayers Association in Wisconsin.

    Barrett is responsible for such applications issued from cases in the 7th U.S. Circuit Court of Appeals, which includes Indiana and Wisconsin.

    Friday’s decision has little practical effect. For now, student loan forgiveness remains on hold from a challenge brought by six Republican-led states. An appeals court judge in the 8th Circuit in October granted the states’ emergency petition to stay the plan pending consideration of the states’ appeal.

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    Since the White House in August unveiled its plan — to cancel $10,000 in student loans for most borrowers and up to $20,000 for those who received Pell Grants for low-income families — it has faced at least six lawsuits.

    Close to 26 million Americans have already applied for student loan forgiveness, and the Biden administration has approved 16 million of the requests, the White House said Thursday. The administration has continued to encourage borrowers to apply for relief despite the recent challenges.

    Caleb Kruckenberg, an attorney at Pacific Legal Foundation, in an emailed statement said, “We’re disappointed by today’s denial but will continue to fight this program in court.”

    “Practically since this program was announced, the administration has sought to avoid judicial scrutiny,” Kruckenberg said. “Thus far they have succeeded. But that does not change the fact that this program is illegal from stem to stern.”

    ‘Standing’ remains an issue for forgiveness challenges

    The main obstacle for those hoping to foil the president’s action has been finding a plaintiff who can prove they’ve been harmed by the policy, experts say.

    “Such injury is needed to establish what courts call ‘standing,’” Laurence Tribe, a Harvard law professor, recently told CNBC. “No individual or business or state is demonstrably injured the way private lenders would have been if, for instance, their loans to students had been canceled.”

    In that light, Barrett’s decision to reject the Pacific Legal Foundation’s request isn’t surprising, said higher education expert Mark Kantrowitz.

    “There were very few substantive differences between their original lawsuit and the new lawsuit, which spells a lack of legal standing,” he said.

    In the Pacific Legal Foundation case, Indiana-based plaintiffs Frank Garrison and Noel Johnson said that they would be financially harmed if some of their student debt was automatically forgiven because they would incur state taxes on that canceled debt.

    Indiana is one of several states that has said forgiveness would be taxable at the state level, and potentially the county level.

    Both Garrison and Johnson are lawyers; Garrison works for the Pacific Legal Foundation and Johnson for the Public Interest Legal Foundation. They are pursuing relief through the public service loan forgiveness program, which allows those who work for the government or specific nonprofits to get their debt canceled after 10 years, or 120 payments. PSLF forgiveness is not considered taxable income.

    After the initial lawsuit, the Education Department said that borrowers can opt out if they do not want to have their loans forgiven.

    Student loan borrowers ‘in limbo’

    As legal challenges mount, financial advisors say borrowers are left wondering where student loan forgiveness stands.

    “The interference of the courts is really troubling because people are looking for certainty with what’s happening with their student loans,” said Ethan Miller, a certified financial planner and founder of Planning for Progress in the Washington, D.C., area. Miller specializes in clients with student loans.

    “There was a plan that clearly outlined the steps,” he said. “And yet everyone’s been put in limbo.”

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  • Education Department overhauls federal student loan system, aiming to make it ‘simpler, fairer and more accountable’

    Education Department overhauls federal student loan system, aiming to make it ‘simpler, fairer and more accountable’

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    The U.S. Department of Education announced on Monday sweeping new changes to the federal student loan system, including additional consumer protections for borrowers and limits on the amount of interest that can accrue on the debt.

    “Today is a monumental step forward in the Biden-Harris team’s efforts to fix a broken student loan system and build one that’s simpler, fairer, and more accountable to borrowers,” said U.S. Secretary of Education Miguel Cardona, in a statement.

    The new regulations should make it easier for students who’ve been defrauded by their schools to get their student loans canceled by the government through the borrower defense process, and allows for the Education Department to come to a determination about these requests for relief as a group, instead of requiring each borrower to individually prove that they were sufficiently harmed or misled by their school.

    More from Personal Finance:
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    Under the rules, higher education institutions that accept federal student aid will be banned from requiring borrowers to sign mandatory pre-dispute arbitration agreements or to waive their ability to participate in a class-action lawsuit over their borrower defense claim.

    The Biden administration will also curb the practice of interest capitalization — in which unpaid interest is added to the borrower’s principal.

    The public service loan forgiveness program, which allows public servants and those who work for certain nonprofits to get their debt canceled after a decade, will also get an overhaul. Months that previously didn’t qualify toward a borrowers’ debt relief, including those when they were in a economic hardship deferment, will be counted. Previously ineligible late payments will also now qualify.

    These changes will go into effect on July 1, 2023.

    Biden administration officials described these improvements as necessary and urgent to fix a system plagued by problems.

    Prior to the coronavirus pandemic, when the U.S. economy was enjoying one of its healthiest periods in history, only about half of borrowers were in repayment. A quarter — or more than 10 million people — were in delinquency or default, and the rest had applied for temporary relief for struggling borrowers, including deferments or forbearances. These grim figures led to comparisons to the 2008 mortgage crisis.

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  • Justice Department Defends Student Debt Relief Plan After Court Pauses Action

    Justice Department Defends Student Debt Relief Plan After Court Pauses Action

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    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.

    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.

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  • President Biden’s Student Loan Forgiveness Plan Temporarily Halted By Appeals Court

    President Biden’s Student Loan Forgiveness Plan Temporarily Halted By Appeals Court

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    Late Friday evening, a federal appeals court put a temporary halt to President Joe Biden’s student debt forgiveness program, preventing loans from being canceled until the court reviews the legal challenge, yet the White House is still encouraging applications. 

    In response to the court’s temporary hold, White House press secretary Karine Jean-Pierre gave a statement: “Tonight’s temporary order does not prevent borrowers from applying for student debt relief at studentaid.gov – and we encourage eligible borrowers to join the nearly 22 million Americans whose information the Department of Education already has. It also does not prevent us from reviewing these applications and preparing them for transmission to loan servicers.” 

    Up to $20,000 of debt per applicant could be canceled under the new plan; the Congressional Budget Office estimated that the program would cost about $400 billion over the next 30 years. 

    The case was brought by six Republican-led states—Missouri, Arkansas, Kansas, Nebraska, South Carolina, and Iowa—that contend that Biden doesn’t have the authority to grant such sweeping loans without the approval of Congress. In response, the government said because of a 2003 federal law, Higher Education Relief Opportunities for Students (HEROES) Act, the Department of Education has “broad authority to manage the federal student financial aid programs.” 

    A district court dismissed the suit earlier this week, saying the states did not establish standing.

    On Thursday, in a separate attempt to block Biden’s loan forgiveness plan, Supreme Court Justice Amy Coney Barrett rejected an emergency request from a taxpayers’ association in Wisconsin to halt the policy.

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    Earlier on Friday, while giving remarks at Delaware State University, President Biden called out Republicans, including Rep. Marjorie Taylor Greene (R-Ga.), who criticized his loan forgiveness plan as being hypocritical as they had massive PPP loans forgiven: “Representative Vern Buchanan of Florida said our plan was ‘reckless.’ Guess how much he got in that program forgiven? $2,300,000.”

    Biden continued: “Ted Cruz, the great senator from Texas, said [the program] is for slackers who don’t deserve relief. Who in the hell do they think they are?”

    In response, Cruz tweeted that Biden had “unbelievable gall” for “comparing PPP loans…to loan forgiveness he gave to his Ivy League slacker fringe liberal base to buy their votes.”

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    As the Biden administration continues to face legal challenges, it has said it would not begin to cancel debt before Sunday, October 23. The deadline for the government to respond to the states’ filing is Monday, while the deadline for the states to reply to the government’s response is Tuesday.

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  • Biden Rips Lawmakers Who Pushed Billions In PPP Grants Now Bashing Student Debt Aid

    Biden Rips Lawmakers Who Pushed Billions In PPP Grants Now Bashing Student Debt Aid

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    President Joe Biden took off the gloves Friday in a speech pummeling Republican lawmakers who backed massive federal subsidies for business owners, including themselves, during COVID-19 but are now complaining about his student debt forgiveness program.

    “Who in the hell do they think they are?” Biden asked to applause during an appearance at Delaware State University, where 75% of students are recipients of Pell Grants geared toward lower-income college applicants.

    “I don’t want to hear it from MAGA Republicans who had hundreds of thousands of dollars of debts, even millions of dollars, in pandemic relief loans forgiven, who are now attacking me for helping working-class and middle-class Americans,” he railed.

    Georgia GOP Rep. Marjorie Taylor Greene and her husband “got over $180,000 in business loans forgiven,” Biden noted.

    He also bashed Sen. Ted Cruz (R-Texas) amid loud boos from the audience. Cruz had criticized the student debt program for helping people he dismissed as “slackers.”

    “Republican governors wrote me a letter saying this relief only helps ‘the elite few.’ Y’all know you’re the elite few? I knew you were really special, but no, you’re the elite few,” Biden added in a dig at the politicians.

    The application process for student debt relief that’s expected to aid some 40 million Americans was launched this week after surviving a court challenge. Supreme Court Justice Amy Coney Barrett rejected a challenge to Biden’s program by a Wisconsin taxpayers’ group.

    But late on Friday, a federal appeals court issued an administrative stay temporarily blocking the program. The 8th U.S. Circuit Court of Appeals issued the stay while it considers a motion from six Republican-led states to stop the loan forgiveness program and ordered the Biden administration not to act on the program while it considers the appeal.

    Biden has previously skewered critics of student debt relief for eagerly supporting the federal Paycheck Protection Program that forgave $742 billion dollars of $792 billion in loans handed out to business owners to help them weather the pandemic business downturn. The handouts weren’t restricted by a recipient’s wealth or income.

    Many of the same lawmakers attacking student debt relief also helped pass former President Donald Trump’s massive 40% tax cut for corporations in 2017.

    Biden’s program would provide up to $10,000 in standard debt cancellation for borrowers who earn less than $125,000 a year. Couples who file taxes jointly and earn less than $250,000 annually will also be eligible.

    Pell Grant recipients, who make up the majority of borrowers, would be eligible for an additional $10,000 in debt relief. The plan is expected to cost as much as hundreds of billions of dollars over the next 10 years.

    Twitter users weighed in approvingly after Biden took aim at Republicans like Cruz and Greene.

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  • Federal appeals court temporarily blocks Biden’s student loan forgiveness program

    Federal appeals court temporarily blocks Biden’s student loan forgiveness program

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    ST. LOUIS (AP) — A federal appeals court late Friday issued an administrative stay temporarily blocking President Joe Biden’s plan to cancel billions of dollars in federal student loans.

    The Eighth Circuit Court of Appeals issued the stay while it considers a motion from six Republican-led states to block the loan cancellation program. The stay ordered the Biden administration not to act on the program while it considers the appeal.

    The order came just days after people began applying for loan forgiveness. It was not immediately clear how the stay would impact those have already applied.

    The court set a deadline of Monday at 5 p.m. CDT for a response for a response from the Biden administration and a 5 p.m. Central Tuesday deadline for any replay from the appellants.

    See also: What are Pell grants? Biden student-loan forgiveness climbs to $20,000 for recipients of Pell grants.

    See also: ‘It’s $10,000 that’s on the line.’ Borrowers who used Pell grants decades ago can’t find proof and worry they will lose Biden’s relief.

    The attorneys for the Republican-led states had asked the court to reconsider their effort to block the Biden administration’s program to forgive the student loan debt.

    A notice of appeal to the Eighth U.S. Circuit Court of Appeals was filed late Thursday, hours after U.S. District Judge Henry Autrey in St. Louis ruled that since the states of Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina failed to establish standing, “the Court lacks jurisdiction to hear this case.”

    Separately, the six states also asked the district court for an injunction prohibiting the administration from implementing the debt cancellation plan until the appeals process plays out.

    Speaking at Delaware State University, a historically Black university where the majority of students receive federal Pell Grants, Biden on Friday said nearly 22 million people have applied for the loan relief in the week since his administration made its online application available.

    Also see: How to avoid being scammed when you apply for student-loan forgiveness

    The plan, announced in August, 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, will get an additional $10,000 in debt forgiven.

    The Congressional Budget Office has said the program will cost about $400 billion over the next three decades. James Campbell, an attorney for the Nebraska attorney general’s office, told Autrey at an Oct. 12 hearing that the administration is acting outside its authorities in a way that will cost states millions of dollars.

    The cancellation applies to federal student loans used to attend undergraduate and graduate school, along with Parent Plus loans. Current college students qualify if their loans were disbursed before July 1. The plan makes 43 million borrowers eligible for some debt forgiveness, with 20 million who could get their debt erased entirely, according to the administration.

    The announcement immediately became a major political issue ahead of the November midterm elections.

    Conservative attorneys, Republican lawmakers and business-oriented groups have asserted that Biden overstepped his authority in taking such sweeping action without the assent of Congress. They called it an unfair government giveaway for relatively affluent people at the expense of taxpayers who didn’t pursue higher education.

    Many Democratic lawmakers facing tough reelection contests have distanced themselves from the plan.

    Biden on Friday blasted Republicans who have criticized his relief program, saying “their outrage is wrong and it’s hypocritical.” He noted that some Republican officials had debt and pandemic relief loans forgiven.

    The six states sued in September. Lawyers for the administration countered that the Department of Education has “broad authority to manage the federal student financial aid programs.” A court filing stated that the 2003 Higher Education Relief Opportunities for Students Act, or HEROES Act, allows the secretary of education to waive or modify terms of federal student loans in times of war or national emergency.

    “COVID-19 is such an emergency,” the filing stated.

    The HEROES Act was enacted after the Sept. 11, 2001, terrorist attacks to help members of the military. The Justice Department says the law allows Biden to reduce or erase student loan debt during a national emergency. Republicans argue the administration is misinterpreting the law, in part because the pandemic no longer qualifies as a national emergency.

    Justice Department attorney Brian Netter told Autrey at the Oct. 12 hearing that fallout from the COVID-19 pandemic is still rippling. He said student loan defaults have skyrocketed over the past 2 1/2 years.

    Other lawsuits also have sought to stop the program. Earlier Thursday, Supreme Court Justice Amy Coney Barrett rejected an appeal from a Wisconsin taxpayers group seeking to stop the debt cancellation program.

    Barrett, who oversees emergency appeals from Wisconsin and neighboring states, did not comment in turning away the appeal from the Brown County Taxpayers Association. The group wrote in its Supreme Court filing that it needed an emergency order because the administration could begin canceling outstanding student debt as soon as Sunday.

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  • GOP-led states appealing dismissal of suit over loan relief

    GOP-led states appealing dismissal of suit over loan relief

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    ST. LOUIS — Attorneys for six Republican-led states are asking a federal appeals court to reconsider their effort to block the Biden administration’s program to forgive hundreds of millions of dollars in student loan debt.

    A notice of appeal to the Eighth U.S. Circuit Court of Appeals was filed late Thursday, hours after U.S. District Judge Henry Autrey in St. Louis ruled that since the states of Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina failed to establish standing, “the Court lacks jurisdiction to hear this case.”

    Separately, the six states also asked the district court for an injunction prohibiting the administration from implementing the debt cancellation plan until the appeals process plays out.

    President Joe Biden on Monday officially launched the application process for the debt cancellation program and announced that 8 million borrowers had already applied for loan relief during the federal government’s soft launch period last weekend. Biden was scheduled to discuss the program Friday in a speech at Delaware State University.

    The plan, announced in August, 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, will get an additional $10,000 in debt forgiven.

    The Congressional Budget Office has said the program will cost about $400 billion over the next three decades. James Campbell, an attorney for the Nebraska attorney general’s office, told Autrey at an Oct. 12 hearing that the administration is acting outside its authorities in a way that will cost states millions of dollars.

    The cancellation applies to federal student loans used to attend undergraduate and graduate school, along with Parent Plus loans. Current college students qualify if their loans were disbursed before July 1. The plan makes 43 million borrowers eligible for some debt forgiveness, with 20 million who could get their debt erased entirely, according to the administration.

    The announcement immediately became a major political issue ahead of the November midterm elections.

    Conservative attorneys, Republican lawmakers and business-oriented groups have asserted that Biden overstepped his authority in taking such sweeping action without the assent of Congress. They called it an unfair government giveaway for relatively affluent people at the expense of taxpayers who didn’t pursue higher education.

    Many Democratic lawmakers facing tough reelection contests have distanced themselves from the plan.

    The six states sued in September. Lawyers for the administration countered that the Department of Education has “broad authority to manage the federal student financial aid programs.” A court filing stated that the 2003 Higher Education Relief Opportunities for Students Act, or HEROES Act, allows the secretary of education to waive or modify terms of federal student loans in times of war or national emergency.

    “COVID-19 is such an emergency,” the filing stated.

    The HEROES Act was enacted after the Sept. 11, 2001, terrorist attacks to help members of the military. The Justice Department says the law allows Biden to reduce or erase student loan debt during a national emergency. Republicans argue the administration is misinterpreting the law, in part because the pandemic no longer qualifies as a national emergency.

    Justice Department attorney Brian Netter told Autrey at the Oct. 12 hearing that fallout from the COVID-19 pandemic is still rippling. He said student loan defaults have skyrocketed over the past 2 1/2 years.

    Other lawsuits also have sought to stop the program. Earlier Thursday, Supreme Court Justice Amy Coney Barrett rejected an appeal from a Wisconsin taxpayers group seeking to stop the debt cancellation program.

    Barrett, who oversees emergency appeals from Wisconsin and neighboring states, did not comment in turning away the appeal from the Brown County Taxpayers Association. The group wrote in its Supreme Court filing that it needed an emergency order because the administration could begin canceling outstanding student debt as soon as Sunday.

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  • Amy Coney Barrett Declines Request To Block Biden’s Student Loan Plan

    Amy Coney Barrett Declines Request To Block Biden’s Student Loan Plan

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    WASHINGTON (AP) — Supreme Court Justice Amy Coney Barrett on Thursday rejected an appeal from a Wisconsin taxpayers group seeking to stop the Biden administration’s student debt cancellation program.

    Barrett did not comment in turning away the appeal from the Brown County Taxpayers Association, which also has lost rounds in lower federal courts. The group wrote in its Supreme Court filing that it needed an emergency order to put the program on hold because the administration could begin canceling outstanding student debt as soon as Sunday.

    Barrett oversees emergency appeals from Wisconsin and neighboring states. She acted on her own, without involving the rest of the court.

    U.S. District Judge William Griesbach had earlier dismissed the group’s lawsuit, finding they didn’t have the legal right, or standing, to bring the case. A panel of appellate judges refused to step in with an emergency order.

    Eligible borrowers can apply to have up to $20,000 of debt canceled.

    Other legal challenges to the program are pending.

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  • Federal judge dismisses effort by 6 states to halt student-debt forgiveness plan

    Federal judge dismisses effort by 6 states to halt student-debt forgiveness plan

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    ST. LOUIS — A federal judge in St. Louis on Thursday dismissed an effort by six Republican-led states to block the Biden administration’s plan to forgive student loan debt for tens of millions of Americans.

    U.S. District Judge Henry Autrey wrote that because the six states — Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina — failed to establish they had standing, “the Court lacks jurisdiction to hear this case.”

    Suzanne Gage, spokeswoman for Nebraska Attorney General Doug Peterson, said the states will appeal. She said in a statement that the states “continue to believe that they do in fact have standing to raise their important legal challenges.”

    Democratic President Joe Biden announced in August that his administration would cancel up to $20,000 in education debt for huge numbers of borrowers. The announcement immediately became a major political issue ahead of the November midterm elections.

    The states’ lawsuit is among a few that have been filed. Earlier Thursday, Supreme Court Justice Amy Coney Barrett rejected an appeal from a Wisconsin taxpayers group seeking to stop the debt cancellation program.

    Barrett, who oversees emergency appeals from Wisconsin and neighboring states, did not comment in turning away the appeal from the Brown County Taxpayers Association. The group wrote in its Supreme Court filing that it needed an emergency order because the administration could begin canceling outstanding student debt as soon as Sunday.

    In the lawsuit brought by the states, lawyers for the administration said the Department of Education has “broad authority to manage the federal student financial aid programs.” A court filing stated that the 2003 Higher Education Relief Opportunities for Students Act, or HEROES Act, allows the secretary of education to waive or modify terms of federal student loans in times of war or national emergency.

    “COVID-19 is such an emergency,” the filing stated.

    The Congressional Budget Office has said the program will cost about $400 billion over the next three decades. James Campbell, an attorney for the Nebraska attorney general’s office, told Autrey at an Oct. 12 hearing that the administration is acting outside its authorities in a way that will cost states millions of dollars.

    The 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, will get an additional $10,000 in debt forgiven.

    Conservative attorneys, Republican lawmakers and business-oriented groups have asserted that Biden overstepped his authority in taking such sweeping action without the assent of Congress. They called it an unfair government giveaway for relatively affluent people at the expense of taxpayers who didn’t pursue higher education.

    Chris Nuelle, spokesman for Missouri Attorney General Eric Schmitt, said the plan “will unfairly burden working class families with even more economic woes.”

    Many Democratic lawmakers facing tough reelection contests have distanced themselves from the plan.

    The HEROES Act was enacted after 9/11 to help members of the military. The Justice Department says the law allows Biden to reduce or erase student loan debt during a national emergency. Republicans argue the administration is misinterpreting the law, in part because the pandemic no longer qualifies as a national emergency.

    Justice Department attorney Brian Netter told Autrey that fallout from the COVID-19 pandemic is still rippling. He said student loan defaults have skyrocketed over the past 2 1/2 years.

    The cancellation applies to federal student loans used to attend undergraduate and graduate school, along with Parent Plus loans. Current college students qualify if their loans were disbursed before July 1.

    The plan makes 43 million borrowers eligible for some debt forgiveness, with 20 million who could get their debt erased entirely, according to the administration.

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  • As A College Counselor, I Was Complicit In The Student Loan Crisis. Here’s Why I Quit.

    As A College Counselor, I Was Complicit In The Student Loan Crisis. Here’s Why I Quit.

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    “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.

    There has been an exodus of higher education staff from universities because of low pay and lack of flexibility, but I have not yet heard discussion of this dissonance as a contributing factor.

    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.

    Even with the possibility of student loan forgiveness for those who will not be excluded, the systemic problem persists: The cost of higher education is rising between 3% and 7% a year, and without sufficient pressure to keep those costs low, any blanket loan forgiveness policies will become less and less effective. Higher education costs have been passed on to students as state and local funding for higher education has waxed and waned.

    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.

    I knew compensation and flexibility were lacking when I chose this profession “for the students,” but what I didn’t know is that the system itself is not for them. It forces them into debt, sees an average of just 60% graduate, and pushes increasing costs on to them such that the year-to-year cost of a degree is challenging to anticipate.

    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.

    Do you have a compelling personal story you’d like to see published on HuffPost? Find out what we’re looking for here and send us a pitch.

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  • “Gainful Employment For All” Isn’t Enough To Hold Higher Education Accountable

    “Gainful Employment For All” Isn’t Enough To Hold Higher Education Accountable

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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.

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    Preston Cooper, Contributor

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  • Student loan forgiveness application website goes live

    Student loan forgiveness application website goes live

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    WASHINGTON (AP) — President Joe Biden on Monday officially kicked off the application process for his student debt cancellation program and announced that 8 million borrowers had already applied for loan relief during the federal government’s soft launch period over the weekend.

    He encouraged the tens of millions eligible for potential relief to visit studentaid.gov and touted the application form that the president said would take less than five minutes to complete. An early, “beta launch” version of the online form released late Friday handled the early stream of applications “without a glitch or any difficulty,” Biden said.

    “It means more than 8 million Americans are — starting this week — on their way to receiving life-changing relief,” Biden, accompanied by Education Secretary Miguel Cardona, said Monday. The president called his program a “game-changer” for millions of Americans saddled with student loan debt.

    The number of borrowers who applied during the testing period already amounts to more than one-fourth of the total number of applicants the administration had projected would submit forms, underscoring the popularity of the program and the eagerness of borrowers to receive the debt relief. Some 8 million borrowers who have income information already on file with the Education Department would see their debt canceled without applying.

    Biden’s plan calls for $10,000 in federal student debt cancellation for those with incomes below $125,000 a year, or households that make less than $250,000 a year. Those who received federal Pell Grants to attend college are eligible for an additional $10,000. The plan makes 20 million eligible to get their federal student debt erased entirely.

    Biden promised to pursue widespread student debt forgiveness as a presidential candidate, but the issue went through more than a year of internal deliberation amid questions about its legality. His plan sparked intense debate ahead of the midterm elections, with Republicans and some Democrats saying it’s an unfair handout for college graduates.

    But on Monday, Biden offered a full-throated defense of his decision.

    “My commitment was if elected president, I was going to make government work to deliver for the people,” Biden said. “This rollout keeps that commitment.”

    He also took aim at Republican officials who have either criticized the plan or are working in court to defeat it.

    “Their outrage is wrong and it’s hypocritical,” Biden said. “I will never apologize for helping working Americans and middle class people as they recover from the pandemic.

    More on Student Loan Forgiveness- Here’s how you can apply for student loan forgiveness

    Biden on Monday said the White House has received more than 10,000 comments and calls of thanks from borrowers. Indeed, thousands took to social media to share the form, with many saying they submitted their applications with little trouble.

    The Biden administration has touted it as a “simple, straightforward” application. It asks for the borrower’s name, Social Security number, contact information and date of birth. It does not require income information but asks users to check a box attesting that they are eligible under the program’s income limits.

    That information will be checked against Education Department records to help identify applicants who are likely to exceed the income limits, the administration says. Those people will be asked for more information to prove their incomes.

    An estimated 1 million to 5 million people will be required to provide that extra documentation, the Education Department said in a recent submission to the White House’s Office of Management and Budget.

    Creating and processing the form is estimated to cost nearly $100 million, a figure that angered advocates who view the application as an unnecessary barrier. The form is meant to help exclude the roughly 5% of borrowers who exceed the income limits, but advocates say it could also deter some lower-income Americans who need the relief.

    Once the Education Department begins processing applications, borrowers should expect to see their debt forgiven in four to six weeks, officials say. Most applications submitted by mid-November will be processed by Jan. 1 — the day federal student loan payments are set to resume after being paused during the pandemic.

    Borrowers will be able to submit applications through the end of 2023.

    The Biden administration is pushing ahead with the debt cancellation even as it fights a growing number of legal challenges. Six Republican-led states are suing to block the plan, saying it oversteps Biden’s authority and will lead to financial losses for student loan servicers, which are hired to manage federal student loans and earn revenue on the interest.

    A federal judge in St. Louis is now weighing the states’ request for an injunction to halt the plan. In court documents, the Education Department has vowed not to finalize any of the debt cancellation before Oct. 23.

    Biden acknowledged Monday that litigation is ongoing but said his administration believes the lawsuits won’t ultimately affect the program.

    ___

    The Associated Press education team receives support from the Carnegie Corporation of New York. The AP is solely responsible for all content.

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  • “Gainful Employment” Could Shut Down Good Programs—Here’s How To Fix It

    “Gainful Employment” Could Shut Down Good Programs—Here’s How To Fix It

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    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.

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    Preston Cooper, Contributor

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