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The total amount of student loan debt in the U.S. currently stands at $1.6 trillion — more than the debt from credit cards and car loans combined. Following President Biden's announcement on student loan forgiveness, many borrowers could soon see large portions of their debt burdens wiped out. Ali Rogin reports on the new policy's impact.
Today, the total amount of student loan debt in the U.S. stands at a staggering $1.6 trillion. That's more debt from credit cards and car loans combined. But following President Biden's recent sweeping announcement on student loan forgiveness, many borrowers could seem soon see large portions of their massive debt burdens wiped out. Ali Rogin has more on the impact of President Biden's new policy.
43 million people could now see some level of student loan forgiveness, and 8 million people with their income already on file with the Department of Education could see their student loans automatically forgiven. Here's how some people with student debt are reacting to the news.
Jahan Riza, Product Owner, Sotheby’s:
I have about $6,700 left in federal student loans. So, I'm very excited to have that forgiven.
Richelle Brooks, School Principle:
I have about $30,000 worth of interest. So yes, I that $10,000 won't cover my interest as it stands up now.
Juan Antonio Sorto, First Generation College Student:
You know, I have a student debt that is over $200,000. It's not like I went out there and spent it on clothing. It's not that we went out there and just started splurging on this debt, right?
Clint Nowicke, Clinical Psychologist:
You know, I've gotten to plenty of arguments, especially online about useless degrees and whatnot. My degree is not useless. My degree saves lives.
Evelyn Moon, Director of Education, Good Grief: My partner's student loan balance will be completely wiped out, which is huge, because he graduated from county college a few years ago. And for myself, it's not just the loan forgiveness, but it's also the changes to the income driven repayment plan, which means now, we're actually trying to save for retirement.
Meghan Singh, Bilingual School Psychologist:
It's an intergenerational impact for me that my mom is getting forgiveness, my brother is having his loan cut in half. At this point, I will have some forgiveness from it.
So, there's lots of excitement out there. Also, some skepticism. Here's what we know about who is eligible, individuals with income under $125,000. Married couples making less than twice that. If you received a Pell Grant, you qualify for $20,000 in debt cancellation. Other loan recipients qualify for up to $10,000 in forgiveness. But beyond those parameters, there's a lot we don't know.
To help us with those outstanding questions, I'm joined by Cory Turner, he's a Correspondent and Senior Editor for NPRs Education Team. Corey, we just went through the round rules of eligibility for this program, who were the people that are set to benefit the most?
Cory Turner, Education Correspondent, NPR:
The roughly 1/3 of the student loan portfolio who have $10,000 in debt or less. There are an awful lot of people when you add in folks who are going to benefit a little more because they had a Pell Grant. According to the White House, roughly 20 million borrowers should qualify to have their debts completely erased, borrowers are going to have to jump through a couple of hoops to get this done. It is not a sure thing.
That's I want to draw you out on because there's so many millions of people who could be applying for this loan forgiveness, most of them are going to have to apply online, they're going to fill out applications that we haven't actually seen yet. And they have to do that on a website that hasn't actually gone public yet. So how is that all going to work? It seems like it could get messy?
The Education Department says the application should be up and available early October. They say it will be, "simple." Essentially, what the department needs is your income information. I have spent the last four years of my reporting career at NPR, investigating programs like the Teach Grant, Public Service Loan Forgiveness, Total and Permanent Disability Discharge, and most recently, Income Driven Repayment.
And all four of those programs were designed with good intentions that made promises about loan forgiveness, and ultimately failed many borrowers. So, I don't want to say that I'm cynical. But I think borrowers at the very least need to approach this process with patience, and a little grace.
As you know, there's been a pause on student loan repayments because of the pandemic, that's set to expire in January. We've also heard from the White House, that they're advising folks to get their applications done and submitted by mid-November, in order to avoid having to start making payments. That really just doesn't seem like a lot of time, based on your experience with other programs, are folks going to be left behind?
If we assume that the White House is right that about 8 million people already have income information on file via department, then anytime you're asking 35 million people to fill out an application to get a benefit, I think it's inevitable that some folks are going to be left behind.
Is there a way for folks to check to see if they're among those 8 million people?
So, my understanding is those 8 million people are folks who were enrolled in income driven repayment programs, because that program requires that borrowers submit income information. What I would recommend, though, is that borrowers be proactive, they can go to ed.gov/subscriptions, and sign up for email updates from the department, notifying them of new updates to this program moving forward. Always better to be safe than sorry.
Cory, we know that another element of what the Biden administration is trying to do is propose a new income-based loan repayment program that essentially lets borrowers pay a smaller amount every month than they're currently allowed to base on their income. Can you tell us a little more about that proposal? And also, how likely is it to become reality?
For folks who will still have debts leftover, this could be a really big deal, because it does a couple of things. It reduces discretionary income from 10% to 5%. So, it will bring down your monthly payment. Presumably, another big deal is it allows for forgiveness after 10 years instead of 20 years, if your loans are below a certain threshold.
One more really important thing it does. And I've heard from lots of borrowers for whom this has been an issue in the past, we know that roughly half of borrowers who were previously in income driven repayment plans, earn so little income that they qualify for a $0 monthly payment. Well, the problem previously is, if you're making a $0 payment, interest is ballooning. Under this new proposed program, interest will be covered by the federal government. So, borrowers in income driven repayment plan in this plan will no longer see interest blow up their debts even as they're following the rules of the plan.
And that seems like something that definitely got overshadowed by the kind of shiny object that was the announcement about loan forgiveness. Critics say that this — the forgiveness program obviously doesn't really address the long-term issues related to college affordability. What's the Biden administration's track record on that so far?
The critics are right, because it doesn't. I mean, affordability is like a coin. It has two sides. You have the borrowers who are trying to afford college and this plan helps them considerably. On the other side is the cost of college and this plan does absolutely nothing to lower the cost of college or to lower colleges price tags.
I will say that is something that is much more difficult to do. I'm not sure how the President could possibly do that through executive authority, the way he has done this, that is something that is likely going to require an all-in effort from Congress.
Cory Turner, Correspondent with NPR's education team, thank you so much for your time.
You're welcome, Ali.
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Ali Rogin is a correspondent for PBS News Weekend and a foreign affairs producer at the PBS NewsHour.
Andrew Corkery is a national affairs producer at PBS News Weekend.
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