Student loan forgiveness isn’t dead yet
The Good News: Kurt’s Loans to the Good Works in the First Round of IDR Review Helices During the Winter Soliton Season
The good news for Kurt was that the education department recently announced the first round of reviews, which would wipe out the loans of more than half a million people and it would continue to grow. All he had to do was wait for seven more months.
After Kurt hangs up, his wife, Lizzy, grabs a small, twist-top bottle of bubbly from the fridge, and they toast the email that says Kurt’s loans will soon be in his past — while his future sleeps quietly in the other room.
To qualify for forgiveness under the IDR do-over, a borrower needs to have been in repayment for 20 years, which is 240 monthly payments. By our count, Kurt had made 233, though that was a conservative estimate, ignoring a few months that had disappeared with servicers’ poor record-keeping.
“She’s lying on my chest on the couch and I can’t go back to sleep that fast,” Kurt says. I looked over at my email and saw the subject and it hit me, oh my gosh this is it!
Kurt got up in the middle of November with someone who had a cold. He lay down on the couch with her hoping she wouldn’t fall asleep.
Biden’s Grand Uncertainty Returned: How Many Loans Have Been Paired? A Conversation with Kurt Panton
“I am so close!” He laughed again. When you were scrolling down the spreadsheet, I was like, ‘please get to 480, please.’ I saw 233. And I said, ‘Nooo!’
Kurt and I hopped on Zoom again in August. As I showed them the spreadsheet I’d created, the baby sat on his lap, and he was about 10 months old.
I asked Kurt to give me every record of the payment he made at the end of our conversation. The plan was to manually tally his payments, all 19 years’ worth, to see if he qualified for this other kind of relief.
Kurt Panton had been paying off his loans for 19 years when we met. Under this do-over, he could technically qualify for loan forgiveness in one more year. Technically. No one comprehended how or when this would happen, and the U.S. Department of Education focused solely on Biden’s debt relief plan.
Two weeks after NPR released its investigation, the Biden administration committed to a sweeping IDR overhaul, promising to review the payment histories of millions of borrowers, find and fix these mistakes, and give borrowers retroactive credit toward IDR’s promise of loan forgiveness.
On top of that, advocates had been sounding the alarm for millions of borrowers who could have benefited from these repayment plans — like Kurt — but were never told about them or, worse, were put into forbearance instead.
The list of shocking problems that were hurting was revealed by NPR. NPR found that some loan servicers weren’t counting the payments so they didn’t know if a person qualified for forgiveness. Servicers miscount payments and don’t give borrowers credit.
Lower-income borrowers were supposed to benefit from the IDR plans by being able to calculate their monthly payments on their income. They were meant to be an engine of good and to keep struggling borrowers from defaulting on their loans.
Kurt and I both knew Biden’s grand plan for debt relief was not certain, so I was thinking of complicated formulas. And I wondered if Kurt’s loans might qualify for another, lesser-understood form of debt relief that did not have to survive the courts.
What did Kurt Panton say in 2022 when he moved to Miami, where he and Lizzy were born and raised in Germany
“That’s going to make an immediate effect,” he told me back then, “and I don’t have to sit here and think about whether I qualify under all these complicated formulas.”
“I’ve been so loyal to my payments,” Kurt told me in 2022. “I can’t even explain the outrage I feel when I look at comments on social media [about debt relief], and it’s like, ‘Well, you took out loans, you repay them!’ You know, this has been a serious financial debt to me. I do everything in my power to pay it back.
Kurt Panton has a age. They lived in Miami with their mother and brother. After graduating from college in 2003, Kurt taught high school until 2016, when he moved to Germany, married Lizzy, who is German, and tried his hand at copywriting.
Kurt Panton’s laugh, surprising and unguarded, erupts when you expect it — after his baby daughter, Pauline, babbles adorably. He confessed that he was frustrated with the federal student loan system.
The Failure of FAFSA and SAVE in 2024: A Year After the Partisan Knife is Throwing a Party on Debt Relief
The question for 2024 is whether that will change, and whether the department can muster the people, time and money required to turn its many high-stakes promises (from SAVE to Fresh Start to FAFSA) into functioning, concrete programs.
The Education Department told NPR that the resources they had received weren’t enough to implement the split as soon as they wanted.
There’s also this bill, passed by Congress and signed into law by President Biden in late 2022, that finally allows former spouses to separate loans they had consolidated while married. The move was a big win for many women who left abusive relationships only to find themselves still tied to their abusers’ student loan debts. While the law achieved the impossible – squeezing through Congress’ partisan eye of the needle – it has stalled in the queue of big ideas the Education Department is trying to implement with finite staff and a grinding budget crisis.
Case in point: Congress charged the department with overhauling the Free Application for Federal Student Aid. The form is usually released in October, in time for students to understand their federal financial aid options before getting acceptance letters from colleges. But this new, overhauled FAFSA has been delayed until December. That’s bad news for families. In a rush to finish the redesign, a mistake has been made that could potentially result in students and their families receiving less federal student aid.
Talk of funding and finger-pointing aside, it’s worth noting that the fight for broad debt relief (and now the negotiated rulemaking) cost the Education Department considerable time, energy and political capital – resources that could not then be spent smoothing the return to repayment.
The department recently announced, of the 22 million borrowers with bills due in October, 60% made a payment by mid-November. The Biden administration sources see the numbers as a win and knew they could have been worse. But no one’s throwing a party, considering more than 8 million borrowers did not make a payment on-time and FSA’s running out of money.
Some within the Biden administration feel that servicers are making a mess of the changes and hurting borrowers. Some sources within the administration say the Education Department wants the servicers to build an airplane, launch from a catapult, and be shamed when they fall.
We are a year later, and the crisis has arrived. The office of Federal Student Aid (FSA) has already had to tell loan servicers to scale back borrower support and may well do so again, if Congress doesn’t agree to a funding solution soon.
What has this budget crisis meant for borrowers? Last January, with no one yet required to make student loan payments, the risk to the system was abstract. Today, it’s crushing.
I began the year, back in January, with a story meant to sound an alarm: The federal agency overseeing the return to repayment, and responsible for implementing these seismic changes in policy, was facing the prospect of having to do it all with no extra funding.
These are seismic changes to the system. They are meant to make for a friendlier repayment system if they don’t result in immediate loan forgiveness.
The Biden administration has rolled out many repayment changes. The Fresh Start program aims to help students who are in default with their student loans. It’s easier for borrowers to get a better credit score with Fresh Start, because they have immediate access to the SAVE repayment plan, which is a welcome alternative to wage garnishment.
I teamed up with Planet Money’s Kenny Malone for a deep-dive episode into SAVE and what it will mean for borrowers in the long-run. You can hear it here.
Source: Student loan forgiveness isn’t dead yet, and other takeaways from 2023
Student Loans: The Great Year in Biden’s First Expansive Plan and the Great Year of Student Borrowers’ Misfortune
“America’s student loan system is broken,” said the Republican chair of the House Education Committee, Virginia Foxx of North Carolina, “and this reckless, inflationary, and illegal expansion of executive authority will all but ensure it’s doomed beyond repair.”
The SAVE plan doesn’t have interest that is greater than what a borrower can afford and exempts more of a borrowers income from the monthly payment math. Under previous plans, borrowers with low or $0 payments — too low to cover their monthly interest — saw that interest explode. That stops when you use SAVE.
On the same day, Biden announced a new path for student debt relief that was in line with today’s ruling. What does that mean? Many people assumed Biden was trying to save face.
On July 14th, after the Supreme Court ruled that the plan was unconstitutional, the Biden administration said it was going to wipe out $39 billion of debt for 804,000 borrowers.
This is a long, muddy process, and whatever debt relief emerges from it, likely in 2024, will feel smaller than Biden’s first, expansive proposal. Something will survive until it faces a new round of legal challenges.
He was and he wasn’t. The education secretary needs to cancel student debts, but the government has a process called negotiated rulemaking which it uses to explore that authority.
If the story of their 2023 could be written by the ghost of Herman Melville, he’d have plunged borrowers into the frigid depths, bound to a white whale big enough to embody the disappointment of millions of Americans who spent the first half of the year hoping to be free of their student loans, and the second half realizing they and their debts were still intertwined.
It was a great year with whale analogies aside. A year that will be studied for decades, as the inflection point between one unprecedented era – a pandemic payment pause punctuated by the U.S. Supreme Court’s scuttling of President Biden’s debt relief promises – and another – the rollout of sweeping new repayment policies just as millions of muddled borrowers return to a system hobbled by partisan bickering and budget cuts.
Many, perhaps most borrowers will tell you that 2023 was the year the idea of “student loan forgiveness” died atop the mahogany bench of the Supreme Court.
