Feds cancel $10 billion in student loans for public employees while Biden considers a decision about overall debt.
A government program intended to encourage individuals to participate in public service has approved more than 175,000 people to receive a total of $10 billion in student loan debt forgiveness, according to the Education Department.
The data, which were released on Tuesday, came to light as President Joe Biden is anticipated to announce whether or not the federal government will forgive $10,000 in debt for debtors paying less than $125,000 per year as soon as Wednesday. Changes to the program for public sector workers still represent some of the greatest chunks of debt that the federal government will cancel, even if the $10 billion number is still a small portion of what is anticipated to be eliminated.
Furthermore, it's a portion of the $32 billion in student loan debt that the Biden administration has previously discharged through previous debt reduction initiatives. For about 208,000 borrowers who attended ITT Technical Institute between January 2005 and September 2016, the federal government most recently cancelled over $4 billion in federal loans.
Miguel Cardona, the secretary of education, stated that the $10 billion in forgiveness for more than 175,000 public employees announced today "shows that the Biden-Harris administration's efforts to cut red tape are turning the Public Service Loan Forgiveness program from a promise broken into a promise kept."
What is the program for loan forgiveness in the public service?
Borrowers have a lengthy history of having trouble utilizing the Public Service Loan Forgiveness program. Those who work for the government or nonprofit organizations generally qualify. That may include public defenders and physicians in addition to educators and firefighters.
Borrowers must participate in the program, work full-time in an approved public service position, and make 10-year payments on their federal student loans. After ten years, the federal government would then cancel any outstanding debt.
In reality, it wasn't that simple to use.
Because of the stringent requirements for the program, the federal government for years denied almost all candidates. It mandated, for instance, that borrowers carry direct loans, which are loans held directly by the government, even though many borrowers didn't realize they had until they had been making payments on the wrong kind of loan for years. Incorrect repayment plans or late payments were other reasons why borrowers were turned down.
How was the Public Service Loan Forgiveness program modified under the Biden administration?
The Biden administration relaxed several of the program's criteria in October, and now borrowers can receive credit for the majority of prior payments as long as they can demonstrate that they were employed in a qualified position at the time. The agency first said that the waiver will completely eliminate the debt of 27,000 more borrowers in addition to wiping off the debt of 22,000 borrowers.
It might be challenging to keep track of the number of people who are qualified for the program because the definition of public service is dependent on an individual's employer rather than their profession.
The application period for asking to have some restrictions exempted expires on October 31; however, on Tuesday, more than 100 politicians and other trade associations signed a petition pleading with the government to extend it until July 1, 2023. (The Education Department advised potential applicants to submit their applications before the waiver expires.)
Sens. Robert Menendez of New Jersey, Patty Murray of Washington, who serves as the chair of the senate's education committee, Tim Kaine of Virginia, Kirsten Gillibrand of New York, and Reps. John Sarbanes of Maryland, Joe Courtney of Connecticut, Jahana Hayes of Connecticut, and Kathy Manning of North Carolina were the leaders of the effort.
They cited data from the Student Borrower Protection Center, a borrower advocacy organization, which suggested that just 15% of the 9 million potential applicants had begun the application process.
"We urge that the Department extend this deadline in order to guarantee that all public workers with federal student loans are able to benefit from this historic waiver," they wrote. "The deadline of October 31, 2022 to qualify for PSLF under the waiver program is quickly approaching.
The signatories of the letter also asked the Biden administration to reach out to more potential program-eligible borrowers.
In order to "urge public workers around the nation to take advantage of temporary adjustments" to the program, the Education Department announced that it will conduct four "days of action" in the upcoming weeks. And on Wednesday, Biden will write to federal workers to let them know of the program's modifications and how to apply.