It’s a great idea if your goal is to do very little.
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What I see being discussed on Reddit regarding refunds isn’t the PSLF forgiveness. Like you alluded to above, it’s people who continued paying on their loans even after the forbearance started in 2020. They are now requesting refunds of these payments in order to restore their balances to the maximum amount that they now qualify for in forgiveness. Once restored, their balances will be forgiven.
Ive seen tons of posts on the subject. People who paid off their loans in totality over the last few years are getting refunds on their payments to take maximum advantage of forgiveness.
If the ExO needed to come up with $500 B, then yes, congress would have to approve that budget. But no money is changing hands. This is an accounting adjustment on paper. No checks being written. The president has no budget so can’t order a program that requires the government to write a check. DACA had to be self funding and that’s why the applicants have to pay an application fee and it cannot be waived… An ExO couldn’t be issued to forgive private student loans because the Dept of Ed would have to pay private lenders the guarantee. Biden could declare Juneteenth a federal holiday because he didn’t need to write a check (even though a federal holiday actually costs the general budget big big bucks).
$500B (and I’ve read $300B) is not ‘lost’ immediately or even lost over 10 years. Many many many of the loans out there are on deferment, in default, will be forgiven under another program like PSLF or Income Based repayment. There will be savings because the number of loans with servicers will be reduced and those costs will be saved (even if a loan isn’t in a payment status, the services gets a monthly fee, even for doing nothing, collecting nothing, calling no one or even sending a bill).
The ‘pauses’ that were ordered by ExO caused money not to come in to the Dept of Ed for 2 years, including interest that was totally waived and will never be recovered. Congress didn’t have a problem with that being unauthorized or done through ExO. All the forgiveness programs that are out there and have been for many years and through many presidents have caused money to not come in to the Dept of Ed. The new proposed REPaYE program which will limit payments to 5% of discretionary income will cause money not to be repaid to the government, and in fact may cause a lot more than $10k from one borrower to not be collected; many will have a $0 payment but have their entire loan forgiven in 20 years, a loan that may be in excess of $100k without a single payment ever having been made. Those aren’t done by ExO but by Dept of Educ programs, but those aren’t specifically authorized by congress.
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Just a few things. The loan forgiveness plan was never designed as a fix for the high cost of college. It is simply offering help to those who currently have loans which are hard to pay due to the current state of the economy. The important thing to remember is the state of the current economy. It has no bearing on future college students. We can all argue if it is fair or not but like my dad used to say “timing is everything”.
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You mean the overheated economy with the incredibly tight labor market and 3.5% unemployment?
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Sure the unemployment rate is low, but the rent/mortgage rates are high, as are the cost of gas, groceries, heat, water… If someone made $20/hr at one of those many many jobs that are available, that’s $3300/mo. $1000 in rent, $500 in car or commuting expenses, $700 in taxes (depending on state), it is hard to squeeze a $250 payment out of that. (my daughter was paying $250 on her $22k balance prior to the pause)
My daughter could have applied for one of the income based repayment plans, but the interest continues to run on those loans and often the payment amount doesn’t cover the interest that is accruing. She didn’t want to be on such a plan for 20 years with the balance growing every day so she was paying as scheduled before the pause. It was really hard for her (and she didn’t/doesn’t make $20/hr).
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Great USEFUL information!
Thanks!
So here’s the problem-the major questions doctrine sets forth that agencies, such as the Dept of Education, can not through regulation determine issues of major economic or political significance-that is Congress’ job, as our elected representatives. The President accepts this, and is relying upon prior broad Congressional authorization in emergencies to alter and forgive the terms of the loans. The office of legal counsel, in DoJ, specifically sets forth this as the basis for the legality of the Executive Order.
It is a debateable position. Certainly a colorable legal claim, and one that deserves a day in court, which it will get. I would not predict success, but it is possible. The underlying question is not whether forgiveness is a good idea or not, but who gets to make that decision, Congress or the Executive branch.
All parties seem to acknowledge that this presents an issue of major economic or political significance, at least in part due to the cost of lost income to the federal government.
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Just to clarify, Congress did authorize Juneteenth as a federal holiday, which Biden signed into law. And the temporary federal “pause” on student loan payments was legally based upon the covid national emergency-as a short-term measure, it likely did not rise to the level of a major policy.
The other loan forgiveness programs (military, public health, etc) were either authorized separately by Congress or included in the Congressionally approved budget authorization bills.
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It is correct that any amount paid during the payment pause can be refunded, since those payments were voluntary. That does allow those amounts to be then forgiven, if the total loan balance is low enough to fall within the $10,000 (or $20,000 if the student had Pell as an undergraduate), and if the student had a qualifying AGI. The payment pause began March 13, 2020. So in a way, there is a way for a limited number of people who paid their loans to get forgiveness. Again, those payments had been voluntary, due to the payment pause.
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My son graduated with a B.A. last May with $20k debt–Perkins loans. My 1st impression on hearing about the $10k loan forgiveness (for non-Pell Grant–Fed loans) was “Nice!” After thinking about it a bit, my feelings are a little more muted:
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I’m no legal scholar, but no doubt there are going to be legal challenges here. Anybody who claims to know the outcome of that 100%, is lying or delirious.
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Any executive order can be done away with by the stroke of a pen by ANY future administration. It seems unfathomable that any president would have the nerve/balls/hutzpah to instantaneously reinstate billions of $s’ of debt to millions of people. You would think that would be evil, not to mention political suicide. (a) For anybody who has watched politics the past few years, there seems to be absolutely nothing that is off limits if it feeds a particular base of voters and appears to screw the opposing party, and (b) there are a large group of people who DO genuinely feel that the action is unconstitutional and/or grossly unfair. It is, at the LEAST a real possibility (refer to Donald Trump’s 1st several months in office in regards to Obama’s executive orders)
I’m urging my son to not bank on the idea that this 10k of debt is gone at this point.
Unfortunately, I don’t believe that Perkins loans are included in the forgiveness. They are not federally held loans. If they have been consolidated into a Direct loan, they would qualify, but that wouldn’t apply for your S.
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A good question from above:
Why is loan forgiveness even needed in an economy where there are many more jobs than applicants?
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I am happy that this will help a lot of people in genuine need, but to be honest, I have mixed feelings.
My DC has friends complaining about their debt, but yet they live at school when they could have lived at home and commuted. They live in the most expensive housing at school. They don’t work, etc. Or kids who went to schools when they could have gone in-state, for example, for half the cost. (I know I am simplifying.)
Sometimes I want to yell, “Where were their parents? How could they let their kids get into this kind of debt?”
We scrimped and saved for many, many years to pay for our kids’ schools. And I am grateful we were able to do it. (And recognize that some people don’t even have that option.) So there is a tinge of frustration as well.
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Jobs are low paying or in person , etc. High cost of commuting. High cost of rent.
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Not sure if that’s always the case, but how is loan forgiveness going to change their job prospects if they feel that available jobs don’t meet their high expectations?
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I am not a moderator…I would like to ask this thread to be more of HOW to get student debt forgiveness and leave out the WHY.
This whole process is very confusing to people. It would be nice to have a place (thread) to come to get some good information.
kelsmom is an SME on this topic. It would be helpful to have someone like her to guide students and families through this process.
My take away on this so far is it is better to out in an application asap before it is challenged and taken away. I would also have last years tax returns uploaded to the federal loan site in case they want to automate the process.
I want to thank people for sharing valuable info on this thread.
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I am a moderator, and I concur.
The “why” (in addition to going OT) will undoubtedly devolve into political discussion, which is fine in the politics forum where there is a thread on the topic, but not here.
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It’s definitely important to apply as soon as possible, even for those who will automatically have their loans forgiven (for example, if 21-22 FAFSA information is on file & student was a dependent in that year). I think it’s better to apply unnecessarily than to miss out because you misinterpreted information. And don’t rely on servicers to tell you whether you should fill out an application.
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Sign up for updates from Federal Student Aid: Subscriptions | U.S. Department of Education. Check “Federal student loan borrower updates.” You’ll be notified when the application opens & will have until December 31, 2023 to submit the application.
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Read this page to better understand what’s happening: Federal Student Aid.
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Everyone’s experience is different. Most kids I know with loans went to the local state school, lived at home and commuted to school, and work part time jobs. They are all mostly first gen students whose parents are poor immigrants.
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