So, I shot my mouth off earlier today about Biden's student debt forgiveness plan without understanding off of the details, and apparently it is a bit more complex than just $10k in student loan forgiveness, so now I'm going to go over it in more detail. Plan here.
Today, President Biden is announcing a three-part plan to provide more breathing room to America’s working families as they continue to recover from the strains associated with the COVID-19 pandemic. This plan offers targeted debt relief as part of a comprehensive effort to address the burden of growing college costs and make the student loan system more manageable for working families. The President is announcing that the Department of Education will:
Provide targeted debt relief to address the financial harms of the pandemic, fulfilling the President’s campaign commitment. The Department of Education will provide up to $20,000 in debt cancellation to Pell Grant recipients with loans held by the Department of Education, and up to $10,000 in debt cancellation to non-Pell Grant recipients. Borrowers are eligible for this relief if their individual income is less than $125,000 ($250,000 for married couples). No high-income individual or high-income household – in the top 5% of incomes – will benefit from this action. To ensure a smooth transition to repayment and prevent unnecessary defaults, the pause on federal student loan repayment will be extended one final time through December 31, 2022. Borrowers should expect to resume payment in January 2023.
Ok, so pell grant recipients do get a bit more than I thought. Up to $20k. Still, given some people (including myself) have much larger student debt totals, this is still a drop in the bucket.
Make the student loan system more manageable for current and future borrowers by:
Cutting monthly payments in half for undergraduate loans. The Department of Education is proposing a new income-driven repayment plan that protects more low-income borrowers from making any payments and caps monthly payments for undergraduate loans at 5% of a borrower’s discretionary income—half of the rate that borrowers must pay now under most existing plans. This means that the average annual student loan payment will be lowered by more than $1,000 for both current and future borrowers.
Eh, I don't really think that the IBR amount itself matters much. I think of it like a tax. You're taxed based on your income. Reducing how much you pay helps, but honestly, as I said, I kind of find IBR itself to be fair, and I wouldn't mind keeping it in some form if FULL forgiveness is off of the table. What's more important is to deal with things like interest and the tax bomb when the loans are forgiven.
Fixing the broken Public Service Loan Forgiveness (PSLF) program by proposing a rule that borrowers who have worked at a nonprofit, in the military, or in federal, state, tribal, or local government, receive appropriate credit toward loan forgiveness. These improvements will build on temporary changes the Department of Education has already made to PSLF, under which more than 175,000 public servants have already had more than $10 billion in loan forgiveness approved.
I mean, this doesn't really sway me either way, PSLF has always existed since I've had loans at least, and I'm not really sure how much this helps.
Protect future students and taxpayers by reducing the cost of college and holding schools accountable when they hike up prices. The President championed the largest increase to Pell Grants in over a decade and one of the largest one-time influxes to colleges and universities. To further reduce the cost of college, the President will continue to fight to double the maximum Pell Grant and make community college free. Meanwhile, colleges have an obligation to keep prices reasonable and ensure borrowers get value for their investments, not debt they cannot afford. This Administration has already taken key steps to strengthen accountability, including in areas where the previous Administration weakened rules. The Department of Education is announcing new efforts to ensure student borrowers get value for their college costs.
I mean, why not just fight to make all public college free? I don't understand why democrats try so hard to focus on these band aid type plans.
Provide Targeted Debt Relief, Fulfilling the President’s Campaign Commitment
To address the financial harms of the pandemic for low- and middle-income borrowers and avoid defaults as loan repayment restarts next year, the Department of Education will provide up to $20,000 in loan relief to borrowers with loans held by the Department of Education whose individual income is less than $125,000 ($250,000 for married couples) and who received a Pell Grant. Nearly every Pell Grant recipient came from a family that made less than $60,000 a year, and Pell Grant recipients typically experience more challenges repaying their debt than other borrowers. Borrowers who meet those income standards but did not receive a Pell Grant in college can receive up to $10,000 in loan relief.
I mean, don't get me wrong, I did get a pell grant one year so I like the extra help, but again, it's still too moderate, for one. Many people have totals way higher than this and we're just screwed. And for two, I mean, I just don't like the idea of focusing so much on means testing this stuff. Why means test it? Why separate the worthy from the unworthy? Everything Biden is doing here is just means testing and half measures. I don't understand why centrist dems are so willing to fragment their policies and make them worse just to fit this weird concept of justice of theirs. Especially when just blanket forgiving all of it is on the table.
The Pell Grant program is one of America’s most effective financial aid programs—but its value has been eroded over time. Pell Grant recipients are more than 60% of the borrower population. The Department of Education estimates that roughly 27 million borrowers will be eligible to receive up to $20,000 in relief, helping these borrowers meet their economic potential and avoid economic harm from the COVID-19 pandemic.
Current students with loans are eligible for this debt relief. Borrowers who are dependent students will be eligible for relief based on parental income, rather than their own income.
Again this is all well and good, but pell grants have always been a bit if a joke. They only provide like a few hundred dollars in aid. I mean, considering the cost of college, that's a drop in the bucket.
If all borrowers claim the relief they are entitled to, these actions will:
- Provide relief to up to 43 million borrowers, including cancelling the full remaining balance for roughly 20 million borrowers.
I mean, sure, but what about the other 23 million, of which I am part of, for full transparency's sake?
This is gonna eliminate like 1/3 of my loans, but that's about it. A lot of people, especially those who made the unfortunate decision to go to grad school like me, have much higher totals, and that's where I'm looking at this. This might help people well on their way, but people with the high debt totals are the ones who need the most help. They're SCREWED. I mean, as I said, focusing on stuff like interest and IBR tax bomb, if we're doing half measures, is more important for stuff like us. because that $10-20k will be added back onto us in a few years. And by the time we end up being "forgiven", we'll be responsible for taxes on the forgiven amount. Which given the interest rates, means OTHER troubles.
It's messed up.
Target relief dollars to low- and middle-income borrowers. The Department of Education estimates that, among borrowers who are no longer in school, nearly 90% of relief dollars will go to those earning less than $75,000 a year. No individual making more than $125,000 or household making more than $250,000 – the top 5% of incomes in the United States – will receive relief.I mean, sure. But idk why focus on the "progressiveness" of it. And I say this as someone without much of an income. And while someone with a higher income like $125k+ SHOULD be able to pay it off, as quite frankly, they're privileged as crap, some of those guys ahve debt totals that make mine look tiny. Especially the law school and med school crowd. I've heard of horror stories with people like $300k in debt and crap.
Ya know? I mean, I think forgiving all of it is better. Accounts for everyone in their situation. All of this means testing helps some people while leaving others high and dry.
Help borrowers of all ages. The Department of Education estimates that, among borrowers who are eligible for relief, 21% are 25 years and under and 44% are ages 26-39. More than a third are borrowers age 40 and up, including 5% of borrowers who are senior citizens.
Idk how seniors still have student loans given IBR is a thing, but yeah. A lot of us are older.
Advance racial equity. By targeting relief to borrowers with the highest economic need, the Administration’s actions are likely to help narrow the racial wealth gap. Black students are more likely to have to borrow for school and more likely to take out larger loans. Black borrowers are twice as likely to have received Pell Grants compared to their white peers. Other borrowers of color are also more likely than their peers to receive Pell Grants. That is why an Urban Institute study found that debt forgiveness programs targeting those who received Pell Grants while in college will advance racial equity.
Ugh, is that why they did the pell grant thing? Granted im a white guy who had a pell grant so I'm grateful they did more for it, and they actually did do it in a colorblind way but again, trying to push this based on race just alienates me somewhat.
Why so much means testing? Like really. I think just helping everyone is better.
The Department of Education will work quickly and efficiently to set up a simple application process for borrowers to claim relief. The application will be available no later than when the pause on federal student loan repayments terminates at the end of the year. Nearly 8 million borrowers may be eligible to receive relief automatically because their relevant income data is already available to the Department.
Ok so I get the impression people on IBR get it immediately. That's good. Less paperwork is good.
Thanks to the American Rescue Plan, this debt relief will not be treated as taxable income for the federal income tax purposes.
Yeah it's good they're not tax bombing this.
To help ensure a smooth transition back to repayment, the Department of Education is extending the student loan pause a final time through December 31, 2022. No one with federally-held loans has had to pay a single dollar in loan payments since President Biden took office.
Yeah, and Biden should just forgive all of it.
Make the Student Loan System More Manageable for Current and Future Borrowers
Fixing Existing Loan Repayment to Lower Monthly Payments
The Administration is reforming student loan repayment plans so both current and future low- and middle-income borrowers will have smaller and more manageable monthly payments.
The Department of Education has the authority to create income-driven repayment plans, which cap what borrowers pay each month based on a percentage of their discretionary income. Most of these plans cancel a borrower’s remaining debt once they make 20 years of monthly payments. But the existing versions of these plans are too complex and too limited. As a result, millions of borrowers who might benefit from them do not sign up, and the millions who do sign up are still often left with unmanageable monthly payments.
I mean, I kind of found the process fair. But yeah, it should've been default. But I kind of found the payment levels fair. Like that isn't the concern. The concern is if you dont make enough of an income where you're actually paying it off, interest just accrues, meaning by the time they get forgiven, BOOM tax bomb. And then you end up having to pay taxes on an amount comparable to the principal you couldn't afford to pay off to begin with! Which just leaves you screwed another way.
To address these concerns and follow through on Congress’ original vision for income-driven repayment, the Department of Education is proposing a rule to do the following:
For undergraduate loans, cut in half the amount that borrowers have to pay each month from 10% to 5% of discretionary income.
Again, kind of feel this is unnecessary.
Raise the amount of income that is considered non-discretionary income and therefore is protected from repayment, guaranteeing that no borrower earning under 225% of the federal poverty level—about the annual equivalent of a $15 minimum wage for a single borrower—will have to make a monthly payment.
Cool, but then it just sits there growing interest at 8% a year because you're not paying it down. And did I mention tax bomb?
Forgive loan balances after 10 years of payments, instead of 20 years, for borrowers with original loan balances of $12,000 or less. The Department of Education estimates that this reform will allow nearly all community college borrowers to be debt-free within 10 years.
This is kind of cool. But still, seems means testy. Everything he's doing is like "oh, gotta help the poor borrowers", "gotta help the community college people", "gotta help the black community", and it's like...ugh. JUST. HELP. EVERYONE. Like so many arbitrary rules and stipulations aimed at some groups but not at others. As I said, I feel like this plan does help some people, it forgives loans for almost half of borrowers outright, but if you're someone with a lot of debt, you're STILL up a creek, and they kind of assume you are just rich enough and have an income to be able to pay it off. Which isn't always true.
Cover the borrower’s unpaid monthly interest, so that unlike other existing income-driven repayment plans, no borrower’s loan balance will grow as long as they make their monthly payments—even when that monthly payment is $0 because their income is low.
Okay, now THIS is huge. As I said this is a good half of the problem. If you aren't part of that group that is getting bailed out since they only went to undergrad and are now under $20k, you're basically screwed since not only do your loans remain, but you end up with interest. Like I'm on IBR. As I said, if you dont pay loans down on IBR due to low or lack of income, they just sit there accruing interest. So...yeah this actually does solve a significant portion of the problem.
These reforms would simplify loan repayment and deliver significant savings to low- and middle-income borrowers. For example:
A typical single construction worker (making $38,000 a year) with a construction management credential would pay only $31 a month, compared to the $147 they pay now under the most recent income-driven repayment plan, for annual savings of nearly $1,400.
I dont really think $147 a month is unjust for someone making $38k a year, but lowering it is nice. And if they get rid of interest, yeah that helps. Still, that remaining total isn't going away....
A typical single public school teacher with an undergraduate degree (making $44,000 a year) would pay only $56 a month on their loans, compared to the $197 they pay now under the most recent income-driven repayment plan, for annual savings of nearly $1,700.
Again, to me the amount they pay isn't the issue. It's a nice change, but the problem is that that amount isn't going away.
A typical nurse (making $77,000 a year) who is married with two kids would pay only $61 a month on their undergraduate loans, compared to the $295 they pay now under the most recent income-driven repayment plan, for annual savings of more than $2,800.
Uh, is paying $295 a month or something like $3600 a year really bad for someone making $77k? Like again, appreciate the gesture, but to me, the big problem is the remaining principle, and the interest. Of course he's solving the interest, but what of people who have large loan totals but don't actually pay it down because they're on IBR? Are they gonna be up a creek due to the tax bomb in 20 years?
For each of these borrowers, their balances would not grow as long as they are making their monthly payments, and their remaining debt would be forgiven after they make the required number of qualifying payments.
Forgiven is good. But the tax bomb is bad. What about the tax bomb, Joe?
Further, the Department of Education will make it easier for borrowers who enroll in this new plan to stay enrolled. Starting in the summer of 2023, borrowers will be able to allow the Department of Education to automatically pull their income information year after year, avoiding the hassle of needing to recertify their income annually.
Ah, modern and effective governance, I like this.
Ensuring Public Servants Receive Credit Toward Loan Forgiveness
Borrowers working in public service are entitled to earn credit toward debt relief under the Public Service Loan Forgiveness (PSLF) program. But because of complex eligibility restrictions, historic implementation failures, and poor counseling given to borrowers, many borrowers have not received the credit they deserve for their public service.
The Department of Education has announced time-limited changes to PSLF that provide an easier path to forgiveness of all outstanding debt for eligible federal student loan borrowers who have served at a non-profit, in the military, or in federal, state, Tribal, or local government for at least 10 years, including non-consecutively. Those who have served less than 10 years may now more easily get credit for their service to date toward eventual forgiveness. These changes allow eligible borrowers to gain additional credit toward forgiveness, even if they had been told previously that they had the wrong loan type.
The Department of Education also has proposed regulatory changes to ensure more effective implementation of the PSLF program moving forward. Specifically, the Department of Education has proposed allowing more payments to qualify for PSLF including partial, lump sum, and late payments, and allowing certain kinds of deferments and forbearances, such as those for Peace Corps and AmeriCorps service, National Guard duty, and military service, to count toward PSLF. The Department of Education also proposed to ensure the rules work better for non-tenured instructors whose colleges need to calculate their full-time employment.
To ensure borrowers are aware of the temporary changes, the White House has launched four PSLF Days of Action dedicated to borrowers in specific sectors: government employees, educators, healthcare workers and first responders, and non-profit employees. You can find out other information about the temporary changes on PSLF.gov. You must apply to PSLF before the temporary changes end on October 31, 2022.
I mean I guess this is nice, but I just didn't really think it was that important. I mean, were there really that many holes there? I'm not familiar with the problems with PSLF.
Protecting Borrowers and Taxpayers from Steep Increases in College Costs
While providing this relief to low- and middle-income borrowers, the President is focused on keeping college costs under control. Under this Administration, students have had more money in their pockets to pay for college. The President signed the largest increase to the maximum Pell Grant in over a decade and provided nearly $40 billion to colleges and universities through the American Rescue Plan, much of which was used for emergency student financial aid, allowing students to breathe a little easier.
Pell grants are a drop in the bucket, man. This is kind of weak.
Additionally, the Department of Education has already taken significant steps to strengthen accountability, so that students are not left with mountains of debt with little payoff. The agency has re-established the enforcement unit in the Office of Federal Student Aid and it is holding accreditors’ feet to the fire. In fact, the Department just withdrew authorization for the accreditor that oversaw schools responsible for some of the worst for-profit scandals. The agency will also propose a rule to hold career programs accountable for leaving their graduates with mountains of debt they cannot repay, a rule the previous Administration repealed.
Building off of these efforts, the Department of Education is announcing new actions to hold accountable colleges that have contributed to the student debt crisis. These include publishing an annual watch list of the programs with the worst debt levels in the country, so that students registering for the next academic year can steer clear of programs with poor outcomes. They also include requesting institutional improvement plans from the worst actors that outline how the colleges with the most concerning debt outcomes intend to bring down debt levels.
I mean this is nice I guess. Still...
More information on claiming relief will be available to borrowers in the coming weeks.
Borrowers can sign up to be notified when this information is available at StudentAid.gov/debtrelief.
Discussion
Okay, so, final opinion on all of this? Eh, it's better than I first thought. It's not JUST taking off $10k and acting like that solves the problem. There is a lot of reform there, it actually does help somewhat, but it really doesn't go far enough.
Here's my story with this. I'm a dude who went to college, and then grad school, in the social sciences. I ended up accruing a decent amount of student debt, perhaps a bit more than the average borrower, but not apocalpytic levels like some law and med school degree people have.
However, I was unable to get a job in my field after college. It turns out majoring in social sciences and not being anywhere near a major city is a terrible idea. There are few to no jobs. Most "opportunities" out of school were volunteer, or worked you insane levels for little pay. I remember one opening for a political campaign wanted me to work 100 hours a week for like $24k a year. It was ridiculous. I knew my degree wouldn't be high paying. But I kind of figured I'd be able to get a decent job in my field out of school, maybe with my local government. But, the opportunities weren't there, and many jobs required insane amounts of experience to even be considered. You need experience to get a job, you need a job to get experience. It's a joke. The whole system is a joke. Many opportunities weren't even near me. I'd have to commute like 1-2 hours a day each way to a city in a different part of the state just to get a job. And I didn't have a car, or an income for one.
It was ridiculous. So...I ended up going on IBR. And that just means that while I don't have to make payments due to my income being low, the interest keeps accruing. And accruing. And accruing. And again, while one day they'll eventually be forgiven, well, then I have to deal with the IRS for another sum I can't pay, yay...
A lot of Biden's plan just...doesn't resonate with me. It comes off as very populist to me in the sense that it appears to help a lot of people, while not really doing a lot at all. It forgives just enough to say it does something where you come off looking like an entitled jerk if you dare suggest it didn't go far enough, and it's means tested to death. it's gonna be a lot like the ACA where it helped some people, and the democrats will be able to say "we forgave 20 million borrowers of all of their loans", while people like me are high and dry. And of course, the gaslighting will come in. I should be grateful I got something. I took out the loans, I should pay them back, you have an advanced degree, why aren't you making good money? Blah blah blah. I can hear it all now.
This is why my parents were conservative. This kind of mentality the democrats have. The democrats have this plan to forgive SOME people their debt, but if you're not the intended target, well, you're considered rich or well to do or not worthy for some reason. And you dont get help, or dont get helped enough.
There was WAY too much means testing with this plan. It was intended primarily to help people in certain situations, but not others. And if you don't fit the profile of the person they're trying to forgive, you aren't helped.
Like me. I mean, I get a sizeable chunk of my loans removed, but the vast majority remains. Honestly, the interest will be gone but the principle will remain. And while no more interest will accrue, eh....it still leaves me screwed.
And then there's the whole IBR thing. Like...they focus so much on lowering payments. Which is nice, but they seemed to forget about the looming tax bomb. Yall realize that after 20-25 years or whatever, you're on the hook for taxes for whatever is left, right? Granted, without interest accruing that total will be A LOT smaller than it otherwise would be, especially given how progressive tax rates are in this country. But still, we are talking being on the hook for thousands in taxes. At least it won't be tens of thousands any more for most of us, but yeah.
Still, it helps. I'd say the $10-20k does help somewhat. The changes to IBR help somewhat, the interest thing is HUGE. Like, that's the big game changer. But honestly, I still think this should've gone further. Ideally, I support wiping all student debt and making college free. But barring that, I'd at least like to see the tax bomb gone on top of this. I mean that's the big thing. I mean, yall realize, for those of us with loans left, that we WILL have to pay taxes on the forgiven amount right?
I mean, just to do a little math on that based on income tax brackets as they exist:
$10,000- $1,001
$25,000- $2,801
$50,000- $6,749
$75,000- $12,248
$100,000- $18,021
You get the idea. So yeah if you happen to have a high student loan balance, but don't have an income to actually pay it off under IBR, yeah....you still have a weight hanging over you.
You see why I'm not particularly thrilled by this?
It does just enough to make enough people happy so enough people will turn into insufferable sycophants about how much this helped people...while leaving others high and dry.
Like, this is what I find infuriating about democrats and their policies. It's simple. There's a problem. Solve it. Just do it in a blanket fashion. But then they only wanna help you if you meet certain conditons and make under a certain income threshold, and qualified for certain help in the past, and they only really fix the problem somewhat, while leaving the rest of it fester.
They do this with healthcare too. The ACA did this too. It helped some, while not helping others.
Really. I just don't understand why the democrats can't just take the approach of "let's just fix this problem completely without preconditions". I swear this kind of stuff is so divisive and maddening. because the people left not fully helped are like "hey still a problem here" and then the rest of society treats you as unworthy, tells you you should be grateful for what was done, and tells you you don't deserve help.
And even worse, it actually just divides people. Im already hearing some people grumbling and acting like Biden shouldnt have done anything because THEY weren't helped either, either having paid off loans already, never had loans, or are like me and are still left with a high balance they can't pay off.
And that just drives some people to become conservative.
It's dumb. While I do appreciate the help given, this plan does feel kind of half baked, and should've done so much more. Oh well, at least now my debt won't balloon to 6 figures under IBR now.
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