What’s next for student loans after forgiveness?

As President Biden moves closer to scrapping at least some student loans in the near future, many higher education advocates and members of Congress are concerned that cancellations without a major overhaul of the federal loan system will only provide a temporary solution to a much larger problem. .

“The problem with our system is that a lot of players are involved. We’ve invested in the state for decades now, colleges are raising tuition, pay grants are flat and all of this is coming out in the student loan program, where we see more and more people borrowing more and more, “said James Coyle, Under Secretary of Education. There is a student loan program that doesn’t really work for many, so we really need to rethink how we can finance higher education in this country. “

The problem at hand, lawyers say, is the system that created the debt crisis in the first place. Biden’s plan to cancel at least $ 10,000 student loans for borrowers earning less than $ 150,000 will provide relief to some borrowers struggling to pay off their debts, according to White House officials. However, many argue that the relief that comes from debt forgiveness will soon fade.

“If we are to move forward with a comprehensive debt forgiveness, what are the policy solutions we are focusing on to ensure that we are not in the same position in one year, five years or 10 years?” Says Justin Drager, president of the National Association of Student Financial Aid Administrators.

Relief with reform

So far, the Biden administration has forgiven 25 billion in student loans through a range of targeted debt relief initiatives. These include the simplification of the Public Service Loan Freeness (PSLF) and the Total and Permanent Disability (TPD) discharge program to make it more accessible to borrowers and the administration’s move to repay student loans for profitable college students.

According to Draeger, “Targeted debt relief with each [efforts] As proposed by the department so far, the administration has made policy changes or made recommendations to address the underlying challenges that required amnesty. “

In a panel hosted by the Bipartisan Policy Center on the future of student loans on Monday, Drager cited the TPD program as an example. “While we’re talking about $ 9 billion for total and permanent disability, the department has concluded discussions on new rules that will make it easier for borrowers who are having difficulty accessing this facility,” Drager said.

So far, the Biden administration has not proposed a targeted set of reforms to complement the administration’s debt relief plan. Many higher education leaders have pointed to potential areas of reform, which raises some questions about whether it is the responsibility of the Biden administration to make it work না not Congress.

Problems with the current system

An expected 15 million American students could benefit from Biden’s campaign promise to cancel a $ 10,000 loan. According to federal data, 52 percent of Americans who have student loans owe less than 20,000, so the rest of the borrowers are high-level borrowers and basically income.

The rising cost of education with complex borrowing methods puts some of the most risky borrowers, typically low-income and low-income borrowers, in a position where they borrow more and struggle to repay the loan equally, especially if they have completed their degree. Do not or are in a job with insufficient income to meet their debt repayment requirements.

Experts suggest that creating more security nets to prevent borrowers from taking out unmanaged loans or defaulting on their loans may be a step towards helping these borrowers.

“We have a bank-based lending program, although we have been pursuing a direct government-to-student loan program for over a decade. So things like interest rates, negative payouts, capitalization, even default concepts, ”Drager said. “Those who make perfect sense in a bank-based lending system. We do not have it today. So we need to re-examine the whole structure of the federal student loan. “

Additionally, advocates argued that these net protection programs need to be simplified to limit bureaucratic barriers that prevent many borrowers from taking advantage of them. According to Kat Welbeck, director of the Advocacy and Civil Rights Council at the Student Borrower Protection Center, when the Department of Education removes administrative barriers, “we create systems that reduce administrative burdens for borrowers and we realize that those who need the most and are the real relief.” Able to get what was intended by these programs when they were originally created. “

Proponents of higher education are also calling for increased accountability among the key players in the federal student loan provision: borrowers, the Department of Education, lenders and institutions of higher learning.

They hope to see increased communication between lenders and borrowers on loan repayment plans and payments. In addition, they want to see an increased limit on who can borrow and how much. They argued that for families struggling to repay such loans, there should be a limit on borrowing from parents plus loans. Because parents do not pay for their children’s degree benefits, a recent study by the Century Foundation found that parent-plus debt is disproportionately detrimental to low-income and low-income families.

“We really need to make sure that when people are borrowing, they’re getting an education that’s worth it,” Koal said.

Congress and Reform

With the focus on higher education policy debate focusing on debt relief, Congress has not largely focused on reforming the student loan system. However, while Democrats and Republicans disagree on the debt waiver, they agree that the debt system needs to be reformed.

“Both sides of the aisle were talking about security nets, conservatives and liberals alike. I think both agree that better work needs to be done for income-driven payments. But it doesn’t work when you’re struggling to get out of debt, “said Beth Ackers, a senior fellow at Center-Right Think Tank at the American Enterprise Institute.

Congressional Republicans, who argue that Biden’s executive branch has no legal authority to release student loans, believe that a public policy process to address the debt crisis through Congress could move the student loan system forward. Assistant to the Senior Senate Health, Education, Labor and Pensions Committee.

On the other hand, Democrats like Senator Elizabeth Warren of Massachusetts want Biden to continue to use executive authority to provide more support through more funding through Pell Grant and other federal funding programs, and move toward a system for greater oversight of for-profit colleges. Free tuition from public colleges.

Movements for sweeping reforms in higher education have stalled over the past decade, with the final re-approval of the 1965 Higher Education Act coming in 2008, bringing about a final round of major changes to the student loan system. Since then, any attempt to revise the law has been thwarted by political joking, which is unlikely to diminish in the near future.

Many argue that raising the federal dollar for grant programs could be an effective solution to move higher education away from a debt-financing system. However, a congressional hearing about that were exactly where the proposal came from.

“We have to pay for the higher education that we want,” Koyal said. “If we want to keep that money behind, we need Congress.”

Without much explicit movement in Congress to resolve the loan system, Drager said he hoped the Biden administration would use executive authority to reform the student loan system.

“If the president can write off student loans for direct borrowers, why can’t the president stop future negative repayments for all borrowers? There was a time when I would say that Congress would need authority. I’m not so sure it does that anymore, ”Drager said.

It is unknown at this time what he will do after leaving the post.

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