Kuttner on TAP
New Hope for Student Debt Relief
With the appointment of Richard Cordray as chief of federal student loan programs, we will now see the potential of executive power to bring relief and end abuses. Cordray is a close ally of Elizabeth Warren and former head of the Consumer Financial Protection Bureau.
The first best policy, of course, would be outright cancellation of up to $50,000 per student, as proposed by Sens. Warren and Schumer. Cordray can’t make that call. President Biden needs to. But there are several other things he can do.
For starters, there is the appalling story of management of cancellation of debt for people who do ten years of public service. This is authorized under the Public Service Loan Forgiveness program. But under Trump and his education secretary, Betsy DeVos, the Education Department did everything possible to deny this relief.
To date, just 1.26 percent of applicants have received debt relief. In fact, in a lawsuit brought by the American Federation of Teachers on behalf of schoolteachers who qualified for debt cancellation, the Biden administration has still not gotten around to reversing the Trump position opposing the debt discharge.
Cordray could put the government on the right side of this issue and provide cancellation for former students who earned the relief, but were disqualified by some technicality—that was often the fault of the for-profit servicer or the department itself.
In the case of student debtors who were duped by for-profit universities that shut down, such as Corinthian and ITT Tech, students can get loan cancellation only if they left the offending university within 180 days of its closure. That deadline should be extended so that more debtors can get relief.
There are also some 400,000 people who qualify for debt cancellation as totally permanently disabled, as certified by the Social Security Administration. Under DeVos, no process was put in place to get them the relief.
More broadly, Cordray needs to reverse the Education Department’s Trump-era priority—from collecting as much money as possible to serving the needs of students and former students now in debt. One way to do that is to exercise much tougher oversight of the for-profit loan servicers on contract to the department, who often give bad advice to students in order to maximize their own profits.
Navient, one of the worst, was cited in an inspector general’s report, for improperly taking over $20 million from the Education Department. It has contracts worth some $200 million a year that should not be renewed. Cordray needs to revive his office’s audits and investigations unit.
Some deeper reforms, such as reduction in the interest rate to something close to the government’s own borrowing rate, as long proposed by Warren, will take legislation (Biden should support this). Others, such as broader cancellation, will take presidential leadership.
But the other things that Cordray can and should do, to change the government from the role of ally of financial predators to ally of students and debtors, is a textbook case of the potential of executive action.
~ ROBERT KUTTNER is editor of the American Prospect.
The cruel Calvinist yields to the kinder Catholic.
What about parents who are paying off student debt? We are still paying off student loans for our children fourteen years after the last child graduated from college.
My husband had the same response to Biden’s plan. Maybe it should be like the ACA, a sliding scale debt reduction based income and the amount of debt.
This is really important, thank you. Making actual public policy is so much more complicated then just “Biden should forgive college debt”.
I have seen posts elsewhere by parents or students who chose an affordable public university or private college offering large merit scholarships who seem a bit resentful that someone may have over $100,000 in debt forgiven after choosing a private college that was unaffordable.
Or what about someone who went into debt over $150,000 to attend law school where average starting salaries for grads are quite low, making that debt impossible to pay back.
So the devil will be in the details,which I suppose will be hammered out.
We took out a Sallie Mae loan. It is not a Federal Loan. The interest rate alone is crushing from 8-9%. They jacked up the rate as soon as our daughter graduated. I got a car loan at 1.9%, cheaper than Sallie Mae which refuses to negotiate down. My entire SS check goes to pay off her loan. Thank goodness I am still working and so is she, but not enough. The promise of the golden doors of opportunity will open are a lie. She would have been better off becoming a plumber, electrician, or some other trade.
I oppose this unless it is extended to any debt that my children might take on in college.
Just goes to show how difficult it is to “level the playing field” for everyone. Someone is always going to end up paying more that someone else. It is especially galling when we view them as less deserving than we are, which may or may not be true. We have to look at it through the lens of what the benefit is to society as a whole. Forgiving my debt might allow me to make some purchases that I don’t. I don’t buy new cars and haven’t bought one for close to thirty years. At my age, though, my potential contributions to society are pretty close to nil. While I am not likely to fall into penury, the benefit of keeping me solvent would not be immediate obvious to society as it now stands. Making young graduates financially stable, however, has potentially long term benefits for society. How’s that for cold-hearted, capitalist thinking?
Driving back into Manhattan this evening, I couldn’t help but think how unsustainable car-based transportation is in America, and how important rail-based transit, including high speed rail, would be it America’s economy. We need infrastructure spending on a big scale, not an unending stream of “stimulus” measures.