The growing student debt in the U.S., which the Federal Reserve estimated at $1.73 trillion in the second quarter, has been a concern for borrowers and policymakers. Will the Biden administration cancel student loans and revamp the PSLF (Public Service Loan Forgiveness)?
Many people see the increasing student debt in the U.S.—which has increased 91 percent over the last decade—as a timebomb waiting to implode. The increase in student debt is way above the increase in GDP. As a result, the student debt-to-GDP ratio has exploded over the last decade. There are estimated to be around 45 million student loan borrowers in the U.S.
Biden has already waived some student loans.
The Department of Education has already approved a waiver of $1.5 billion in student loans under the borrower defense. The program, which is offered by the Federal Student Aid, waived loans of borrowers who were misled by the education institute. However, the program’s scope was limited and most of the student loan borrowers didn't qualify.
PSLF revamp coming soon
At a press briefing, White House Press Secretary Jen Psaki said that changes to PSLF would be announced soon. Psaki emphasized that "Fixing this program has been a priority for this administration from the first day.”
Now, PSLF, which was founded in 2007, is in dire need of an overhaul. There has been a lot of confusion about who qualified for loan forgiveness under the program. For example, while the program is for borrowers working in a public sector job, there wasn’t apparently a list of eligible employers.
Putting the confusion to numbers, applications for 98 percent of student loan borrowers who applied for forgiveness under the program were denied. That’s a pretty high number and shows that the program needs a serious revamp.
Student loan forgiveness NPR
NPR did an exclusive story on issues with student loan forgiveness and the troubles with PSLF. Citing sources, NPR said that the Education Department would soon offer some quick fixes to PSLF.
This would include counting the payments towards the discontinued Federal Family Education Loans towards PSFL. Also, student loan borrowers would receive credit even if they made the payment towards the wrong repayment plan.
CBS’ 60 Minutes military veterans’ loan forgiveness
On CBS, 60 Minutes showed how even military veterans haven't been able to get student loan forgiveness under the PSLF. Citing data from the U.S. Government Accountability Office, it said that only 124 of the 180,000 service-members on active duty with federal student loans managed to get their loans waived. That’s even below 1 percent of the borrowers.
Will Biden cancel student loans?
While the PSLF program looks set to be revamped, it would only have an impact on student loan borrowers working in the public sector. While the payments and interest on eligible student loans have been waived until the end of January 2022, it looks like a final extension and might not be extended.
While many people want Biden to come up with a plan to broadly cancel more student loans, it doesn't look very likely. Given the federal government's already strained finances, a blanket cancelation of more student loans doesn't look like a realistic possibility.
Meanwhile, some people would argue that a solution to the student loan problem is as pressing an issue as revamping the country's infrastructure. However, in all likelihood, a full-blown student loan waiver looks like it's off the table.