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Harder than it looks: Income-targeted student loan forgiveness invites ‘train wreck’


These potential income limits are intended to fend off criticism that widespread loan forgiveness would benefit some Americans with higher incomes who do not need help. But imposing income caps may carry other potential risks for the Biden administration, particularly if the Department of Education is unable to quickly execute any loan forgiveness Biden may announce in the weeks to come. to come.

A spokesperson for the Department of Education, speaking on condition of anonymity, said in a statement that the agency “continues to assess its options to implement broad debt cancellation through the executive”.

The Department of Education does not have individual income information for most of the 45 million Americans who have federal student loans.

The Internal Revenue Service relied on Americans’ previous years’ tax information to distribute income-related benefits, such as stimulus checks and expanded Child Tax Credit payments from Democrats. The Department of Education, on the other hand, does not have access to this wealth of income data. Federal law strictly limits how the IRS can share taxpayer information with other agencies.

The result, Department of Education officials concluded, is that the agency is unable to cancel federal student loans based on the borrower’s income level without requiring action on the part of the borrower. the borrower. Department officials told the White House they should set up some kind of application process to determine whether borrowers are eligible for relief, according to people familiar with the discussions.

This extra layer of bureaucracy would likely take longer for the Ministry of Education to implement compared to the general discount, and it would mean that borrowers would lose the benefit if they don’t know how to enroll or do any. Requirement.

“The landmines on this are everywhere,” said Bryce McKibben, the senator’s former senior policy adviser. Patty Murray (D-Wash.) to the Senate Committee on Health, Education, Labor and Pensions, which compared looming implementation challenges at the Department of Education to the disastrous rollout of HealthCare.gov by the Obama administration.

“Their options are: an income cap and a train wreck policy – ​​or no income cap and broader, automatic relief for everyone. There’s not much in between,” said McKibben, who is now senior director of policy and advocacy at Temple University’s Hope Center for College, Community, and Justice.

“Millions of borrowers would likely be locked out of the system based on an application requirement,” especially the lowest-income borrowers and the most distressed borrowers, he said. “People are going to fall through the cracks, and those people are going to be very angry and they’re not going to vote in the fall.”

“There is an ongoing political discussion and process” about Biden’s student loan debt plans, a White House spokesperson said on condition of anonymity, adding that the administration “continues to evaluate cancellation options”.

Beyond the implementation challenges of imposing income caps, the White House would also face the return of progressives who have called on the administration to pursue a universal relief program.

On Thursday, student debt activists rallied again outside the White House to demand Biden move forward with canceling student loan debt. The NAACP, which organized the rally, says “the $10,000 cancellation is not enough and the means test is simply unacceptable,” said Wisdom Cole, national director of youth and colleges. of the organization, in a press release.

representing Mondary Jones (DN.Y.) said it would be a “terrible” idea for the White House to limit student loan relief based on borrowers’ income.

“We do not test K-12 education resources. We do not test Social Security resources. We do not test Medicare resources. That’s why these programs are widely popular,” Jones said. “And rich people tend not to have student debt, it turns out. I don’t think we should create an opportunity for people in bad faith to brand another program as just for the poor.

representing Ayanna Pressley (D-Mass.), who has called student loan debt forgiveness a racial justice issue, said while she encourages Biden to appear ready to act, she wants to make sure the relief is “broad. “.

“At the end of the day, we need to ease the burden of whoever is burdened with this debt,” Pressley said. “We should focus on what has the most impact and will reach as many people as possible.”

The student loan forgiveness is particularly popular among Democratic voters and younger voters, according to a POLITICO/Morning Consult poll from April, which found more than three-quarters of GenZers and Millennials want to see at least one loan forgiveness. federal student loan. Among all voters overall, 62% supported canceling at least some federal student loan debt, with 29%, including half of Republican voters, completely opposed, according to the poll.

Any massive write-off of federal student loans would represent an unprecedented task for the Department of Education, which has never written off debt on the scale envisioned by the White House. The agency should understand, for example, how to apply loan forgiveness to tens of millions of borrower balances, which typically consist of multiple loans at different interest rates.

But adding an income test would be a considerably more difficult undertaking, according to current and former ministry officials as well as outside experts.

Another potential pitfall: A crush of borrowers trying to find out if they qualify for loan forgiveness could also overwhelm the Ministry of Education’s contract loan service call centers, which have downsized over the course of the year. the past two years since most federal loan repayments were frozen.

When the Biden administration expanded an existing loan forgiveness program for public service workers last year, the Education Department had to publicly ask borrowers to stop flooding service lines. due to the increase in calls.

Scott Buchanan, executive director of the Student Loan Servicing Alliance, which represents companies contracted by the Department of Education to service student loans, said it would be “very difficult, if not impossible” for the department and officers to loan to implement an extensive loan cancellation program. before the midterm election, whatever its structure.

“It would be easier, but obviously much more unfair, to provide general treatment to everyone,” Buchanan said.

Education Department officials are predicting different scenarios depending on how the White House decides to structure the details of any loan forgiveness programs that involve income caps.

One option officials are exploring is a self-attestation process in which borrowers simply certify that their income qualifies them for relief, according to people familiar with agency planning. This would probably be the fastest way for the ministry to determine who is eligible, although it would raise questions about the government’s ability to verify the information.

Another possibility is for the Department of Education to build on an existing agreement with the IRS that allows borrowers to electronically access their own federal tax information and then automatically enter it into a department application. But this process would not work for borrowers who do not file tax returns.

The Department of Education has been implementing for years a 2019 law, known as the FUTURE Act, which relaxed some restrictions on the agency’s access to IRS information to allow people to more easily apply for federal financial assistance or enroll in income-based reimbursement. plans.

But even when fully implemented, this law still requires individuals to affirmatively consent to the IRS sharing their taxpayer information with the Department of Education — a safeguard that was included to address concerns. some legislators regarding the flow of confidential taxpayer information through government. .

On the campaign trail in 2020, Biden supported the idea of ​​forgiving $10,000 per borrower. Since taking office, however, he has been reluctant to ease his executive authority in unprecedented ways to write off student debt, and he publicly questions whether he has the power to do so.

That calculus seems to have changed at the White House in recent months. Biden said in April he was “seriously considering” canceling “some” debt. White House press secretary Jen Psaki said Biden wants this loan forgiveness to be “targeted to the graduates who need it the most.”

Republicans, meanwhile, are rallying against Biden’s efforts to cancel student loans. GOP lawmakers have introduced legislation to block some of the Department of Education’s powers to forgive or suspend student loan repayments.

“Student loan socialism would be a giant slap in the face for every family that sacrifices to save for college, for every graduate who has paid off their debt, for every worker who has made a different career choice in order to be debt-free. “said the Senate Minority Leader. Mitch McConnell said last week.

While Republicans may not have the power to block any loan forgiveness, GOP control of the House or Senate next year would allow the party to aggressively oversee how the Department of Education implements any debt relief program.

Biden has teased a final decision on canceling student debt in the coming ‘weeks’ and the White House said it plans to announce a decision before the pandemic-related freeze expires on most countries. federal student loan payments at the end of August.

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