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Biden says too many Americans are saddled with school debt as he cancels federal loans for 153,000

CULVER CITY, Calif. (AP) — President Joe Biden said Wednesday that while a college degree was still a ticket to a better life, that ticket is often too expensive, as he announced he was canceling federal student loans for nearly 153,000 borrowers.

https://apnews.com/article/biden-student-loan-forgiveness-2024-california-cc23ba93a733b583f3ee8963cdd02566?

Biden unveils latest round of student loan cancellation to aid 153,000 borrowers

President Joe Biden expanded his push to eliminate student loan debt Wednesday, saying during a speech the initiative is part of a campaign promise to address the “broken” system.

https://floridaphoenix.com/2024/02/21/biden-unveils-latest-round-of-student-loan-cancellation-to-aid-153000-borrowers/?

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Federal rulings out of Kansas, Missouri put Biden student-loan forgiveness on hold

Federal judges in Kansas and Missouri have blocked full implementation of a student-loan forgiveness program proposed by the Biden administration that was set to launch July 1.

https://floridaphoenix.com/2024/06/25/federal-rulings-out-of-kansas-missouri-put-biden-student-loan-forgiveness-on-hold/?

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Federal appeals court blocks remainder of Biden’s student debt relief plan

WASHINGTON (AP) — A federal appeals court blocked the implementation of the Biden administration’s student debt relief plan, which would have lowered monthly payments for millions of borrowers.

https://apnews.com/article/student-loans-biden-debt-relief-appeals-court-abd06890b12073bd39a08deef83a9158?

Student loans

 

President Biden announced another round of student loan debt forgiveness today, totaling $1.2 billion for 35,000 public-sector workers like teachers, nurses and firefighters. The borrowers are eligible for student debt cancellation after making 10 years of monthly payments while working in a qualifying public-sector job for a nonprofit or the government. The Biden administration is eager to show how it has canceled more student loan debt than any prior administration — now totaling more than $168 billion for nearly 4.8 million Americans. But its signature, one-time student loan forgiveness program remains in legal limbo. The Supreme Court is expected to decide soon whether to block part of the SAVE plan while the matter is fully litigated.

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Student loans

 

The Supreme Court declined on Wednesday to lift a sweeping block on President Biden's student loan repayment plan that aims to slash monthly payments and accelerate the path to loan forgiveness. The high court turned down a request from the Biden administration to put the plan back in play after lower courts blocked it this summer in a legal challenge brought by GOP-led states. Wednesday's order has no immediate impact on the 8 million borrowers currently enrolled in the plan, known as SAVE (Saving on a Valuable Education), which was implemented nearly a year ago. But the fate of the plan — which would cost an estimated $276 billion — remains uncertain as courts consider ongoing legal challenges.

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Student loans

 

A group of seven Republican-led states filed a new lawsuit Tuesday seeking to block a new student loan relief plan that the Biden administration planned to start rolling out this fall. The lawsuit marks yet another legal challenge to President Biden's student loan policies and could potentially tie up his latest effort to deliver debt relief before the November election. Currently, Biden's student loan repayment plan, known as SAVE, is blocked. The president's sweeping, one-time student loan forgiveness program was knocked down by the Supreme Court last year. Still, the Biden administration has canceled more student loan debt than under any other president — mostly by using existing programs. Data shows nearly 4.8 million people have seen their federal student debt canceled under Biden, totaling $169 billion.

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Reminder: Student loan protection ending
By Sareen Habeshian
 
an illustration of a vintage heather grey sweatshirt with the words
 

Illustration: Tiffany Herring/Axios

 

Heads up: A temporary student loan grace period protecting borrowers with missed or late payments will end later this month.

The big picture: Nearly 10 million borrowers were past due on their payments as of January, per a Government Accountability Office report released last month. That's about $290 billion in outstanding loans.

Zoom in: September 30 marks the end of a one-year on-ramp period, where borrowers who were late or missed payments on federal student loans were not penalized or reported to credit bureaus.

  • Starting October 1, borrowers who are late on payments or do not make them can be reported to credit bureaus, which can negatively impact their credit scores for as long as seven years.

Yes, but: Federal student loans have "relatively generous guidelines for late payments," NerdWallet lending expert Kate Wood said.

  • If you are late with a federal student loan payment, that won't be reported to the credit bureaus for 90 days, which is longer than the usual 30-day billing cycle, according to Wood.

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Student loan payment grace period ends today
By
 
an illustration of a vintage heather grey sweatshirt with the words
 

Illustration: Tiffany Herring/Axios

 

A temporary student loan grace period protecting borrowers with missed or late payments ends today.

The big picture: Nearly 10 million borrowers were past due on their payments as of January, per a Government Accountability Office report released last month. That's about $290 billion in outstanding loans.

Zoom in: Nearly four million Californians have federal student loan debt that totals more than $148 billion, according to Federal Student Aid data.

  • More than half of those borrowers owe less than $20,000.

Driving the news: September 30 marks the end of a one-year on-ramp period, where borrowers who were late or missed payments on federal student loans were not penalized or reported to credit bureaus.

  • Starting October 1, borrowers who are late on payments or do not make them can be reported to credit bureaus, which can negatively impact their credit scores for as long as seven years.

Zoom out: The end of the on-ramp period comes as the Department of Education awaits a final decision on its SAVE Plan and other income-driven repayment programs after a federal court injunction prevented their implementation.

What's next

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Student loans

The Biden administration on Thursday announced another round of student loan forgiveness, bringing the total amount of student loan cancellation to more than $175 billion for nearly 5 million people since Biden took office. More than 1 million of these student loan borrowers received debt relief through the Public Service Loan Forgiveness program, which promises loan forgiveness to public-sector workers — like teachers and nurses — after they've made 10 years of qualifying payments. However, other student loan relief efforts, including a new repayment plan known as Saving on a Valuable Education (SAVE), are tied up in litigation. The lawsuits were filed by groups of Republican-led states that argue that the Department of Education does not have the legal authority to implement the costly debt-relief programs.

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🚨 Student debt cliff
 
Illustration of a graduation cap submerged in the ocean like an iceberg, with a small corner above water
 

Illustration: Sarah Grillo/Axios

 

The clock started ticking on a financial time bomb this week for student loan borrowers: Those in default will now be referred to debt collections, Axios' Emily Peck reports.

  • Why it matters: Because of the messy state of the student loan world, the economic fallout could be far more widespread than anticipated, hitting some who typically would be able to pay back loans. It also comes amid recession fears, worries over higher inflation, and a slowdown in hiring.

📈 By the numbers: The 5.3 million who are already in default could see the federal government garnish their wages, Social Security benefits or tax refunds.

  • Many more are in limbo. Some 20% of borrowers are in delinquency, but not yet at the default line — more than 270 days past due — according to a report earlier this week from credit agency TransUnion. That's up from 11.5% in February 2020, when the federal government stopped asking people to pay on their loans.

Zoom out: Many of these people would normally be able to avoid default, and work out a payment plan. But the mechanisms meant to help them navigate the process are in shambles.

  • The White House gutted the Department of Education, which manages student loans. It's trying to do the same to the Consumer Financial Protection Bureau, which helps folks navigate the financial system.

👀 But this isn't a mess that the current White House started.

  • The roots go to 2020, when the government told borrowers they no longer had to make payments. The Biden administration extended that grace period for three years.

The program was poorly implemented and overly generous from the start, says Tomasz Piskorski, a finance professor at Columbia Business School, who wrote a major study on debt forbearance in COVID, published by Brookings.

  • It was different from other kinds of pandemic debt relief programs — like for mortgage holders, who had to apply. (Few did.) For student loan borrowers, everyone got a pass. That's created a bigger problem.

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Student loan payments have restarted. Here’s how to manage the impact to your credit score

NEW YORK (AP) — Millions of Americans are seeing their credit scores drop now that the U.S. government has resumed referring missed student loan payments for debt collection. But there are things you can do to help your score rebound.

https://apnews.com/article/credit-score-student-loan-fix-help-f60ce67909eab7dc8d1952f7e0ae240c?

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