Friday, June 21, 2024

New White House plan could reduce or eliminate accumulated interest for 30 million student loan borrowers

By Charlene Crowell

Multiple recent announcements from the Biden administration offer new hope for the 43.2 million borrowers hoping to get relief from the onerous burden of a collective $1.727 trillion dollars of student loan debt.

On April 16, the federal Education Department initiated a regulatory change that could give an estimated 30 million student loan borrowers, including Black and Latino borrowers, up to $20,000 in interest forgiveness if they have:

• Paid on their loans for 20 years or longer;
• Balances that in repayment are now larger than the original amount borrowed; or
• Enrolled previously in income-driven repayment.

 

Responding to a wide call for relief from debilitating debt, the White House administration has been seeking a program to alleviate financial burden. (Courtesy photo)

If approved as presented, forgiveness could commence this fall. Further, and unlike some other programs, no relief application would be required.

It is worth noting that according to the Education Data Initiative, 2023 marked the first-ever annual decline in student loan debt, which should be credited to the Biden Administration’s efforts over the past three years.

A related White House fact sheet underscored the significance the interest reduction plan could have on the nation’s racial wealth gap.

“Four years after graduation, Black bachelor’s degree borrowers, on average, owe more than they borrowed,” said the White House. “These plans would not only help create more financial stability for millions of working and middle-class families, they would also help address the disproportionate debt burden on communities of color and advance racial equity.”

In a related briefing on the initiative Education Secretary Miguel Cardona spoke directly to the nation’s needs and the plan’s benefits.

“We’re delivering as much relief as possible for as many borrowers as possible as quickly as possible,” said Dr. Cardona. “And what does that really mean for people?”

“It means breathing room,” answering his own question. “It means freedom from feeling like your student loan bills compete with basic needs like grocery or health care…Student loan forgiveness isn’t only about relief for today’s borrowers. It’s about social mobility, economic prosperity, and creating an America that lives up to its highest ideals.”

In a related effort to inform communities of this latest White House initiative, Vice President Kamala Harris convened a roundtable discussion with community leaders on April 8 at Philadelphia’s William Cramp Elementary School.

“If you’ve paid undergraduate loans for more than 20 years or graduate loans for more than 25 years, those loans will be completely forgiven, regardless of your income and even if you did not graduate,” said Vice President Harris. “And forgiveness will be automatic for the vast majority of the 25 million people that we believe will benefit from this approach.
“And to see if you could be eligible, I would urge everyone to go to StudentAid.Gov. That’s StudentAid.Gov,” she urged.

Consumer and civil rights advocates welcomed the new plan.

Wisdom Cole, the NAACP’s Director of Youth and College said, “It is a proud moment to see our collective, years-long advocacy culminate in millions of Americans being unshackled from the chains of student debt.”

The Center for Responsible Lending (CRL) also welcomed the administration addressing the long-standing problem of borrowers being overwhelmed by accumulating interest.

“For years, CRL has advocated for the elimination of accrued interest that prevents millions of low-income borrowers from repaying their loans and breaking free from a cycle of debt,” said Mitria Spotser, CRL’s vice president and federal policy director.

“We applaud President Biden’s genuine efforts to recognize the burden carried by those who owe more than they originally borrowed due to the interest accrued on their federal loans and thank the administration for incorporating CRL’s recommendations into its interest relief proposal.” She said the changes ensure a higher education system that is fairer and more accessible to all.

“From day one of my Administration, I promised to fight to ensure higher education is a ticket to the middle class, not a barrier to opportunity,” said President Joe Biden. “I will never stop working to cancel student debt.”

Charlene Crowell is a senior fellow with the Center for Responsible Lending. She can be reached at Charlene.crowell@responsiblelending.org.

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