The Biden administration has announced it’s wiping away hundreds of millions of dollars in student loan debt for borrowers who said they got ripped off by their school.
This latest wave of debt forgiveness comes on top of at least $2.3 billion in student loans that the Department of Education canceled earlier this year. Those borrowers now have more room in their budgets to save, invest or get a handle on their other debts.
As millions of Americans wait for word on whether President Joe Biden will provide massive student loan forgiveness, here’s a look at whether you might be covered by the new action.
Who’s eligible for the latest forgiveness?
The fresh debt forgiveness is going to students who attended ITT Technical Institute and made claims against the school for misrepresentation or deceit, the Education Department announced Wednesday. ITT, a for-profit technical school that operated campuses across the U.S., closed in 2016.
Eligible borrowers will receive 100% loan discharges, totaling about $500 million. Claims from some 18,000 students have been approved, the department says.
“Our action today will give thousands of borrowers a fresh start and the relief they deserve after ITT repeatedly lied to them,” Education Secretary Miguel Cardona says in a news release.
Officials found that the school misrepresented how much students could expect to earn and the types of jobs they could land after graduation. In reality, borrowers told the department that having ITT on their resumes made it harder to find employment.
This is ‘borrower defense’ debt cancellation
This latest round of forgiveness is thanks to provisions in the law that allow borrowers with federal student loans to ask that the debt be erased if their schools did anything deceptive or illegal — or abruptly went out of business.
For one of these “borrower defense” claims to be approved, you must be able to demonstrate that your college violated state law with your loan or with the education services the school provided.
This new relief is in addition to $1 billion in student debt the Biden White House canceled earlier this year under the same law. A later, unrelated move forgave another $1.3 billion.
In the case of ITT, eligible borrowers will receive notices over the next several weeks — followed by forgiveness of their loans.
What about broader student loan forgiveness?
This year’s debt cancellations are — to be honest — just small change compared to the sweeping student loan forgiveness that’s being discussed in Washington and is advocated by a number of influential lawmakers.
Members of Congress have been on a mission to convince President Biden to obliterate up to $50,000 in federal student loan debt for every American saddled with unpaid college loans. They want the president to use his executive authority to strike the debt.
He has said he’s willing to cancel $10,000 in student debt, but he has rebuffed calls for the bigger amount. Still, he has asked administration officials to look into the idea, and he recently told Senate Majority Leader Chuck Schumer and Massachusetts Sen. Elizabeth Warren that they’re welcome to keep pushing him on the issue.
Those fighting for more generous relief say it would give Americans a more meaningful break from crushing student debt that’s kept them from buying homes and cars, getting married and investing for their futures.
How to deal with your student debt in the meantime
If you’re not eligible for the government’s latest forgiveness plan and you need relief from overwhelming student loan debt, there are things you can do right now to make your life a little easier.
First, consider refinancing your student loans. Interest rates on student loan refinances from private lenders have hit record lows, so replacing your debt with a new private student loan could cut your monthly payments substantially.
Refinancing a federal student loan into a private one would make you ineligible if federal loan forgiveness ever happens.
If you’re a homeowner, you might want to refinance your mortgage. With 30-year rates averaging less than 3%, some 14.1 million mortgage holders could save an average of $287 a month by refinancing, according to mortgage technology and data provider Black Knight.
The best rates go to borrowers with the highest credit scores. If you haven’t seen your score in a while, it’s easy now to take a look at your credit score for free.
After you’ve cut your debt costs, you might generate a little more income with some low-stakes investing in the stock market. One popular app helps you build a diversified portfolio using little more than your “space change” from everyday purchases.
