A top Democratic lawmaker said that progress was being made to push the White House to cancel student loan debt.
“I have told the president, this is one of the most important things he can do to help our economy grow,” Senate Majority Leader Chuck Schumer (D-NY) said at the ‘The State of Student Debt Summit.’
“We must get this done. So we’re working on it,” Schumer added. “We’re making progress, folks. We are making progress. The White House seems more open to it than ever before.”
The senator’s remarks come days after the White House yet again extended pandemic payment pause on federally-backed student loans through the end of August.
Schumer and fellow Democrats have consistently urged the president to do more.
“The payment pause has been a significant federal investment throughout the pandemic, providing essential relief to millions of families during the economic and public health crisis and saving them an average of $393 per month,” a recent letter from Democrats stated.
It went on to say that most borrowers “are not financially prepared to shoulder another bill as they face skyrocketing costs for necessities like food and gas.”
‘College is so expensive’
During the summit on Wednesday, Schumer also addressed the deeper issues relating to the rising cost of college and talked about his personal experience through school.
“When I was in school, I could work my way through school. My family didn’t have much money, but you could get out without debt. That can’t happen anymore,” Schumer said. “College is so expensive, that even if you work your butt off, you’re not going to be able to emerge without this huge amount of debt on your shoulders.”
Income-driven repayment doesn’t work: Former ED official
A former government official also highlighted the issues with the existing system that’s pushing him to call for student debt forgiveness.
Former Education Secretary John King, who served in the Obama administration and is running for gubernatorial office in Maryland, talked about the failings of the student loan machinery during the summit.
“We … were very focused on trying to improve income-driven repayment plans and our hope was in the Obama administration that income-driven repayment would help address the student debt crisis,” King said. “But the reality is, it hasn’t.”
A recent investigation by NPR revealed that student loan servicers struggled to implement income-driven repayment, which is a key way low-income borrowers seek relief on their student loans during difficult financial periods. IDR ties a borrower’s monthly repayment to his or her income — and without any income, the debtor’s payments drop to $0.
The investigation also found systematic mismanagement among student loan servicers. Some providers were not clearly tracking IDR payments and did not know when borrowers qualified for forgiveness.
According to research from the National Consumer Law Center, despite millions of student debtors qualifying for forgiveness under IDR terms, which stipulate that borrowers who pay for 20-25 years can have the rest of their debt forgiven, only 32 have actually had their debt cancelled.
Over the years, IDR additionally “hasn’t really budged the default rates, and we’re still looking at a quarter of borrowers defaulting within 12 years,” King said.
King also noted that the federal government had substantial capacity to cancel debt if it chose to do so.
In talking about his experience of setting up a protocol within the federal government to provide debt relief for defrauded borrowers, he noted that his office created a lever the Biden Education Department has pulled over the last few months to cancel debt for some debtors.
“When I became secretary, we were very focused on having more rigorous enforcement against predatory for-profit colleges … We launched an enforcement unit, we shut down an institution like ITT through our enforcement efforts. We were very focused on creating a process for debt cancellation so that the folks who were victimized by these predatory for-profit colleges would have a way to be made whole,” King said.
“We built that process and use our executive authority to create a process that now is being used by the Biden administration to cancel debt for large numbers of students,” he stated. “So it’s very clear that the federal government to the executive branch has the authority to cancel debt.”
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Aarthi is a reporter for Yahoo Finance. She can be reached at [email protected]. Follow her on Twitter @aarthiswami.
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