As President Joe Biden moves closer to canceling some student loan debt, the top federal student loan official said any forgiveness by the president would be additive to other reforms taking place.
“That’s a decision that the White House will make,” Federal Student Aid (FSA) Chief Operating Officer Richard Cordray told Yahoo Finance in an exclusive interview this week (video above) when asks about student loan forgiveness, later reiterating “it’s up to the White House to make a judgement about that. At the same time, there’s quite a few existing programs that provide for pieces, bits and pieces of loan forgiveness. And some of those bits and pieces are rather large.”
The Biden-era Education Department (ED) has taken several actions — aside from extending the payment pause multiple times — to refine the unwieldy student loan system and erase debt. These include overhauling the troubled Public Service Loan Forgiveness (PSLF) program for student loan borrowers in public service; erasing debt held by some students who were defrauded by a predatory for-profit college; discharging debt of totally and permanently disabled borrowers; and increasing scrutiny of student loan servicers.
One estimate is that 700,000 borrowers have seen more than $17 billion wiped away through various actions. An estimated 37 million borrowers haven’t had to make payments on their loans during the payment pause, and no new interest has accrued.
The New York Fed recently found the payment pause has led to “an estimated $195 billion worth of waived payments through April 2022.”
During a press conference on Thursday, President Biden said he was considering “some debt reduction” but not up to $50,000, and that he would have an answer on forgiveness in the “next couple of weeks.”
Additionally, Biden is reportedly weighing income caps on who receives loan forgiveness.
Cordray’s wins
Cordray highlighted the ED’s efforts to revamp Public Service Loan Forgiveness (PSLF), which is a key debt relief program for public servants, such as teachers, military servicemembers, and fire fighters.
The program knocks off student loan debt for these borrowers if they make 120 qualifying monthly payments. Under previous administrations, the program has been a massive flop with few civil servants obtaining debt relief under cumbersome rules.
“For variety of reasons that program got — I’ll use a technical term here — all screwed up over the years. And there were a lot of things that needed to be fixed,” Cordray said. “Congress tried to fix a few of them,” but “it was up to us at the department to bite the bullet and fix the remainder of them.”
Last October, ED announced it was offering a time-limited waiver to borrowers working towards PSLF, on top of other reforms, to get more public servants debt relief. Under Biden’s tenure, Cordray said, the number of public servants to receive forgiveness rose from about 7,000 to more than 220,000.
“We have made great strides with that program,” Cordray said.
Another program being overhauled is the borrower defense program. That program is an initiative to provide relief to students defrauded by predatory schools that sputtered during the Trump administration.
On Thursday, ED announced it was canceling debt held by defrauded student loan borrowers who had attended a now-defunct beauty school, erasing $238 million.
“We now have a backlog that we’re working through,” Cordray said about borrower defense claims, adding that there will be more claims processed going forward because “there were some schools and change the schools that cheated a lot of students.”
Cordray, who served for six years as the first Director of the Consumer Financial Protection Bureau (CFPB), added that “we have a few other ways that we can provide [student] loan forgiveness very specific authority that Congress has granted us. We are working to do that as aggressively as we can. None of it is a substitute for general loan forgiveness. But again, that’s a decision for the White House to make.”
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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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