Biden is considering canceling some student debt.  Here's why it's not a great idea

Intensive course in student loan debt forgiveness

The management’s actions so far have been largely Focus on students who have been defrauded by now closed schools, such as Corinthian. But these steps have also fueled the debate over whether the rising cost of higher education is an undue burden on young people. Opponents say that just a tolerant student Debt is a moral hazard and punishes people who have already paid their debts.

Our conversation, conducted via email, is below.

What matters is: What is this latest move by the Biden administration, and how many people does it affect?

Lubosco: Wednesday’s action is the Biden administration’s largest move to cancel student debt to date, totaling $5.8 billion for 560,000 borrowers.

It will affect all borrowers who attended Corinthian College at any time during its existence, dates back to 1995, and still have outstanding federal student loan debt.

Some former Corinthian students have qualified for student loan forgiveness, but the new measure will ensure that all borrowers receive debt forgiveness automatically. They will not have to take action.

How is this possible?

What matters is: how Administration Simply able to forgive this debt? Why didn’t Congress need to think?

Lubosco: The Department of Education has long had the authority — conferred by Congress in the Higher Education Act — to cancel federal student loan debt held by borrowers who were misled by their colleges or enrolled in schools that engaged in other misconduct in violation of some state laws.

But the department rarely used this power before 2015, when Corinthian Colleges and many other for-profit schools suddenly closed in the face of state and federal investigations into their practices. Many schools have been found to mislead prospective students through inflated employment numbers and the possibility of transferring their credits to other schools.

At the time, the Obama administration streamlined the process, known as Borrower Repayment Defense, making it easier for these borrowers to file amnesty claims with the Department of Education. The agency has been inundated with requests, and the Trump administration, which has struggled to change policy, has stopped processing claims for more than a year. There were more than 100,000 applications pending when Biden took office.

Since then, the Department of Education has worked to reduce the backlog, speeding up the process by granting amnesty to groups of borrowers simultaneously.

What is a for-profit college?

What matters is: What is the difference between a for-profit college and other colleges, which also cost a lot of money?

Lubosco: The big difference is that for-profit colleges aim to make money, unlike public and private non-profit colleges and universities.

Not all for-profit colleges are bad. They tend to award degrees for trade-related occupations that prepare students to enter the job market quickly. In this respect, they attract a lot of non-traditional students – such as parents and veterans who want to acquire the skills that will make them marketable to new employers.

But many for-profit colleges have left thousands of students with degrees that haven’t helped them land higher-paying jobs and have burdened them with student loan debt.

How have for-profit colleges changed?

What matters is: What is the state of for-profit colleges now? How has the industry changed in recent years?

Lubosco: Registration in for-profit colleges in 2020 I was About half of what it was in 2010, when it had more than 2 million students enrolled, according to the College Board.

Corinthian Colleges — which operates schools under the names Everest, Heald College or WyoTech — enrolled more than 110,000 students on 105 campuses at their peak in 2010. It sold most of its campuses in 2014 and closed the rest in 2015.

A year later, another for-profit college, known as ITT Tech, suddenly closed after facing state and federal investigations into its hiring tactics.

What happens with debt forgiveness in general?

What matters is: This is just one effort. What do larger debt forgiveness efforts look like? How much student debt has been forgiven and how much is there?

Lubosco: Under the Biden administration, the Department of Education says it has agreed to cancel $25 billion in student debt for 1.3 million borrowers as of this week.

Nearly $8 billion in relief provides relief to 690,000 borrowers who have been misled by their colleges. More than 8.5 billion dollars have been made Automatically canceled for more than 400,000 Borrowers with permanent disability who previously qualified for debt relief but did not apply.

The administration also temporarily expanded eligibility for what’s known as the Public Service Loan Forgiveness Program — which cancels remaining federal student loan debt after a public sector worker made 10 years of eligible payments. The expansion resulted in the cancellation of $6.8 billion for more than 113,000 borrowers.

The Biden administration has also made changes to income-driven repayment plans, bringing millions of borrowers closer to tolerance.

What about collective debt forgiveness?

What matters is: Cancellation of debts to scammers is nothing. Many Democrats would like to see debt relief for people with legitimate degrees, too. Where does this effort stand?

Lubosco: Several Democrats and advocacy groups continue to call for Biden to scrap up to $50,000 on a large scale for each of the 43 million borrowers with federal student loan debt.

So far, Biden has resisted this pressure and instead taken a piecemeal approach to canceling student debt by expanding existing forgiveness programs.

In April, Biden said he was considering canceling student loan debt more broadly — though he also doubled down on his resistance to canceling up to $50,000 per borrower.

In the course of the campaign, he proposed canceling at least $10,000 in student debt per person in response to the pandemic, as well as forgiving all federal student debt related to college tuition from two and four year public colleges and universities for those borrowers who earn up to $125,000 in the year.

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