The Biden Administration is facing yet another looming deadline as the last extension on the pause on student loan repayments is approaching the August 31 deadline.
The Department of Education has been telling student loan servicers however NOT to contact borrowers to start demanding that money as the deadline approaches, which signals they are expecting the Biden Administration to announce another extension.
And honestly, that’s the least, and I mean the very absolute least Biden could do; he should have done it already.
Scott Buchanan, the executive director of the Student Loan Servicing Alliance, which represents all of the companies that service the federal loans subject to the administration’s moratorium that “We needed to know two months ago, but really, we’re at the Rubicon here. If we get into August and don’t have guidance on this, I mean, we are really creating an untenable position for us and for borrowers.”
I guess Biden was too busy allocating all that money to Ukraine over the past few months…what’s the total now, around $56, 57 BILLION DOLLARS…that he forgot about student loan debt.
Well, we didn’t forget! We knew those payments were coming due and we were dreading them. And we had reason to, as we’ve been saying all along, and it’s not because we just don’t want to pay back the original loan; it’s that we can’t afford the payments that those loans have ballooned into.
Business Insider reports that an employee of a small student-loan company in Iowa who was there when the Education Department created the income-based repayment program in 2007 told Insider it was flawed at the outset.
“The implementation of this plan was never the problem, it was a bad program from the very beginning.” Why is that?
The plans allow borrowers with direct federal loans or loans through the Federal Family Education Loan program, which are privately held, to pay them down through monthly payments fixed at a percentage of their discretionary income, with forgiveness after 20 or 25 years of repayment. But being on a 25-year repayment plan didn’t stop interest from growing because if a borrower is late in recertifying their income, the interest will capitalize — meaning it’s added to the original loan balance, so future interest grows based on that higher amount — leading to higher monthly payments.
Because of this capitalizing interest, only 32 people have received loan forgiveness, even though the program has been around since 1994.
Investigations have described other major flaws with the plans, like a failure to keep track of payments and an onerous process for certifying income in the application processes.
The Biden’s Education Department recently indicated it wants to prevent interest capitalization whenever possible. While that could help borrowers starting in 2023, those who have been in repayment for decades could continue contending with higher monthly payments.
Which is why the debt must be canceled entirely, completely, and outright.
Lawmakers will again kick the can down the road with another extension, which is unavoidable since the democrats would be putting the final nail in their already half-closed political coffin if they allow the payments to resume before the mid-term elections. But any real change in the exploitative student loan industry that relieves the unbearable burden of mounting debt that so many are under is not coming for most of those people any time soon.
You know it’s bad when an industry insider makes the situation plain as day. The employee of the student loan servicer said, “I think the government has a responsibility to these people because we’ve done this to Gen Xers and millennials, but now we’re getting a lot of Gen Z on there,” she said. “And this is all these people who are getting trapped in this debt because they were told they were making the smart and the fiscally responsible decision to go on the income-based repayment plan and have a payment that matched their income. And all it’s done is just lead to massive debt.”
Now might be a good time to stop throwing all that money at Ukraine and just cancel all this student loan debt, especially since restarting those payments as this country is entering a recession would be absolutely disastrous. Now would be a good time for Biden to abandon his Safer America Plan, which would see an allocation of $13 million for the states to hire 100,000 more killer cops, and man that sounds like the 1994 Crime Bill all over again that doesn’t need to be redone at all!
Stop funding war. Stop funding killer cops. Just cancel the doggoned debt!