DOVER, DELAWARE – OCTOBER 21: U.S. President Joe Biden gives remarks on student debt relief at … [+]
Borrowers are contending with delayed student loan forgiveness on a number of fronts as the Biden administration works to simultaneously implement multiple student loan debt relief initiatives. The problems, largely related to inadequate federal funding, may only get worse in the coming months.
Here’s what borrowers should know.
The Biden administration has launched a number of temporary or one-time student loan forgiveness initiatives designed to provide billions of dollars in debt relief to millions of federal student loan borrowers. These initiatives include the following:
Between all of the separate student loan forgiveness initiatives, millions of borrowers are entitled to relief. But there are widespread delays across the board.
The Limited PSLF Waiver ended on October 31. However, the Education Department and MOHELA, its contracted PSLF student loan servicer, are contending with a backlog of 2 million PSLF applications. As a result, it is taking three months or longer (sometimes, much longer) for borrowers to receive student loan forgiveness under the waiver, particularly for borrowers who submitted PSLF applications during last summer or fall.
Meanwhile, the IDR Account Adjustment is just getting started (and notably, the adjustment may also benefit borrowers on track for PSLF who missed the Limited PSLF Waiver deadline). But the Education Department has already delayed implementation of the account adjustment several times. The program was initially supposed to start resulting in student loan forgiveness by last fall, with implementation completed as early as January 2023. Now, however, the Education Department does not anticipate borrowers receiving student loan forgiveness until the spring of 2023, with implementation not completed until the summer.
Many borrowers who received notifications last year that they were approved for Borrower Defense relief have yet to receive any student loan forgiveness, and the Education Department has hinted that it might take much of 2023 to implement the group discharges. Meanwhile, the Education Department has provided no concrete timeline on the availability of the benefits of the new REPAYE plan.
Biden’s one-time cancellation program has been blocked by federal courts since last fall, so no one has received student loan forgiveness under that program. The Supreme Court will review the initiative. Oral arguments before the court are set for next month, and a decision is expected by June.
The federal omnibus bill that Congress passed during the lame duck session resulted in the Office of Federal Student Aid (FSA) receiving no additional funding to cover its operations. This flat-funding outcome is a significant reason for the delays in implementing the Biden administration’s student loan forgiveness initiatives. Officials and employees have been tasked with establishing and running an increasingly diverse array of student debt relief programs that collectively will impact tens of millions of borrowers, but with no additional resources or support. As a result, everything is taking longer, and officials are reportedly warning that the problems may only worsen.
Furthermore, political brinkmanship in Congress could also pose a real problem. Republican lawmakers in the House of Representatives are reportedly going to use a battle over the debt ceiling to extract spending cuts. Breaching the debt ceiling, failing to fund the government, or cutting funding to the U.S. Department of Education may only constrain FSA’s resources further. This may lead to compounding implementation delays across the board.
Biden’s one-time student loan cancellation initiative cannot be implemented yet due to a federal court order while the case is reviewed by the Supreme Court. But if the court ultimately sides with the administration and upholds the program, the Education Department will then need to implement hundreds of billions of dollars in student loan forgiveness for 40 million borrowers — on top of continuing to operate all of the other student debt relief programs.
In short, student loan borrowers should buckle up and prepare for ongoing delays and mounting frustrations in the coming months.
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