Natalie Gardiner has a 2-year-old son, a husband in the military, and a boatload of anxiety about how she’ll provide for her family while paying off her student debt.
- President Joe Biden has said each of the nearly 43 million federal student loan borrowers holding a total of $1.6 trillion in debt should have $10,000 of it canceled. A more aggressive plan among liberal Democrats would cancel $50,000 per borrower. But nothing’s been done so far.
- The Education Department extended a pandemic relief program pausing payments and interest for those with student loans until Jan. 31, which some say has also become the unofficial timeline for Biden to accomplish his blanket loan cancellation.
- Some students waiting for loans to be wiped out have stopped making payments they could afford during the pandemic-era pause, according to one financial advisor. Some have even taken out loans they hadn’t planned to take.
Currently a stay-at-home mother while she works toward a master’s degree in school counseling, Gardiner knows that in many ways she’s lucky. Her husband's role in the Army landed her a discount on tuition, and with $50,000 in federal student loans deferred until she graduates, the family has enough to make payments on a car while also putting food on the table.
But the 27-year-old Washington state resident also looks ahead with dread knowing her loans will come due next year, right about the time her husband transitions out of the military—making her the primary breadwinner.
Gardiner continues to hope that the blanket student loan cancellation promised by President Joe Biden and other Democrats may soon become reality—even if she has stopped following the day-to-day political back-and-forth. It has become too much for her to handle.
"I don’t want to put all my eggs in one basket,” Gardiner said. “I’m ignoring it but hoping for it, if that makes sense.”
There are 42.9 million borrowers like Gardiner in the federal student loan portfolio, holding nearly $1.6 trillion in debt—an average of $36,296 per borrower. The uncertainty surrounding blanket student loan cancellation has caused anxiety for many of them, and some have even changed their behavior based on what they believed were assurances their loans would be wiped away. After nearly a year of Biden saying he would like to see $10,000 in student debt forgiven for every borrower with a federally held loan, those who qualify are left wondering when the president will act—or whether he even intends to.
The questions have taken on new significance since the Education Department last Friday extended until Jan. 31 a pandemic relief program that has paused payments and interest on federal student loans. Thanks to the relief program, about 26 million borrowers have not had to make payments on their federal student loans since March 2020, according to department data, with interest waived for approximately 41 million. With the department saying it will not renew the pause again, some feel like the window is closing fast for blanket loan cancellation.
“Sounds like January 31, 2022, is the deadline to cancel student debt,” Rep. Jamaal Bowman (D-New York) wrote Friday on Twitter. “No more extensions required.”
In a statement released in conjunction with last week's Education Department announcement, Biden hinted that more may be coming for student loan borrowers as the administration considers policies to aid the economic recovery from the pandemic.
“We know there is more work to do and the road will still be long for many people—especially for the one in six adults and one in three young people who have federal student loans,” Biden said in the statement.
Can He or Can’t He?
The major debate regarding blanket forgiveness has centered around whether Biden—or any president—has the power to unilaterally cancel federal student loan debt. No president has broadly canceled debt before, and there’s disagreement about whether those cases where the executive branch does have the authority to waive debt—like when students were misled by their schools—allow for the president to offer blanket forgiveness.
Biden has said he prefers a legislative solution, with loan forgiveness coming from Congress, but has hinted before about an impending cancellation.
In April, Biden’s chief of staff, Ron Klain, told Politico that the president had asked the Education Department to prepare a memo about the legality of the president canceling student debt. The White House has yet to announce whether it has received the department’s findings.
The American Rescue Plan, passed by Congress and signed into law in March, seemingly paved the way for blanket forgiveness by changing the federal government’s revenue code so that any student loan debt canceled after Dec. 31, 2020, and before Jan. 1, 2026, would not be considered income and therefore wouldn’t be taxed.
Then there’s Biden’s repeated insistence that he would like to provide blanket loan cancellation. In a speech last November, for example, the then-president elect said $10,000 in forgiveness was “in my plan” and “should be done immediately.”
In June, more than half (58%) of people surveyed by lending website CollegeFinance, perhaps taking Biden at his word, said they have treated their student loans differently because of impending student loan forgiveness and the pandemic. Of that group, 35.4% stopped making payments altogether during the pandemic as they waited for their loans to be forgiven. The more debt a borrower had, the less likely they were to continue paying off their loan, the survey results showed.
Betsy Mayotte, president and founder of The Institute of Student Loan Advisors, a nonprofit group that provides free advice to borrowers, says she has seen this behavior firsthand, and it continues to shock her.
Mayotte has watched current students take out loans they didn’t previously plan to take, with the expectation the debt would be wiped out by blanket cancellation. She’s seen students who were paying back their loans during the pandemic—in order to take advantage of 0% interest—stop paying completely. Some even asked for their money back, thanks to a pandemic-era policy where the Education Department will provide refunds to borrowers who request them. One client refused to take her advice to make payments during the pause, saying he didn’t want to “feel like a chump” paying a loan that would be forgiven.
“You shouldn’t change your financial behavior in anticipation of forgiveness,” Mayotte said. “The odds this will happen are greater than they’ve ever been since I’ve been doing this—which is since the Earth cooled—but it doesn’t mean it’s close. The odds are still slim.”
Mayotte said the confusion isn’t Biden’s fault—his messaging has been consistent, she said. She places the blame instead at the feet of progressive Democrats, who have muddled the message and raised hopes unrealistically, she said.
She specifically pointed to a press conference in February, when Sens. Elizabeth Warren (D-Massachusetts) and Chuck Schumer (D-New York) introduced a resolution signed by 16 senators and 46 members of the House of Representatives—all Democrats or independents who caucus with them—that called on Biden to use executive power to cancel $50,000 in student debt for every borrower. The live-streamed event caused a spike in anticipation and interest from borrowers, Mayotte said, with more people asking about potential forgiveness and more borrowers altering their behavior.
“It was a statement of approval,” Mayotte said. “It didn’t push the issues forward. But consumers didn’t realize that. They thought something was imminent.”
‘An Abundance of Caution’
Nothing changed, though, and Biden has continued to face pressure on the issue from within his own party. In April, Warren went so far as releasing data obtained from the Education Department showing the congressional plan would wipe out the entire student debt burden for more than 80% of borrowers. Biden’s plan, meanwhile, would zero out the bills of 33.4% of borrowers.
Biden likely is waiting for Congress to take up forgiveness, or for a clear-cut path to emerge that would allow him to cancel the debt without any legal challenges, Mayotte said. The legislative route would be incredibly hard, due to Democrats’ slim margins in both the House and Senate and opposition from Republicans, who believe blanket forgiveness would be a bailout burdening taxpayers. Moreover, if forgiveness legislation were to wind up in court it would create “a mess,” Mayotte said, since there’s no playbook for what would happen if Biden canceled debt for millions of borrowers only to have the courts declare the move unconstitutional.
“I don’t blame him for having an abundance of caution,” Mayotte said.
Nick Brackett, an elementary school teacher from New Jersey with $90,000 in student debt, said the legal questions and debate within the Democratic party haven’t affected him, because he’s stopped paying attention to the issue. Tired of the discourse around student loan forgiveness, he said he has resigned himself to whatever happens.
“I never really believed it would happen,” Brackett said. “Obviously, I would like it if it did. If I got $10, I’d be thankful. But I don’t expect anyone to pay for me. I took the money out so I know I’m responsible.”
Brackett has taken advantage of the pandemic-era payment pause, but has also acted on his own to make his loans more manageable once payments do resume. He cut his estimated monthly payment in half, to $500, thanks to a repayment plan that limits how much he has to pay each month, based on his income. He also recently refinanced some of his loans to cut their interest rate from 13% to 4%—a relief because he said he couldn’t stand watching his loan balance grow each month despite making payments.
Despite being proactive, however, Brackett said he feels like the loans that seemed like the key to a better life are holding him back. He pointed to the fact that he has to drive an 18-year-old car he inherited from his grandfather because he can’t afford anything else.
Brackett echoed a sentiment common among student loan borrowers—he needed the loans to get through school and into the career he desired, and never thought about the debt accumulating in his name until the bill came due once he graduated.
“I did what I had to do,” he said. “I figured I’d deal with it when we got there.”
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