4 things to know about Biden’s recent student loan forgiveness announcements

BY Sydney LakeAugust 27, 2021, 2:00 AM
The Chantilly Campus of ITT Technical Institute sits closed and empty, as seen in September 2016.
(Photo by Jahi Chikwendiu—The Washington Post/Getty Images)
The Chantilly, Va., campus of ITT Technical Institute sits empty in September 2016. (Photo by Jahi Chikwendiu—The Washington Post/Getty Images)

The U.S. Department of Education on Thursday announced yet another round of student loan forgiveness, discharging $1.1 billion for 115,000 borrowers who attended the ITT Technical Institute, a now-defunct for-profit technical school. The latest announcement is the fourth round of student loan forgiveness during President Joe Biden’s tenure, but it barely scratches the surface of remaining debt. 

Late last week, the Education Department announced it would discharge $5.8 billion in student loan debt for 323,000 borrowers with a “total and permanent disability.” This was the largest round of forgiveness during Biden’s tenure, though only a small fraction of this type of debt—and less than what he had promised on the campaign trail.

Those students who attended programs with deceptive or illegal practices like ITT Tech received relief this year through two rounds of forgiveness totaling more than $1.5 billion and affecting nearly 75,000 borrowers. Since March 18, the Biden administration has forgiven $9.5 billion in student loans.

Here’s what you should know about Biden’s latest rounds of student loan forgiveness.

They’re only a ‘drop in the bucket’

Total federal student loan debt stands at $1.7 trillion as of the second quarter. Combined, the forgiveness announced this year accounts for less than 1% of all federal student loan debt.

“It’s hard to conceptualize, but it really is a tiny, tiny, tiny fraction of how much the government spends on other issues,” says Cody Hounanian, executive director of the Student Debt Crisis Center. “It’s really a drop in the bucket when it comes to the broader student debt issue.”

The round of forgiveness for disabled Americans, though, does give relief to people who should have received relief a long time ago, Hounanian adds. 

“The action removes a major barrier that prevented far too many borrowers with disabilities from receiving the total and permanent disability discharges they are entitled to under the law,” U.S. Secretary of Education Miguel Cardona said the day of the announcement. “This change reduces red tape with the aim of making processes as simple as possible for borrowers who need support.”

Who actually gets the relief

There have been multiple rounds of student loan forgiveness, but the two main groups getting relief are disabled Americans and borrowers who attended now-defunct institutions.

Borrowers with a “total and permanent disability” (TPD) qualify if they are identified through an existing Social Security Administration data match.

The SSA looks at whether someone is working and has a “severe” condition when establishing a TPD claim. The agency will also evaluate if people can still do what they did previously or whether they could do any other type of work. Many disabled veterans qualify for this type of debt relief. 

The other rounds of forgiveness go to students who attended institutions with deceptive or illegal practices and people who had approved “borrower defense to repayment” claims. Borrowers with approved claims against schools including Corinthian Colleges, ITT Technical Institute, American Career Institute, Court Reporting Institute, Westwood College, and Marinello Schools of Beauty qualified for debt forgiveness. 

These rounds of relief stood up for students whose “colleges took advantage of them,” Cardona said in a statement.

How the forgiveness will be implemented

The TPD round of student loan forgiveness will go into effect in September during the Education Department’s data match with the SSA. Borrowers will receive approval notices for a discharge in the weeks following, according to the department.

Discharges will be made automatically. Borrowers will no longer need to fill out an application before receiving relief, which was required in the past. 

Borrowers with defense to repayment claims (those in the other rounds of forgiveness) will receive the discharge automatically, so long as they didn’t enroll in another institution within three years of their previous school’s closure. Most ITT borrowers covered by the latest action did not enroll elsewhere within three years of the school’s closure, according to the Education Department. These discharges will also begin in September.

Other groups that may have relief on the way

Public service workers deserve to be at the top of the priority list for debt forgiveness, Hounanian says, since they’re guaranteed student loan relief under Federal Student Aid’s Public Service Loan Forgiveness (PSLF). 

The program forgives the remaining balance on direct loans after making 120 qualifying monthly payments for workers including teachers, firefighters, and social workers. But about 90% of people who have applied for this program have been denied, according to Hounanian.

Mass debt cancellation could still be a possibility, although Biden isn’t on board with the $50,000 reprieve per borrower that other Democrats are pushing. Sen. Elizabeth Warren, a Democrat from Massachusetts, said in February that cancelling student loan debt could provide a “massive stimulus to our economy, help narrow the racial wealth gap, and lift this impossible burden off of tens of millions of families.”

Groups like the Student Debt Crisis Center are pushing for mass debt cancellation ahead of the end of forbearance, which is now Jan. 31, 2022. Federal student loan borrowers have not had to make payments since March 2020. 

This reprieve has given borrowers relief, but it “just kicks the can down the road,” Hounanian says.