Biden's student loan forgiveness Plan B has begun. Here's what to know

Dozens of people, most of them student loan borrowers and many holding back tears, on Tuesday implored the federal Education Department to finally do something about their debt. The four hour-long, livestreamed hearing was the first step in a process that President Joe Biden is tapping as part of his revamped effort to provide broad relief.

The administration’s hope is that this process, known as negotiated rulemaking (or “neg reg” or “reg neg” for short), will result in changes to the country’s primary higher education law that enable widespread student loan debt forgiveness. Biden’s original plan for doing so relied on a separate law that gives the president authority during national emergencies – a strategy that garnered lawsuits and was last month struck down by the U.S. Supreme Court.

The neg reg process is long and complex, as USA TODAY has detailed, and will next involve the creation of a committee that will negotiate actual changes to the rule. And this path, too, is likely to face legal challenges. But through neg reg, members of the public have greater opportunity than they did with Biden’s first plan to opine on the issue and help shape student loan relief policies.

The speakers’ commentary hints at some of the key themes that will likely arise as the Biden administration works to make this backup relief plan a reality. Here are five key takeaways:

Borrowers to Biden: ‘Promises made should be promises kept’

Raised by a single mother in a low-income household, Melissa Byrne was always told that a four-year college degree was her only shot at the middle class.

She said she did as she was told, completing her higher education, but has found in the years since that things aren’t so simple: Living a comfortable middle-class existence isn’t guaranteed when you grew up without generational wealth and are still struggling to pay off the debt, not to mention the interest that’s accompanied it.

Last summer, when Biden announced he’d use an emergency lever to cancel the student loan debt of tens of thousands of Americans, that dream of a comfortable life at last felt like it was in reach. She and some 26 million fellow borrowers quickly signed up for forgiveness.

But then, of course, that plan was squashed – various entities quickly sued the administration over its maneuver, putting that plan on pause and then ultimately striking it down for good with the Supreme Court’s ruling in June.

“I really urge everyone who will be on this committee – everyone at the Department of Education, everyone in the administration – to ensure that everyone that was promised the relief last August gets the relief they were promised,” said Byrne, who’s also a student loan cancellation organizer and advocate. “Promises made should be promises kept.”

Some of Tuesday’s speakers were pointed in their frustration with the Biden administration’s fits and starts on student loan forgiveness. Take one speaker, a family therapist with the screenname T Davis, who for decades worked in public service but because of various life circumstances hasn’t secured relief. “I don’t hold this current administration of the Department of Education responsible for the (actions of) previous administrations – this administration offers hope where there hadn’t been any for decades,” Davis said. “However, I do hold you accountable for making meaningful changes to uphold your own mission statement.”

Biden’s Plan B on debt forgivenessIt could take an excruciatingly long time

Should all student loan debt be cancelled?

Some borrowers stressed that the Education Department should prioritize people who have been told their loans could be forgiven but have yet to see that happen.

But many others argued such parameters – limiting relief to specific populations – only allows the country’s larger student debt crisis to fester.

Manuel Galindo said he grew up in one of Los Angeles’s poorest neighborhoods, raised by parents who fled war-torn El Salvador. His father, who shares his son’s name, Galindo noted, can’t read or write. “My family instilled in me the need for education as a way to escape oppression, both in their country and in this one,” said Galindo, an organizer with a union of borrowers known as the Debt Collective.

By the time Galindo completed his undergraduate degree, he had nearly $30,000 in student loan debt. “The cost of education has gotten so high that students in my community, children from my background, are actively deciding not to go to college because they do not see the financial benefit in their lives or in their in your family’s lives,” Galindo said, acknowledging that even he has questioned whether college is worth it.

“I’m here today to demand that we cancel all student debt for all people and stop trying to stratify who deserves cancellation or not.”

Another speaker, Salvatore Cottone, said he is a current college student who relies on Pell Grants – federal aid for low-income individuals – to help fund his tuition. But the maximum annual Pell Grant amount, less than $8,000, covers just a fraction of the cost to attend the rising junior’s private four-year university. The average tuition and fees at such institutions was, as of 2020, roughly $37,000, and that often excludes other costs of attendance such as living expenses.

Over the past few weeks, he said, he’s been crippled with anxiety over whether to continue pursuing his dreams with graduate school, which could add as much as $100,000 to his debt.

After Biden first announced broad cancellation, “even students who didn’t qualify for that round due to just taking out their first loans in the past year felt relief that our nation was listening to our burden” – that relief would be possible for college hopefuls.

Fulfilling that promise, he continued “is an investment in the mental health of an entire generation. It would send a powerful message of empathy and support from our government … I’m scared of not seeing the reality be fulfilled for my generation.”

Student debt crisis has borrowers questioning value of college

A number of borrowers spoke Tuesday about all the life milestones they’ve had to delay or abandon completely thanks to their student loan debt. A woman in her mid-60s who can’t retire. A man in his late 30s who can’t start a family or buy a home. Several people who’ve had to turn down or leave jobs that make the world a better place because their own worlds are crumbling financially.

“Oftentimes people think that young folks and this generation are in debt because we live beyond our means,” said Rep. Maxwell Frost (D-Fla.), the only lawmaker to testify Tuesday. “But it’s not because we live beyond our means. It’s because we’ve been denied the means to live.”

They highlighted the dramatic racial and socioeconomic imbalances in who’s forced to take on debt to get an education. Black and brown Americans are far more likely than their white peers to use loans to pay for school; most of the borrowers who would’ve had their debts cleared under Biden’s original plan are low-income.

Christopher Laureano, a child of immigrants, said he made “uneducated decisions” as a high schooler to pursue a four-year degree because he thought it was essential to achieving the American Dream. The then-aspiring art educator didn’t realize that there were other, less costly postsecondary options – certificate programs, for example.

Various hiccups left him getting a degree he hadn’t originally planned for, and ultimately working a job whose pay doesn’t suffice to pay off his loans nor justify his decision to abandon his passion of teaching art.

All this debt has filled him with “resentment” toward his higher education choices, he said Tuesday.

In addition to recommending that the Education Department provide mass debt forgiveness through the HEA, Laureano asked that it consider making financial literacy education a requirement for high schoolers. Such education would emphasize that there are options beyond a traditional four-year college, he suggested.

Critics: Only Congress can forgive loans en masse

Critics of loan forgiveness have questioned the legality of Biden’s Plan B.

Mark Chenoweth of the New Civil Liberties Alliance said the neg reg approach “would be even worse” than the original plan route, asserting Biden lacks the executive authority to forgive loans. Using the neg reg process is akin to bringing a “wooly mammoth out of statutory mousehole,” he said, suggesting the law’s original authors decades ago did not intend for it to be used the way Biden is attempting to.

Karen Harned, chief legal officer of the Job Creators Network Foundation, described this plan as a Band-Aid solution that would, five or 10 years from now, bring the country back to the same crisis in which it now finds itself. Only Congress can authorize such relief, she said, given its taxing and spending powers as the federal legislative body.

For Harned, colleges and universities need to be held accountable, too. The bottom line, she said, is that despite the hundreds of billions of dollars these institutions collectively hold in their endowments, attendance costs have increased exponentially.

These critics, however, were in the minority on Tuesday – just three of the more than 50 who spoke expressed skepticism of Biden’s attempts at loan forgiveness.

Multiple higher education experts reiterated in their comments that federal law clearly gives the president and his education secretary the power to cancel loans.

More:Student debt: Why Biden’s backup plan may wind up in trouble again at the Supreme Court

Interest, Parent PLUS loans, bankruptcy: A broken financial aid system

A particularly common pain point cited by borrowers on Tuesday: compounding interest that’s made it all but impossible for them to make good on their loans. One woman with nearly $200,000 in loans noted that interest accounts for roughly a third of that amount.

While federal loans haven’t accrued interest during the soon-to-expire payment pause, borrowers who previously entered forbearance for whatever reason still accumulated interest during that time. Some types of loans even accrue interest while borrowers are still in school. Meanwhile, many borrowers say they were coerced into forbearance, unaware of their relief options through targeted programs such as income-driven repayment.

One reason for forbearance: returning to school. Borrower Barbara Koehrer on Tuesday spoke of all the degrees she pursued just to level up in her career. (Women account for roughly two-thirds of the country’s $1.6 trillion in total student loan debt, in large part because of gender pay disparities that pressure them to get advanced degrees.)

Then there are the other cracks in the system. Various speakers, including student loan policy experts and borrowers themselves, highlighted loopholes in the targeted forgiveness options that are currently possible through the HEA. Some examples

Parent PLUS loans: One type of federal student loan is reserved for parents who take on the debt on behalf of their children. But these Parent PLUS loans aren’t eligible for some of the targeted relief options even if their children are. As Peter Granville, a fellow at the left-leaning Century Foundation think tank, noted, “parent borrowers have more at stake than many other borrowers.”
Contracted public service workers: A long-standing – and long-mismanaged – relief program is known as public service loan forgiveness, or PSLF. Through this program, people who’ve worked in public service fields such as teaching, nursing and law enforcement can have loans forgiven after a decade of payments. But a speaker who identified himself as Rick shared on Tuesday that many public service workers have struggled to get approval for loan forgiveness because some of their work was contracted versus in full-time positions. Rick, an emergency medical services worker, pointed out that more than a quarter of people in that industry work for multiple companies in contract roles. And while recent rule changes include some contractors, he said, that exception only applies in states that prohibit direct hiring of EMS workers. “There’s a huge raft of us who were kind of banking on that forgiveness,” he said, referring to Biden’s original plan for broad relief.
Getting loans discharged through bankruptcy: A number of speakers complained about how difficult it remains to have student loans discharged via bankruptcy despite recent changes.

Contact Alia Wong at (202) 507-2256 or awong@usatoday.com. Follow her on Twitter at @aliaemily.

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