Biden Administration Flags $127B Of Student Loans For Potential Cancellation
President Joe Biden’s administration has flagged $127 billion of federal student loans for potential cancellation.
What Happened: This decision comes despite a Supreme Court ruling earlier this year that limited the scope of such relief.
The Supreme Court, in its June verdict, stated that the Biden administration lacked the legal grounds to erase hundreds of billions of dollars in student loans for tens of millions of borrowers.
However, undeterred by this ruling, Biden has ingeniously leveraged various tools, some underutilized by his predecessors, to work around this limitation, reported The Wall Street Journal.
From the time he assumed office in 2021, Biden has managed to cancel an amount equivalent to nearly 30% of the total projected cost of the initially proposed mass loan cancellation plan.
To provide context, approximately 40 million Americans are currently saddled with a collective federal student loan debt of close to $1.6 trillion.
According to the report, Biden’s initial strategy, unveiled in August 2022, aimed to alleviate $430 billion of this debt. However, this ambitious plan faced a roadblock when the Supreme Court intervened in June.
Despite this setback, the administration has been proactive, piecing together loan forgiveness packages totaling around $127 billion.
By invoking consumer protection regulations and anti-fraud measures, the administration has forgiven $22.5 billion for over 1.3 million borrowers. These borrowers either fell victim to deceptive practices by their colleges, witnessed abrupt closures of their institutions or were beneficiaries of related court settlements.
A streamlined application process has further facilitated the forgiveness of $11.7 billion for 513,000 borrowers diagnosed with total and permanent disabilities. Moreover, modifications to the public-service loan forgiveness initiative, established in 2007, have resulted in the cancellation of nearly $51 billion for 715,000 public servants since 2021.
Addressing long-standing issues in income-driven repayment schemes, the Biden administration has successfully wiped out close to $42 billion for nearly 855,000 borrowers, according to The Wall Street Journal.
However, the entire relief amount hasn’t been fully processed, leading to some confusion among borrowers about their remaining student loan obligations, especially as loan payments and interest rates are set to resume post a pandemic-induced pause.
While the measures adopted by the administration have historically been deemed legally sound, they are not immune to future legal challenges. One case in point is a recent decision by a federal court in New Orleans, which temporarily suspended the expansion of the borrower defense mechanism, casting a shadow of uncertainty over its future application.
Produced in association with Benzinga
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