Joe Biden

Biden Has Canceled $9.5 Billion in Student Loan Debt Yet Forgiveness for All Isn't Necessarily Coming

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Earlier in August, the U.S. Education Department under President Joe Biden announced it would cancel another $1.1 billion in student loan debt for about 115,000 borrowers who attended ITT Technical Institute, a now-defunct school.

This latest round of forgiveness brings the administration's total to about $9.5 billion erased for about 563,000 borrowers, according to the Education Department.

While a win for many, it isn't a sign that broad-based student debt forgiveness will necessarily come anytime soon, experts say.

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That's because some of the debt canceled so far was done through a program called "borrower defense to repayment." This targeted aid was created to protect people from being defrauded by schools engaging in misconduct or violating certain laws, such as falsely claiming guaranteed employment or incorrectly telling students that credits would transfer to other colleges. Other debt has been canceled for students with total and permanent disability status.

Both are separate from the Biden administration's efforts to determine whether the president can legally cancel federal student loan debt through executive order.

"They are apples and oranges," said Betsy Mayotte, president and founder of The Institute of Student Loan Advisors, a nonprofit.

Playing catch up  

Still, headlines about forgiven student loan debt have popped up in recent months, adding to confusion and excitement for borrowers. There's been an uptick in loans canceled through borrower defense lately because the Biden administration is making up for lost time, according to Mayotte.

Updated rules for the program were set to go into effect under former President Donald Trump but were delayed. Then, the former administration released its own regulations in July 2020, months before Trump left office.

"They made it almost impossible for anyone to get relief and put on hold or stalled any applications in the pipeline," said Mayotte.

That changed when Biden came into office in 2021. He revived the program and quickly extended relief to thousands of borrowers.

"There's a catching up that's going on right now on that front, and that likely will continue," said David Bergeron, a higher education expert who served as the acting assistant secretary for postsecondary education and the deputy assistant secretary for policy, planning and innovation at the U.S. Department of Education during the Obama administration.

What's next for broad student loan forgiveness

Of course, the Biden administration is still working towards broader student loan debt forgiveness that would help millions struggling with repayment.

The president is currently waiting on reports from the Education Department and the U.S. Department of Justice that will outline their thoughts on the legality of forgiving student loan debt through executive action.

"The government is working through the process to do this the right way," said Will Sealy, co-founder and CEO of Summer, a company that helps borrowers simplify and save on student debt.

If Biden does forgive a portion of student loan debt through executive action, it's likely that it would be challenged in court and could result in more issues for borrowers if it isn't upheld, according to Mayotte.

"I understand why he's not moving forward with an executive order until he's sure that if it got challenged, he'd win," she said of Biden's hesitancy to proceed on debt cancellation on his own.

Even though some legislators, such as Senate Majority Leader Chuck Schumer, D-N.Y., and Sen. Elizabeth Warren, D-Mass., have asserted that the president can legally forgive student loan debt through executive order, not all experts are so certain and want to minimize potential harm to borrowers.

"The greatest risk to borrowers is that they get thrown into this legal black hole," said Bergeron.

If the Education Department doesn't think that Biden has the authority to cancel loans through an executive order, such a move would have to be approved by Congress, he said.

Borrowers with federal student loan debt still have some time without payments due or interest on their balances accumulating. In early August, the Biden administration extended the pause on student loan payments through January 2022.

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