< Student loan forgiveness isn't dead yet, and other takeaways from 2023

ASMA KHALID, HOST:

More than 40 million federal student loan borrowers had an eventful year. It began with a promise of forgiveness. Then they were unforgiven, and now some may be forgiven again. The Supreme Court overturned President Biden's loan forgiveness plan, so the administration then tried another way. Our colleague Steve Inskeep spoke with NPR education reporter Cory Turner, who has covered these twists and turns throughout the year.

STEVE INSKEEP, HOST:

Good morning, Cory.

CORY TURNER, BYLINE: Hi, Steve.

INSKEEP: So this loan forgiveness is still alive?

TURNER: I like to think of it as a sort of slow, shambling zombie that isn't going to reach everybody, but it just might sneak up on you (laughter).

INSKEEP: (Mimicking zombie) I forgive.

Go on.

TURNER: So, yes, to be clear, President Biden's big official plan to forgive hundreds of billions of dollars in student loans, that is very dead. The U.S. Supreme Court said he cannot go that big. But what the Education Department is doing now is they're going through a pretty tedious process - it's called negotiated rulemaking - to see, well, how big can he go? Can he legally cancel the debts of borrowers with really old loans, or maybe for borrowers who now owe more than they initially borrowed?

INSKEEP: OK.

TURNER: And we'll see what happens there. But I do want to be super clear here, Steve - from the beginning, the Biden administration has done a ton of other things that have led to nearly $132 billion in loan forgiveness for more than 3.6 million borrowers.

INSKEEP: Oh, wow. This is interesting. And as a reminder, the Supreme Court didn't say, as a policy matter, you can't forgive loans. They said you have to do things within current law as we interpret it. So where is that forgiveness coming from?

TURNER: So this forgiveness is coming from Biden administration efforts to essentially overhaul a handful of old and pretty broken programs. They include public service loan forgiveness, as well as serious mismanagement of federal income-driven repayment plans and a deeply flawed system that was hurting borrowers with severe disabilities. The Biden administration has overhauled all three. That $132 billion in loan forgiveness, I think we can agree objectively, is an enormous amount of loan forgiveness, Steve.

INSKEEP: Yeah.

TURNER: The challenge, I think, politically for President Biden ending 2023 is it still feels small to a lot of borrowers because it's not nearly as much as he promised.

INSKEEP: Well, what is happening now with people who got to pause their student loan debt payments during the pandemic and have had now to return to payment.

TURNER: So that is my second takeaway. They are coming back to a very different repayment system, and that's largely because of a new income-based repayment plan the Biden administration is rolling out called SAVE. It is more flexible and more generous than any previous repayment plan. It keeps interest from blowing up a borrower's loan balance, No. 1. In July of next year, it's going to cut undergraduate borrowers' payments in half. In fact, it is so generous that Republicans have been fighting to shut it down. They point to one estimate that says the SAVE plan could cost as much as $475 billion over the next 10 years. President Biden has said, though, even if Congress does send him a bill to kill SAVE, which at least the Senate seems unlikely to do, he'll veto it.

INSKEEP: All of this is so complicated that even with your clear explanations...

TURNER: (Laughter).

INSKEEP: ...I struggle to follow it. What if I'm a borrower and I want to call my servicer and figure out what I can do?

TURNER: This is my third takeaway, and that is that our student loan system right now, at least as borrowers experience it, is a total mess. My advice to borrowers is don't call unless you absolutely have to. And the reason for all of this is because there was a budget fight a year ago, and Congress refused to give the Ed Department any additional funding for this past year. Now, until the pandemic payment pause ended, that was sort of an abstract problem.

INSKEEP: Sure.

TURNER: But now it is a full-blown funding crisis. Just think about this for a second. The Education department right now has to help 28 million borrowers make their way into this funnel of repayment, also while implementing a brand-new repayment plan and while conducting a massive retroactive review to fix past mistakes in borrower accounts. And we're also seeing cracks in the department's ability to do other things because it is so stretched. The FAFSA form is late.

INSKEEP: Oh, this has to do with college financial aid. OK.

TURNER: Basically, a whole bunch of things the Ed Department is doing right now the department is struggling to do. As one more example that comes to mind from our own reporting, my colleague Sequoia Carrillo has covered a new law to allow couples who joined their loans while married to now separate them. It's a big deal, especially for women in abusive relationships who end up trapped by their abuser's student loans. Now, this law passed more than a year ago. President Biden signed it. To this day, there is still no program. I reached out to the Education Department just a couple of days ago, and they told me they just don't have the money to implement it right now.

INSKEEP: Cory, thanks for the update - really appreciate it.

TURNER: You're welcome.

INSKEEP: That's NPR's Cory Turner, who has covered student loans all through this year.

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