The NPR Politics Podcast - Biden Reverses On Debt Cancellation For Hundreds of Thousands

Episode Date: October 3, 2022

In a remarkable reversal, the U.S. Department of Education has quietly changed its guidance around who qualifies for President Biden's sweeping student debt relief plan. People who took out Perkins loans and Federal Family Education Loans, the mainstay of the federal student loan program until 2010, may no longer be eligible for forgiveness.This episode: White House correspondent Tamara Keith, senior political editor and correspondent Domenico Montanaro, and education correspondent Cory Turner.Learn more about upcoming live shows of The NPR Politics Podcast at nprpresents.org.Support the show and unlock sponsor-free listening with a subscription to The NPR Politics Podcast Plus. Learn more at plus.npr.org/politics Connect:Email the show at [e-mail] the NPR Politics Podcast Facebook Group.Subscribe to the NPR Politics Newsletter.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

Hey Atlanta, it's Asma Khalid from the NPR Politics Podcast. We are going to be live on stage doing our show Thursday, October 20th at 8 p.m. at the Buckhead Theater. And we'd love for you to be there. Ticket info is at nprpresents.org. Thanks to our partners, Georgia Public Broadcasting, WABE, and WCLK Jazz. See you there. My name is Rex and I'm getting into my 2019 Volkswagen Alltrack to go to work. But it's not what I wanted to talk to you about. It's my work vehicle. A 1988 Grumman Long Life vehicle or LLV. This Blue Eagle is a small white block of a truck with a short nose with a four-cylinder 90 horsepower engine that doesn't use a timing belt or chain helps me deliver to about 850 houses each day.

This podcast is recorded at 109 p.m. on Monday, the 3rd of October. Things have likely changed by the time you hear this, but I'll still be delivering the mail. Here's the show. Always delivers. Yeah. Hey there, it's the NPR Politics Podcast. I'm Tamara Keith. I cover the White House. I'm Domenico Montanaro, senior political editor and correspondent. And Corey Turner is here with us from NPR's education team. Hey, Corey.

Hey, Tam. Hey, Domenico. Hey. So we have you here because you reported a story last week. You're still reporting it as the fallout continues. But the U.S. Department of Education has quietly changed its guidance around who qualifies for President Biden's sweeping student debt relief plan. That could be a big deal for many borrowers who now apparently no longer qualify for the $10,000 or $20,000 in loan forgiveness that the Biden administration is offering and that a few weeks ago they thought they did qualify for. So Corey, explain these changes, how you noticed them and who it impacts. Yeah, so I will try to keep this as unnerdy and in the weeds as possible. We are talking about old federal student loans called FELL loans.

It stands for Federal Family Education Loans. And these used to be the mainstay of the federal student loan program until 2010 2010 when the program was shut down and basically the whole system shifted largely over to direct loans. So to be very clear, these are federal loans because they are guaranteed by the federal government, but they were issued back at a time when the loans were actually held and serviced and managed by private banks and loan servicers and even some state-based agencies who are allowed to profit from them, even though they're guaranteed by the government. So in total, Tam, we know that we're talking about roughly 4 million borrowers who have these commercially held FED loans. And when Biden announced his

sweeping debt relief plan, so this would have been late August, the Ed Department told these borrowers, hey, all you need to do is consolidate these old loans into new direct loans, and then you'll qualify for relief too. But then late last week, very quietly, without any real public explanation, the department changed those rules and said suddenly to these borrowers, as of this day, you no longer can consolidate your loans and qualify for relief. I had heard something might be changing. And so I, I screenshotted the language as it was on the federal student aid website, the old language. And honestly, I was just staring at the ed website, hitting the refresh button. And then sure enough, around 11 o'clock in the morning, I noticed the policy had completely changed. Wow.

So, okay. Why? completely changed. Wow. So, okay, why? You know, like, is there, it would seem to be a very big question. This is a shift. This is a change. They have changed their policy. Why would they do that to these borrowers? I mean, that is exactly what I was trying to figure out. And I think there are a couple different answers here. At first, the administration offered no answer, no explanation. But it also doesn't take a lot of work to read between the lines here. So you remember those loan servicers and the private banks and the state-based agencies that I mentioned who manage and profit off of these old loans?

Well, they started to argue, look, if we lose too many of these loans because of your debt relief plan, we're going to start suffering financial harm. And in fact, last week, about the same time that the Ed Department is changing this policy, six Republican states filed a lawsuit arguing exactly this and asking a judge for an injunction to stop Biden's entire debt relief plan. And so I think the White House was so worried about that happening that they were essentially willing to quietly change the scope of their debt relief plan, you know, sacrificing these fellow borrowers, hoping to undercut the state's arguments and protect everyone else who might benefit.

It kind of reminds me of the Affordable Care Act. You know, I mean, you had this argument that they made in court about, you know, the mandate actually being a tax, which wasn't something that a lot of people had talked about in the beginning. But, you know, then that winds up getting taken out. And I know the Obama administration was worried that the entire law would become, you know, thrown out. And I know the Obama administration was worried that the entire law would become, you know, thrown out. So it sounds like the Biden administration was trying to preempt, you know, potentially a lawsuit that could throw out this entire thing that had gotten the hopes up for a

lot of people who have student loans. So Domenico, I do want to talk about the politics here. This was always going to be, you know, sort of threading a needle for the president and for the White House with this policy. And now they're having to thread it even more because of the legal challenges. Yeah, I mean, it was always going to be difficult because there's only so much that a president can do by executive order for as many things as, you know, people in the president's base want him to do and that the president wants to do and he promised to do, you still need Congress. And with Congress being as closely divided as it is, it's just difficult to get a sweeping policy through that won't be

challenged in court and have part of it sort of thrown away. And it makes it for a very difficult bit of policymaking and politics to be able to get some of this through, not to mention a little bit of the backlash that I think the White House knew was coming where you have conservatives saying that this in the first place was a giveaway that they saw as use, the Biden administration, the Biden White House, used with younger people, frankly, in a midterm election year to sort of try to help some of that enthusiasm to say whether it will change the scope of a race or two or here, wherever that might be, because inflation is still the dominant issue for a lot of independents and Republicans with prices being as high as they are. motivating factor for Democrats, while you also have Democrats in swing districts also watching the economy and wanting to make sure that they're not ignoring economic concerns of a lot of their constituents. So yes, student loans play into the economic concerns of a lot of people. And that's part of why I think you're seeing this White House try on this angle with student loans to try to get some help and relief to younger borrowers and also to get them out to the polls. All right, we're going to take a quick break. More in just a moment. And we're back. And Corey, this policy, the student debt relief policy was announced about six weeks ago.

Since then, the Congressional Budget Office, which you promised not to get wonky, but I'm taking you there right now. No. Yeah, when we start talking about CBO scores. We're going there. So the Congressional Budget Office, which is like the nonpartisan office

that sort of does the budget scores and says how much something's going to cost, what the effect of things might be on the economy or otherwise. They looked at this policy. And Corey, what did they find? Yeah, they said it would probably cost around $400 billion. It's not nothing. $400 billion is a lot of money. Even if you concede to arguments that these are debts that were written years in the past, it's not exactly like writing a check. And I think it just forced the White House to go back into justification mode, you know, making clear to folks why they think this is still an important policy and worth the cost. But then there's the political analysis that layers on top of that, because a lot of the other big Democratic priorities that haven't made

it through Congress can't be done through executive action. You know, this administration has actually gotten quite a bit done when you think about a 50-50 Senate that Corey is alluding to here, especially because of things that conservatives, frankly, have been very upset about. And it's another one of those examples, though, of expectation setting kind of getting in the way a little bit when you run in a campaign and kind of promising you can lasso the moon. And when you get only out of the atmosphere and into space, people see it as a failure. So some of this is about that kind of expectation setting that, you know, Biden as a candidate was certainly willing to say he could do all of the things. And when he accomplishes some of it, it doesn't look quite as shiny and good. Well, speaking of expectation setting, Corey, six weeks ago, many of these borrowers thought that they were going to get this relief. Now, at least some of them, maybe 2%, if you take the White House number, are email just a few minutes ago. And you're, and you're

right. Like, I think the real tragedy here is, is that they were given a false hope. I, I, I've talked to lots of folks who think the Biden administration would have been on solid ground, you know, six weeks ago when they made this announcement, simply saying like, look, anticipating a lot of lawsuits, we just don't see a way to help these fell borrowers. And I think that would have been frustrating for many of these borrowers, but they would have understood, you know, being told you're going to get help and then having it essentially taken away six weeks later is really hard. And I think most people don't realize when we talk about these FFEL loans, like this is a very specific group of people. These are old debts. You know, the FFEL program, as I said earlier, ended in 2010.

Many of these borrowers went to community colleges, for-profit colleges, historically black colleges and universities. I mean, honestly, when President Biden was talking about who he wanted to help with this debt relief plan, fellow borrowers are right there in the middle of it. And so it's tough. And so what I'm hearing from some of these borrowers, you know, I've heard frustration from some of them about the way the administration is now talking about it, you know, saying, well, it's really only 2% of those who might be affected. I saw a tweet from one borrower who said, well, if you're one of the 800,000, it matters.

Don't try to erase my story with your greater good stats. I just got another email not that long ago from a borrower who wrote, I've been paying my loan since 2006, so this abrupt news is a punch to the gut. It feels awful. I do want to say, though, I'm going to try to be glass half full here. You know, the administration insists they're still exploring exploring other avenues that they could possibly use to help these borrowers. We'll see. It's possible things will change. Honestly, this story has changed so much every week. I don't think anything is set in stone at this point. Well, one thing I am certain of is that you are going to be watching this closely and we will have you back on the pod when there are more major

developments. Corey, thank you for joining us today. Thank you so much for having me. I'm Tamara Keith. I cover the White House. And I'm Domenico Montanaro, senior political editor and correspondent. And thank you for listening to the NPR Politics Podcast.