Today, Explained - Back to school loans

Episode Date: August 22, 2023

President Biden can’t stop, won’t stop trying to forgive student debt, even as borrowers are shortly expected to resume payments. The Washington Post’s Danielle Douglas-Gabriel explains. This episode was produced by Jon Ehrens, edited by Amina Al-Sadi with help from Jolie Myers, fact-checked by Hady Mawajdeh and Amanda Lewellyn, engineered by Cristian Ayala, and hosted by Sean Rameswaram. Transcript at vox.com/todayexplained Support Today, Explained by making a financial contribution to Vox! bit.ly/givepodcasts Learn more about your ad choices. Visit podcastchoices.com/adchoices

President Joe Biden tried to push the biggest student debt forgiveness plan in United States history through using his executive power alone. And he failed. End of story, right? Take the L and move on. I think it's a lot more complicated than that. Was he able to pass this massive debt forgiveness and help 40 million people? No. Or at least not yet.

His signature economic policy, or at least one of his signature economic policies, was struck down by the Supreme Court. But he's still fighting for this. And there is still another path to getting this form of student relief to the people who need it. Danielle Douglas-Gabriel covers higher education for The Washington Post. And on Today Explained, just as borrowers prepare to start paying back student loans again after a three-plus-year hiatus. She's going to help us understand

the president's journey on this issue, which appears to be far from over. Bet MGM, authorized gaming partner of the NBA, has your back all season long. From tip-off to the final buzzer, you're always taken care of with a sportsbook born in Vegas. That's a feeling you can only get with Bet MGM. And no matter your team, your favorite player, or your style, there's something every NBA fan will love about Bet MGM.

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Ontario only. Please play responsibly. If you have any questions or concerns about your gambling or someone close to you, please contact Connex Ontario at 1-866-531-2600 to speak to an advisor free of charge. BetMGM operates pursuant to an operating agreement with iGaming Ontario. Estar escuchando a Hoy Explicado. Today Explained. The president of the United States can't stop, won't stop trying to alleviate the financial burden of millions of Americans. And we asked Danielle Douglas Gabriel what that tells us about his presidency.

This is the president who's interested in compromise and is willing to listen to his constituency. I think we clearly saw that in the fact that for the first year of his presidency, he was being pushed by Chuck Schumer. Tens of millions of Americans, student loan payments are a huge burden upon them.

Elizabeth Warren. Even if you don't have student loan debt, you will be helped by seeing student loan debt cancel. Ayanna Pressley. College degrees are increasingly essential for economic survival, but their sticker price is far too out of reach for most families. On this issue, they did not let up. They were unrelenting.

He was reluctant at times, but eventually when he received the information about how dynamic student loan debt is and who's suffering, the fact that people who didn't actually graduate and have a lot of debt make up about 40% of the population with student loans, all of that information and all of the efforts on the part of the population with student loans, all of that information and all of the efforts on the part of the liberal wing of the Democratic Party and student activists, I think really got to the president. And that's what we saw with the policy of last year. Using the authority Congress granted

the Department of Education, we will forgive $10,000 in outstanding federal student loans. In addition, students who come from low-income families, which allowed them to qualify to receive a Pell Grant, will have their debt reduced $20,000. Both of these targeted actions are for families who need it the most. Working and middle-class people hit especially hard during the pandemic, making under $125,000 a year. Where does President Biden's student loan forgiveness saga begin? I believe it begins before he's even in office, right? Definitely. This was something that he had promised on the campaign trail to forgive some portion of student loan debt. And this wasn't a policy that he was really campaigning on early on. I think as it was clear he was going to cinch the Democratic nomination, he really adopted a policy that was being championed by people like Kamala Harris, people like Elizabeth Warren, who continued to fight for it once Biden actually

was elected president. So he seemed to be reluctant to come into this stance. But once he got there, he seemed ready to fight. And I think that's what we're seeing now, a president who is still willing to fight for this policy. My campaign for president, I made a commitment. I made a commitment that would provide student debt relief. And I'm honoring that commitment today. So once he's in office, what does he do? He doesn't roll out some student loan forgiveness on day one. No. So the first year in office, year and a half almost, it was a will he, won't he? Does he have the authority? Will he do it? And it was like a constant back and forth as to whether we were going to see this big sweeping policy. But while that was happening, there were all these smaller policies getting at student

loan relief that were coming out. There was the waiver for the rules around public service loan forgiveness, a program that helps teachers and social workers get debt relief after 10 years of service. There was an announcement that he was going to give people credit towards student loan forgiveness if they'd been in repayment for a long time through this income-driven repayment adjustment. There was the Department of Education granting group debt relief for folks who'd been defrauded by their colleges. So there were all these kind of efforts to chip at the larger problem of student debt in America. And I think also trying to clean up what has been decades of administrative problems with the way the system runs. But none of that was getting the amount of attention as this

big, looming, possible policy to forgive loans for, you know, some 40 million people. So how does he come to a decision on what exactly to do? I think a lot of that came from the Black Congressional Caucus, from the Hispanic Congressional Caucus constantly from the Hispanic Congressional Caucus constantly pushing him on this issue. So the question today is, does the president of the United States have the power, the legal right to cancel student debt? To that we say, yes.

Also bringing the kind of data that made the issue salient to the president, right? Giving data like showing that the student loan burden is really being shouldered by students of color, by minority students because of the way racial wealth inequality works and, you know, labor market discrimination and all of those things. And then getting data that shows that 40% of people who owe loans never actually got a college degree because they went to places that didn't really help them or they had to drop out for myriad reasons. And once I get the sense that the president was able to wrap his head around the dynamics and the nuance of student debt, it became easier to sell the policy. And I think that's why we saw the final plan written

the way it was, where the most amount of debt relief went to people who had Pell Grants, which is a form of federal aid for low-income students. It was supposed to be more targeted than just blanket relief for everybody. And when does he roll out that plan, and how do people respond? Last summer is the rollout. And some people, particularly people who, you know, owe a lot more money than $20,000, were like, this is a drop in the bucket. This won't even cover my interest on my debt. Thanks, but couldn't you do better?

Coupled with my loans from undergrad, I plan to be over $100,000 in debt when I graduate. 10K off, it's not changing anything dramatically about my life situation, but I'll take it. I'll certainly take what I can get. Then there were other people who were like, this is awesome, I can't believe that we got here. The idea that student debt forgiveness is an actual viable policy after so many years of just being on an activist wish list.

I mean, I am just overwhelmed that 20 million people aren't going to have student loan debt anymore. And then, of course, you had many folks like, this is a waste of money, and this is an overreach of presidential authority. I don't think it's a good idea because we're already in a lot of debt in federal spending. And certainly that's where we saw the crop of lawsuits spring out of

that ultimately defeated the plan. How long did it take before lawsuits were filed there? Oh, weeks. His reckless, unconstitutional, immoral student loan transfer scheme. And I assure you, there were, you know, conservative groups that were trying to figure out how to find a client who had standing, meaning that they could prove that they were harmed by the policy. And a lot of the cases, it was like throwing spaghetti at the wall to see if it would stick. Many got dismissed within a couple of months. Some of them made it through.

The two that ultimately made it to the Supreme Court were perhaps the strongest, but still had holes. A lot of people still questioned whether the one that did make it through the court and ultimately defeated the plan was as strong as the court and the justices perceived it to be. And mind you, the program is shut down, God, by November, I think it was.

By then, 26 million people had applied for student loan relief. So more than half the people who would have been eligible. And the Department of Education had actually approved 16 million of those applications. So there were 16 million people ready to get loan forgiveness. 16 million people. 16 million people had already been approved. The money was literally about to go out the door. And then Republican elected officials

and special interests stepped in. They said, no, no. So at the Supreme Court, during oral arguments in February, it seemed pretty clear that the justices were going to rule against the program. What I think they argue that is missing is cost to other persons in terms of fairness, for example, people who've paid their loans, people who have planned their lives around not seeking loans, and people who are not eligible for loans in the first place.

And that a half a trillion dollars is being diverted to one group of favored persons over others. But people are holding that hope. And then, you know, we get the decision at the end of June. And what exactly does that mean for borrowers, for the millions and millions of Americans who are already promised debt relief? They're not going to get it, at least not through this strategy. Borrowers, of course, are devastated. Within hours of the Supreme Court's decision,

because the White House had been planning, figuring out what else it could do in the event that the program got struck down, they come up with another strategy to do this, a different authority, and to see if he's able to push through his debt relief plan under that authority through negotiated rulemaking. I'm announcing today a new path consistent with today's ruling to provide student debt relief to as many borrowers as possible, as quickly as possible. We will ground this new approach in a different law than my original plan, the so-called Higher Education Act. And then, is there still potential that this new plan could get challenged all the way to

the Supreme Court, where we know there's a tendency to kick this thing back down? Oh, definitely. I have been in talks and reporting out stories about conservative groups that are, again, waiting in the wings, waiting to see what the final plan and final rule looks like and to see if there's any entry point that could be challenged in court. You've seen it happen with lots of other Biden policies during his tenure. So it's very likely it will happen with this new rule once it comes down. Where does this leave borrowers? I mean, you were promised a plan by the president of the United States. It went to the Supreme Court. They kicked it back. The president immediately says he's going to try something else.

That's going to take a while to figure out. Are a lot of people going to be paying as they're supposed to come September? Are they going to be defaulting on these loans? Are people confused as hell? I've spoken to a few confused as hell folks, but I've also spoken to a good number of people who are kind of formulating a plan. Look, you have a year in which the Department of Education will not mark your late payments as delinquent and send you to a collection agency and ruin your credit. So that 12-month on-ramp period, for folks who have a difficult time, it's built in to try to make sure it doesn't destroy their financial lives as they ease back into repayment after

three years. But keep in mind, interest is still going to be accruing. Interest starts accruing on your loans September. And October is when payments are due. this new income-driven repayment plan known as SAVE, as the answer for a lot of borrowers, especially low-income borrowers, who really can't afford their payments. Today, I'm proud to announce a new program called the SAVE plan.

It's the most affordable student loan plan ever. And certainly, it is the most generous repayment plan out there, but it doesn't take full effect till next year. So it's confusing for people who are trying to figure out what should I do now. But what's kind of nice and I appreciate is that there are a lot of interactive tools on the Department of Education's website that lets you plug in your financial situation and figure out which plan is best for you. The president clearly said,

start paying your loans. And so if the man who created the program that's trying to wipe away some of that debt is telling you to start paying your loans, I would say, listen to him. I, you know, look, interest is going to start accruing September, right? And payments aren't due to October, but why wait and see your

debt continue to climb? Paying down your loans at this stage would not be a bad thing. I just don't think waiting for a year as your loans kind of become delinquent is a great financial strategy for the majority of student loan borrowers. And you cover this so people can trust you. I hope so. And I was one. I'm not only the player, I'm a player president. Is that the lie? More with Danielle when we return on Today Explained. One more chance. One more chance. One more chance. Support for Today Explained comes from Ramp. Ramp is the corporate card and spend management software designed to help you save time and put money back in your pocket. Ramp says they give finance teams unprecedented control and insight into company spend.

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Call 1-866-531-2600. Visit connectsontario.ca. But then there's another group of Kirkland Signature dads going, Hey, I had to work 30 hours a day to pay off my student debts. And dads, I hear you. No one should be happy.

Today, Explained is back with Danielle Douglas-Gabriel from The Post of Washington. Danielle, despite the failure to get the Supreme Court's buy-in, how many people in this country have received student loan forgiveness as a result of Joe Biden and Joe Biden programs? In total, the Biden administration has approved more than $116 billion in student loan forgiveness for more than 3.4 million people. Huh. That's a lot of money. That's a lot of money. How does that compare to, say, previous presidents who have considered student loan forgiveness? I mean, certainly this knocks out the park compared to any other administration. And a part of this, again, as I said earlier, is

a matter of cleaning up the messes of existing programs. So a lot of this forgiveness isn't coming through brand new policies. It is fixing problems in existing programs. And has he done anything since the Supreme Court killed his plan? Sure. I mean, just this month, the department began discharging the loans for 804,000 borrowers. This is about $39 billion of loan forgiveness. The Department of Education today is announcing this plan, which looks at a system that connects repayment of loans to people's income level. This is for people who have been in repayment for more than 20 or 25 years, and they're the ones who are getting their loans forgiven. This is some significant amount of debt. I've spoken

to borrowers who are benefiting from this who had like $64,000 in loans left, had $50,000 in loans left. And they have this money left while they are quickly approaching retirement. So clearly they were never able to really save towards retirement. Plus they were staring down the potential of having to be making these payments of over $500 for some of these people while they're, you know, at the tail end of their working lives. Has the student loan forgiveness that President Biden has managed to accomplish moved the needle at all on how politically feasible an idea this is? I don't know. I mean, in some ways, right? The idea that this plan could even get as far as it did before the court struck it down

is still amazing to me. Two years ago, 10K was a ridiculous thing to ask for, and now we've just won it. So what that tells us and what that shows us is that we have to keep fighting. You know, I've been looking at this space

and covering this space since about 2014. And the idea of broad-based debt cancellation probably came about really in the activist community around 2015, 16. We saw with a lot of former for-profit students who were pushing this idea of not having to pay debt that they felt they should never have had to take out. And they were kind of defrauded and such.

And that really gained momentum. And debt, because you decided to go and advance yourself through higher education, should not happen in this country. No how, no way. And so to see it turn into a viable policy is still amazing to me. And I think even though it was unsuccessful, it does expand the imagination of what is possible. And we're seeing more legislation trying to address issues of interest.

I mean, just last month, I think it was Joe Courtney who introduced legislation to have zero interest rate on student loans. Now, if it passes, students would have three years to refinance and pay no interest. The bill would also automatically

refinance any direct loans. It's unlikely that's going to get anywhere in this very divided Congress. And this super capitalist country. Yes. But the idea that people are pushing these sorts of policies that would have been laughed at, you know, five, ten years ago, is still significant. This all started in a presidential election, like, I don't know, four-ish years ago. And it looks like we're already in another presidential election.

Is President Biden going to have some Republican counterparts proposing student loan forgiveness? Or is this just going to be him talking about it? I'm pretty sure it's just going to be him talking about it, looking at the current Republican field. President Trump proposed limiting student loan borrowing to force colleges to limit tuition increases or cut tuition. Don't get me wrong. There are conservatives who do believe that some form of very targeted student loan forgiveness makes sense, but definitely not on the level of what this administration has tried to achieve.

And how do the American people feel about it at this point? There are a lot of people who feel sorry for people who are drowning in debt and unable to really make the most of their degree. But there are also a lot of people who feel like this is not the best use of taxpayer dollars. Not everybody decides to go to college, so why should they have to pay for your student loan debt if you did? They want working Americans to take on $430 billion in debt they didn't sign up for. This is also in part, you know, because this is higher education. The idea that you are able to obtain a degree, even if it costs you all of this money, you still have a better potential of earning than someone with a high school degree. At least that's the belief.

By and large, the college-seeking coalition is the elite coalition. It's disproportionately the Democratic coalition. It has cultural hegemony. And in most cases, it has economic power. I think more folks who have an understanding of how this looks in practice for a lot of Americans tend to be a lot more empathetic to this issue. But if you are someone who still has outstanding student loan debt, and it's an important political issue to you, chances are you're still probably voting for the only guy in the race who's talking about it? I wouldn't be surprised. I mean, the only person who's still pushing the policy, who's still literally writing the rule to try to get you what you want, I would imagine would be your pick. But of course, you know, voters are looking at lots of things right now. And while

student loans is really a salient issue for many American households, it's not the only issue. What do you think it was in the intervening four years that made this an issue that President Biden was sort of not that hot about to becoming one that he just is unrelenting over? Part of it, I think Joe Biden likes a good fight.

And once he was on board, I don't think he was going to back down. He doesn't strike me as the kind of I'm going to back down on this issue kind of person, right? Especially when it was challenged in the way that it was with all these conservative groups just looking for ways to attack it and strike it down. His reckless, unconstitutional, immoral student loan transfer scheme. I think that probably made the president even more resolved to push this plan forward. But I also think it's important to recognize the activist community that pushed this issue, pushed the issue to lawmakers, pushed this issue in the public space, constantly kept fighting for this. And they are a part of the reason why it got to where it got to, even if it wasn't successful. Danielle Douglas Gabriel, Higher Education, Washington Post. The program today was produced by John Ahrens.

He had help from Jolie Myers, Amina Alsadi, Hadi Mawagdi, Amanda Llewellyn, and Christian Ayala. I'm Sean Romsferm. It's Today Explained.