Before the federal student loan payment pause expires later this month, President Biden is expected to announce that he will use his executive authority to unilaterally cancel a certain amount of existing student loan debt per borrower.
Supporters of student debt relief have called on the President to scrap it Everyone federal debt for student loans, something he has signaled he would not do. Nonetheless, there is a case for a broad-based approach to student debt forgiveness to provide economic relief to Americans who are financially strained by reducing student loan debt at a time of rising inflation fears and tight budget budgets.
We will soon find out if there is the political will to act on student debt relief.
Meanwhile, the growing student loan crisis is threatening the financial security of millions of households, not just in New York but across the country. Every 28 seconds, a student loan borrower defaults on their payments. Studies show that student loans have different effects on low-income borrowers of color, particularly Black and Hispanic women. Findings from a new Community Service Society (CSS) report, Mitigating the Growing Impact of Student Loan Debt, confirm this.
The report, based on our annual Unheard third party Survey found 43 percent of Black women and 38 percent of Latina/x women have outstanding student loan debt, compared to just 27 percent of white women. Overall, women owe two-thirds of all student loan debt. However, black women are slower than their peers in paying off student loans and are more likely to struggle to meet essential expenses because of this debt. Default rates are also higher among black and brown borrowers
Of course, canceling student debt in any form would not help the next cohort of student loan borrowers. Without massive reforms to our higher education funding system and curbing the skyrocketing costs associated with acquiring post-secondary education, each new year will bring another cohort of borrowers. And each succeeding cohort will have to contend with the same predatory practices inherent in our credit service sector and the highly complex student loan repayment system that contributed to today’s $1.7 trillion student debt crisis.
But help for borrowers struggling with student loans could be on the way.
Legislation introduced this month by Representative Hakeem Jeffries (D-NY-08) and Representative Jahana Hayes (D-CT-05) would introduce federal funding for nonprofit consumer assistance programs to help borrowers effectively manage their student debt and navigate an extraordinary complex system to ensure they have the right repayment schedules and are taking advantage of all the options available to them, including loan forgiveness and relief.
HR8643 The Student Loan Literary Act of 2022 is modeled after a program funded by the New York state legislature – the Education Debt Consumer Assistance Program (EDCAP). Since its inception in 2019, EDCAP has saved New York consumers millions by helping borrowers apply for Public Service Loan Forgiveness (PSLF), recover from default, avoid wage garnishments and Social Security adjustments, resolve disputes with loan servicers , access cancellation and relief programs, and more. [Full disclosure: EDCAP is administered by CSS]. That year, EDCAP received $3 million in funding from Governor Hochul to expand services nationwide. Robust consumer support programs like EDCAP are and will remain critical.
Whether President Biden decides to forgive $10,000 or $50,000 in student loan debt, there will be an increased need for consumer assistance programs to help borrowers navigate the complex system of student loans and make informed decisions about the best path forward to meet their debts. To illustrate, consider the borrower with multiple loans and different interest rates who is about to qualify for other forgiveness or relief services. If she owes more than $50,000, she needs help to ensure the $50,000 is being used in the most beneficial way and advice on developing a plan to deal with her remaining debt.
Just ask Lisa Cepeda, 59, of Brooklyn, who first met with an EDCAP counselor in January 2020. Back then, the Brooklyn Bridge Park Corporation employee was financially burdened with an old, defaulted Perkins loan that eventually led to the confiscation of her tax refunds for many years. EDCAP tracked down the defaulted loan and negotiated a solution that ended Ms Cepeda’s tax refund interception. EDCAP’s support in this case was crucial due to the complexity of the pending judgment and the number of parties involved in finding a solution. EDCAP is currently helping Ms. Cepeda get on track for PSLF.
HR8643 would allocate $80 million in grant funds to states, which would be shared with community-based organizations and other direct service providers who work directly with borrowers. With more than 45 million Americans owing $1.7 trillion in college debt, it makes business sense to fund programs that can help borrowers reduce or eliminate their debt and put themselves on the path to debt bring financial health.
Even our bitterly divided Congress should be able to agree on that.
David R. Jones, Esq., is President and CEO of the Community Service Society of New York (CSS), which has been the leading voice for low-income New Yorkers for more than 175 years. The views expressed in this column are solely those of the author. The City Agenda is available on the CSS website: www.cssny.org.