Just one week after it wiped the slate clean of $5.8 billion in student loan debt held by more than 323,000 Americans, the Biden administration has announced it’s canceling another $1.1 billion in loans.
Officials say the new action provides relief to former students of a school that made “widespread representations” as it fought a losing battle to stay in business. About half the borrowers being granted forgiveness have defaulted on their loans, the U.S. Department of Education says.
Debt cancellation will give them more financial room save, invest or get a handle on their other debts.
Meanwhile, tens of millions of Americans are still wondering if President Joe Biden will erase student loan debt in a more sweeping manner.
Relief for former ITT students
The fresh debt forgiveness is going to 115,000 borrowers who attended ITT Technical Institute, a for-profit technical school that operated campuses across the U.S. before it shut down in 2016.
Does this sound like a story you’ve heard before? That’s because the government in June canceled about $500 million in student loan debt held by some 18,000 former ITT students who claimed they’d been lied to about their ability to land a job with a degree from the school.
The new, bigger round of relief covers borrowers “whose attendance at ITT overlapped with a period during which the institution engaged in widespread misrepresentations about the true state of its financial health and misled students into taking out unaffordable private loans that were allegedly portrayed as grant aid,” the Education Department says.
According to officials, the school’s “malfeasance” kept it in business long after it should have died — and left more students saddled with student loan debt.
“For years, ITT hid its true financial state from borrowers while luring many of them into taking out private loans with misleading and unaffordable terms that may have caused borrowers to leave school,” Education Secretary Miguel Cardona explains in a news release.
The borrowers whose debts are being canceled never finished their degree or credential programs and left ITT on March 31, 2008, or later. An estimated 43% are currently in default with their loans.
Broad loan forgiveness remains a question
With the new, $1.1 billion round of student debt forgiveness, the Biden administration says it has now canceled $9.5 billion in student loans since January, affecting more than 563,000 borrowers.
But those numbers are puny next to America’s total student loan debt of $1.7 trillion, owed by 45 million people across the country.
During the campaign and earlier this year, President Biden said he wanted to cancel $10,000 in federal student loan for every borrower. Democrats in Congress have been urging him to go higher, and knock out up to $50,000 per person.
While Biden hasn’t been enthusiastic about the bigger amount, he asked Cardona — months ago — to look into the idea. And he has told Senate Majority Leader Chuck Schumer and Massachusetts Sen. Elizabeth Warren that they’re welcome to keep pushing him on the issue.
Those fighting for more generous relief say it would give Americans a more meaningful break from crushing student debt that’s kept them from buying homes and cars, getting married and investing for their futures.
But so far, there’s been no movement whatsoever on wide-scale loan forgiveness, either $10,000 or $50,000. Both the House and Senate just approved $3.5 trillion Democratic budget plans that will be filled in with social spending — though student debt cancellation hasn’t been mentioned.
How to deal with your student debt in the meantime
If you haven’t been eligible for any of this year’s loan forgiveness and you need relief from overwhelming student debt, there are a few things you can do right now to make your life a little easier.
First, take a look at refinancing your student loans. Interest rates on student loan refinances from private lenders have hit record lows this year, so replacing your debt with a new private student loan could slash your monthly payments.
Refinancing a federal student loan into a private one would make you ineligible if federal loan forgiveness ever happens.
If you’re a homeowner, you could refinance your mortgage to save a lot of money. Rates on home loans are still historically low — even lower than they were last year at this time. Amid the pandemic, millions of borrowers have typically reduced their mortgage costs by hundreds per month through refinances at lower rates.
The best rates go to borrowers with the highest credit scores. If you haven’t seen your score in a while, it’s easy these days to take a peek at your credit score for free.
Finally, you might try some low-stakes investing to drum up a little extra income in the stock market. One popular app helps you build a diversified portfolio merely using your “space change” from everyday purchases.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.