Just a week after clearing the slate of $5.8 billion in student loans from more than 323,000 Americans, the Biden administration has announced it is canceling another $1.1 billion in loans.
Officials say the new move offers relief to former students at a school that has made “widespread representations” as it fought a losing battle to stay in business. About half of borrowers who are forgiven have defaulted on their loans, the U.S. Department of Education says.
Debt cancellation gives them more financial room to save, invest or get a grip on their other debts.
Meanwhile, tens of millions of Americans still wonder if President Joe Biden will erase student loan debt in a more sweeping way.
Relief for former ITT students
The new debt waiver goes to 115,000 borrowers enrolled in the ITT Technical Institute, a for-profit technical school that operated campuses across the US before it closed in 2016.
Does this sound like a story you’ve heard before? That’s because in June the government canceled about $500 million in student loans from some 18,000 former ITT students who claimed they had been lied to about their ability to get a job with a degree from the school.
The new, larger round of support concerns borrowers “whose participation in ITT overlapped with a period when the institution made widespread misrepresentations about the true state of its financial health and misled students into taking out unaffordable private loans that were allegedly portrayed as subsidies,” says the Education Department.
According to officials, the school’s “crime” kept it in business long after it should have died — leaving more students in debt for student loans.
“For years, ITT has hidden its real financial condition from borrowers, while many of them have been tricked into taking private loans with deceptive and unaffordable terms that could lead to borrowers dropping out of school,” Education Secretary Miguel Cardona explained in a statement. An press release.
The borrowers whose debts are forgiven never completed their degree or diploma program and left ITT on March 31, 2008 or later. An estimated 43% are currently in default on their loans.
Broad loan forgiveness remains a question
With the new $1.1 billion student debt cancellation, the Biden administration says it has canceled $9.5 billion in student loans since January, affecting more than 563,000 borrowers.
But those numbers are negligible next to America’s total $1.7 trillion student debt 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 loans for each borrower. Democrats in Congress have urged him to go higher and knock out up to $50,000 per person.
While Biden wasn’t thrilled about the larger amount, he asked Cardona – months ago – to investigate the idea. And he’s told Senate Leader Chuck Schumer and Massachusetts Senator Elizabeth Warren that they’re welcome to… keep pushing him on the issue.
Those fighting for more generous aid say it would give Americans a more meaningful break from crushing student debt that kept them from buying houses and cars, getting married, and invest for their future.
But until now, there has been no movement at all in terms of large-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 with social spending — though student debt forgiveness has not been mentioned.
How do you deal with your student debt in the meantime?
If you didn’t qualify for loan waiver this year and need relief from overwhelming student debt, there are a few things you can do right now to make your life a little easier.
First look at refinance your student loans. Interest Rates on Student Loan Refinancing from Private Lenders have reached record lows this year, so replacing your debt with a new private student loan could lower your monthly payments.
If you refinance a federal student loan into a private loan, you will not be eligible if federal loan forgiveness ever occurs.
If you are a homeowner, you can transfer your mortgage to save a lot of money. Home loan rates are still historically low — even lower than last year around this time. Amid the pandemic, millions of borrowers have typically cut their mortgage costs by hundreds a month through refinancing at lower rates.
The best rates go to borrowers with the highest credit scores. If you haven’t seen your score in a while, nowadays it’s easy to get a check your credit score for free.
Finally you could 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 by just using your “space change” of everyday purchases.
This article provides information only and should not be construed as advice. It comes without any kind of warranty.