Biden Administration Cancels Another $3.9 Billion in Student Debt




  • In Business
  • 2022-08-17 17:17:30Z
  • By The Fiscal Times
 

The Department of Education announced Tuesday that it will cancel $3.9 billion in student loan debt associated with ITT Technical Institute, a private, for-profit educational chain that went bankrupt six years ago. The department will automatically cancel all loans for students who attended ITT from January 2005 to September 2016, affecting roughly 208,000 borrowers.

Before declaring bankruptcy, ITT had been under investigation for a variety of deceptive practices. "The evidence shows that for years, ITT's leaders intentionally misled students about the quality of their programs in order to profit off federal student loan programs, with no regard for the hardship this would cause," Education Secretary Miguel Cardona said in a statement Tuesday.

Cardona also said that the Biden administration would "continue to stand up for borrowers who've been cheated by their colleges, while working to strengthen oversight and enforcement to protect today's students from similar deception and abuse."

Including this most recent announcement, the Biden administration has forgiven nearly $32 billion in student loans.

Budget hawks lobby against broad debt forgiveness: The Biden administration is currently considering what to do about the nation's $1.5 trillion student loan portfolio, payments on which were suspended repeatedly during the Covid-19 crisis. Though the most recent extension of the suspension expires at the end of August, many analysts expect the administration to extend the pause again, at least through the end of the year.

At the same time, some student loan activists have been calling on the White House to forgive student loan debt, in full or in part, with forgiveness of $10,000 per borrower being one frequently cited option. On Tuesday, the Committee for a Responsible Federal Budget, a fiscally conservative group that generally opposes student debt forgiveness, published an analysis of the cost of doing so. Extending the payment pause for the rest of the year would cost $20 billion, CRFB estimated. And canceling $10,000 in debt for middle- and low-income borrowers (defined as earning less than $300,000 per year) would cost $230 billion over 10 years.

The CRFB analysts note that the cost would wipe out much of the budgetary savings provided by the climate and health bill signed into law by President Biden Tuesday. "Combined, these policies would consume nearly ten years of deficit reduction from the Inflation Reduction Act," CRFB said.

Politics of debt cancelation: Biden has reportedly been weighing a decision on student loans for months, with political and fiscal factors pulling in different directions. As CNN's Katie Lobosco reports, opinions about student loan forgiveness vary significantly by age and by political orientation. A recent CNN poll shows that while 69% of self-described liberals agree that the government is doing too little on student loan debt, only a third of conservatives say the same. Younger people are also far more likely to be interested in more government involvement in student loans: About 70% of those under 35 say the government is doing too little, while just 35% of those 50 and older agree.

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