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Students, don’t count on loan debt forgiveness ever happening again

Some students looking to take advantage of the promised forgiveness have already signed up for more loans. That could land them in even more debt.

Student loan forgiveness advocates rally to celebrate the announcement to forgive partial student debt. (Shawn Thew/Shutterstock)
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The Biden administration has established an expectation that future administrations won’t or can’t meet: forgiveness of additional student loan debt.

President Biden announced a plan to cancel up to $10,000 in student loans for millions of borrowers with an income of $125,000 or less for individuals and not more than $250,000 for couples filing a joint federal tax return. Pell Grant recipients could get as much as $20,000 of their loans erased.

This move could drive people deeper into debt.

The White House said nearly one-third of borrowers have education debt but no degree. I worry about setting a precedent that broad-based loan forgiveness will be available again. It is paramount we manage borrowers’ expectations.

Some students looking to take advantage of the promised forgiveness have already signed up for more loans, according to Betsy Mayotte, president of the Institute of Student Loan Advisors.

“There are people who are applying for loans for this semester or more loans than they had originally applied for because they assume they’re going to be forgiven,” said Mayotte, who works closely with student and parent borrowers.

Calculate how much of your student loan debt can be forgiven here

This fall, millions of high school seniors will begin applying to college for the 2023-2024 academic year. One wonders if they might overextend themselves with the expectation that they, too, will someday not have to repay part or all of their loans.

Only current borrowers are eligible for forgiveness of loans fully disbursed by June 30, Mayotte said in an interview. “We’ve opened Pandora’s box,” she said.

In the last five years, Mayotte said she’s seen a trend of borrowers assuming they won’t have to pay back their loans.

Mayotte said she received an email from a woman in her mid-70s who decided to return to college to get a master’s degree, racking up $100,000 in education debt.

“She said, ‘I want to know how I can get forgiveness because I’m old,’” Mayotte said. It would never occur to somebody that their car loans would be forgiven. It would never occur to somebody that their credit card debt would be forgiven other than through bankruptcy.”

Mayotte said she favors forgiveness but is concerned that some people will take it as a sign of future debt relief and borrow under that assumption.

Opinion: The student loan announcement is an expensive mistake

Biden’s announcement this past week could lure families sending their kids off to college into taking on too much debt. And it doesn’t deal with the underlying issue: the high cost of college.

Many families don’t shop for college as they do for other major expenditures, Mayotte said. This is something I’ve observed as well. The college choice becomes emotional, with parents and students willing to take on an uncomfortable amount of debt.

As a parent who has been stung many times by overpromising something to my children, here’s a warning: Don’t take on future student loan debt you can’t afford in anticipation that it will be wiped out.

This has to be said given the euphoria of people desperate to find out when they might get some, if not all, of their student loans forgiven. Outstanding student loan debt stood at nearly $1.6 trillion in the second quarter, according to the Federal Reserve Bank of New York’s Center for Microeconomic Data.

Who qualifies for the new plan to cancel $10,000 in student debt?

The news of the debt cancellation understandably crashed the federal government’s website. Millions of folks have been hoping for this relief. When I tried to access the site, I was put in an online waiting room with a notice that said, “ is experiencing high volumes of visitors. You will be able to proceed to the site momentarily. Thanks for your patience!”

Colleges have for too long failed to rein in expenses because students and their parents have been essentially given a blank check to pay for college by allowing them to borrow a crushing amount of debt under federal and private loan programs.

Live your life like this is the last time student loans will ever be forgiven. Just look at the federal Public Service Loan Forgiveness (PSLF) program, which was established under the College Cost Reduction and Access Act of 2007. There’s no better proof of the government’s ineptness at loan cancellation than PSLF in which the remaining balance of a borrower’s debt is forgiven after 120 qualifying monthly payments.

What kinds of people have student loan debt in the United States?

Here’s what happened, however. Borrowers were either misled or not properly informed on how to qualify for the PSLF program. Only federal direct loans are eligible for PSLF. You must pay off the debt under a certain income-based repayment plan while working full-time for a qualifying employer. Many borrowers found out after making what they thought were qualifying payments that they weren’t on track to get rid of their debt.

The Department of Education announced steps in April to fix the long-standing problems in the program, which included a one-time waiver that would count previously ineligible payments toward PSLF, including for people with previously ineligible types of federal student loans. The waiver, by the way, ends Oct. 31. You can find out more about the waiver at

“Student loans were never meant to be a life sentence, but it’s certainly felt that way for borrowers locked out of debt relief they’re eligible for,” Education Secretary Miguel Cardona said in announcing remedies to PSLF.

We need to fix the underlying problem in getting an affordable college education without debt or very little of it, because it is never sound financial planning to take on debt you have no chance of paying off.

B.O.M. — The best of Michelle Singletary on personal finance

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