In early July, the US Department of Education under President Joe Biden wrote off about $ 56 million in student loan debt for some 1,800 borrowers, bringing the administration’s total to about $ 1.5 billion.
Experts say that while this is a win for many borrowers, it doesn’t mean that student loan debt forgiveness is bound to happen anytime soon.
This is because the most recent round of debt cancellation was specifically carried out through a “borrower protection before repayment” program. Borrower Protection was created to protect people from being scammed by schools that commit misconduct or violate certain laws, such as falsely claiming job security or incorrectly telling students that loans will be transferred to other colleges.
More from Invest in You:
How to navigate the child tax credit payment process
Is it time for a 4-day work week? Some predict it will catch on.
Child Tax Credit Payments Help Offset Lost Pandemic Programs
This is separate from the Biden administration’s efforts to determine whether the president can legally cancel student loan debt through a decree.
“These are apples and oranges,” said Betsy Mayotte, president and founder of The Institute of Student Loan Advisors, a non-profit organization.
However, headlines about student loan write-offs have begun to appear in recent months, adding to borrowers’ confusion and excitement. There has been a recent increase in loans canceled due to borrower protection as the Biden administration is catching up, Mayotte said.
The updated program rules were supposed to take effect under former President Donald Trump, but have been postponed. The former administration then issued its own rules in July 2020, months before Trump left office.
“They have made it nearly impossible to get aid and have suspended or suspended any applications under development,” Mayotte said.
That changed when Biden took office in 2021. He relaunched the program and provided assistance to nearly 92,000 borrowers in just a few months. according to the education department.
“There is a catch-up on this front now and it is likely to continue,” said David Bergeron, a higher education expert who has served as acting assistant secretary for higher education and deputy assistant secretary for policy, planning and innovation. at the US Department of Education under the Obama administration.
What’s in store for widespread student loan forgiveness
Of course, the Biden administration is still working on broader cancellation of student loans, which would help the millions of people struggling with repayment.
Currently Biden waiting for a note from the Ministry of Education officials who will state their thoughts on the legality of the president forgiving student loan debt through executive action.
“The government is working to make it right,” said Will Seeley, co-founder and CEO of Summer, a company that helps borrowers streamline the process and save on student debt.
If Biden forgives portion of student loan debt through enforcement actionAccording to Mayotte, it is likely that it will be challenged in court and could cause more problems for borrowers if it is not upheld.
“I understand why he doesn’t move forward with a presidential decree until he’s confident that if challenged, he will win,” she said of Biden. indecisiveness about debt cancellation yourself.
Although some legislators such as Senate Majority Leader Chuck Schumer, New York, and Senator Elizabeth Warren, Massachusetts both argued that that the president can legally write off student loan debt by his order, not all experts are so sure and want to minimize potential harm to borrowers.
“The biggest risk for borrowers is that they will find themselves in this legal black hole,” Bergeron said.
If the Department of Education does not believe that Biden has the legal authority to revoke loans by decree, he said, the move must be approved by Congress.
Borrowers, meanwhile, should be aware that repayment of the loan is scheduled to resume on October 1. after a hiatus for over a year. This means people need to prepare again for their monthly payments, and if they have experienced significant changes in income, consider applying for an income-driven repayment plan, Seeley said.
And according to Seeley, people who have previously been in this plan will have to re-certify. Starting this process as soon as possible is the best way to avoid delays, he said, as millions of borrowers return to repayments.
Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns…