Aarti Swaminathan of Yahoo Finance joins Yahoo Finance Live’s discussion at the top of a panel of senators urging the Department of Education to fix forgiveness programs as the payout gap approaches.
AKIKO FUJITA: We have less than two months before the pandemic pause in student loan payments is lifted. And the Biden administration is increasingly being pressured to help students. Let’s invite Aarti Swaminathan from Yahoo Finance to cover this space for us. And Aarti, we’re talking specifically about fixing existing programs. But how quickly can the administration act?
AARTI SWAMINATAN: Yes, these senators – and many of them have been arguing about fixes for a couple of years now. Right? In particular, 23 senators, including Patti Murray, Chuck Schumer, [INAUDIBLE] many acquaintances, they called on education to fix existing programs, such as forgiveness of loans for public services, payments on the basis of income, protection of borrowers, layoffs of people with complete and permanent disabilities.
And, in essence, they are looking to make loan repayments easier, close gaps in forgiveness programs, and basically increase borrower confidence in the entire student loan system. Because right now, borrowers are very, very worried about what is going to happen, aren’t they?
And interestingly, this is the time, and more and more letters are being sent to Cardone, Miguel Cardone, Minister of Education, because the payment pause expires at the end of September. And they all worry about insolvency and a sharp rise in delinquency.
As we reported earlier, nine out of 10 borrowers said they are not willing to pay when the student loan suspension expires. So we will see more and more of these letters. But this … the pressure is only growing. And they hinted that they can do something, the education department. But so far we have not heard anything concrete.
BRIAN CHEN: Aarti, I want to answer the staff question. This applies to all agencies, but especially the Ministry of Education. The Biden administration has hired new staff specifically for the Education Department. Was there anything on this list that caught your attention?
AARTI SWAMINATAN: Yes, this is a really good point. Because yesterday there was one person on the list that was announced that really caught my attention – Toby Merrill. She previously worked at the Harvard Predatory Lending Project. And she still represented many students in cases against the government, mainly dealing with student loan repayments. And it was announced to her that she was going to work in the Office of the General Counsel.
Another important reason this is so important is because she is one of three lawyers who wrote the memo, which basically outlines why the president or secretary has the power to unilaterally cancel the debt without the need for Congress intervention. So Warren has been quoting this letter mostly since she made this political proposal.
So it will be very interesting to introduce such a person into the system. Will this change their attitude towards politics? What does it mean? I don’t know if I’m too optimistic. But for borrowers, this is a really interesting sign to watch out for.
BRIAN CHEN: Yes, well, I mean, people forget that we only have six months in this administration. So they still have time to do something. And we will definitely be in the know. But again, Aarti Swaminathan, thank you very much for stopping by.