There are officially fewer than 40 days until the end of 2021—a year that saw some pretty significant changes for federal student loan borrowers. The Biden administration and Education Department canceled about $11 billion in debt; some federal student loan servicers ended their contracts; and a major overhaul of the Public Service Loan Forgiveness (PSLF) program came to fruition.
President Joe Biden made pretty big promises on the campaign trail—touting policy that would cancel up to $10,000 in federal student loan debt per borrower—and his tune has changed while in office. Biden isn’t so keen on the idea of mass forgiveness, and debt cancellation has gone to very targeted groups of borrowers: students who attended now-defunct institutions, those people with total and permanent disabilities, and public service workers.
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STEM-designated. Tar Heel ROI. No compromises. Visit WebsiteAn ever-looming question remains: Is mass student debt cancellation a possibility? Some federal student loan experts say it is, but most anticipate further rounds of targeted student loan forgiveness instead.
“The Biden administration has a real track record now that we can look to and know how it thinks about awarding student loan relief,” Andrew Pentis, a certified student loan counselor with Student Loan Hero, tells Fortune. “It’s been a track record of targeted relief to specific borrowers—not the mass forgiveness proposals that many progressives have called for.”
Looking ahead to 2022, who else might get their federal student loans canceled? Fortune spoke with several student loan experts. Some people predict additional rounds of forgiveness, while others foresee changes to existing loan forgiveness programs as a more likely possibility.
Borrowers in default and low-income borrowers
A lot has changed in the 20 months since the initial freeze was placed on federal student loan payments through the CARES Act in 2020. Even though the economy has rebounded, lower salaries, difficulty budgeting and other financial challenges from 2020 still persist.
Payments on federal student loans are set to resume in February 2022, and some borrowers were already in default ahead of the pandemic.
“I can see the administration automatically changing defaulted loans back into good standing, which would immediately help the roughly 7 million borrowers who were in default prior to the pandemic,” Robert Farrington, founder of The College Investor, tells Fortune. “This would stop potential wage garnishments, tax offsets, and more.”
Low-income borrowers could also get relief through an overhaul of the federal income-driven repayment (IDR) plan option, Pentis says.
While it’s not the same type of targeted loan forgiveness we’ve seen in 2021, a more streamlined IDR process could “seriously slash borrower monthly dues” by bringing contributions down to 5% or 10% after taxes, Pentis explains. Currently, the Federal Student Aid office offers four different IDR options, which limit monthly dues to only 10% to 20% of a borrower’s income. Rates are established to help borrowers pay off their loans within a 20-year to 25-year period.
“That’s the priority: Make it easier for low-income borrowers to make their payments and stay current on their debt without going so far as mass student loan forgiveness, which remains a very contentious issue,” Pentis says.
Teachers and parents
In early October, the Education Department unveiled sweeping changes to its largely failed Public Service Loan Forgiveness (PSLF) program, which was created to provide debt relief for public servants.
The PSLF program is designed to help public servants, including teachers, firefighters, social workers, and other government or nonprofit employees; but since its 2007 inception, eligible borrowers have had many hoops to jump through with ultimately 98% of applicants being denied. Under original pretenses, borrowers needed to hold a public sector job, be enrolled a repayment plan, and make 120 on-time payments on their student loans.
The short-term changes to the program will automatically make 22,000 borrowers eligible for forgiveness “without the need for further action on their part,” according to the Education Department. But long-term changes need to be made through a process called negotiated rulemaking.
The Office of Postsecondary Education in early October compiled a list of issues with how PSLF has been regulated and run, along with ways to “make payment rules less confusing, ensure borrowers do not accidentally lose progress toward relief through deferments and forbearances and consolidation, and give borrowers a clearer process for having decisions reconsidered,” according to notes from the initial rulemaking session.
“Teachers and parents may not necessarily fall into those categories as neatly as the Department of Education would hope, so those borrowers may need some level of access to forgiveness, as well,” Pentis says.
Military and borrowers who ‘really cannot pay back those student loans’
Leslie Tayne, the founder and managing director of Tayne Law Group, is skeptical that mass debt cancellation is possible, but she does say she believes more action will be taken with targeted loan forgiveness.
The Biden administration and Education Department are “going to be looking to those who really cannot pay back those student loans,” Tayne, who specializes in debt relief law, tells Fortune. “People with total and permanent disabilities is a realistic group. Those coming out of the military who have been injured in the line of duty could be considered a group.”
Looking at PSLF as a roadmap, Tayne also believes that the Biden administration will see how changes to existing debt forgiveness programs pan out.
Is mass debt cancellation a possibility?
Many student loan policy insiders agree that mass cancellation is a long shot.
First, there’s still plenty of debate about whether the president even has the authority to cancel federal student loans through an executive order. Policy experts, Speaker of the House Nancy Pelosi, and Biden himself don’t think that’s possible; they believe it would take an act of Congress to achieve sweeping debt cancellation.
“If [mass debt cancellation is] a possibility, it is a remote one and not one that I’m confident will come to fruition, certainly in Biden’s first term,” Pentis says. “Biden and his administration dropped free community college from its social policy bill [the Build Back Better Act], and I think it would’ve been much more reasonable to see that potentially getting across the finish line as opposed to loan forgiveness in a mass fashion.”
Other student loan experts argue that mass cancellation doesn’t fully address the complexity of the issue of student loan debt.
“Mass cancellation doesn’t really solve the problem of the student loan crisis or the rising costs of higher education,” Farrington says. “It just kicks the can down the road.”
Farrington offers the following example: If you forgive a random amount of student loans—say $10,000 per borrower—what does that really do? He questions whether that really fixes the problem, asking, “Is random loan cancellation every few years just going to become policy?”
“It doesn’t really make sense,” he says.
Tayne also argues that even mass debt cancellation, as it’s been presented, can still be discriminatory or unfair to certain borrowers. If the president or Congress were to forgive debt today—then what about the borrowers who had already paid off their debt?
“You can argue for sweeping student loan reform, but there comes with it a lot of challenges,” Tayne says. “I don’t think it’s really something that borrowers should be hanging their hat on.”
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