Student-loan borrowers are battling for relief even after Biden’s administration canceled $2.3 billion: ‘We were taken advantage of’

• Biden's Education Department has canceled billions in student debt, but trillions remain outstanding.
• Even if you qualify for relief, you may not know about it, or you could get a 0% rate of forgiveness.
• Borrowers told Insider there's a lack of clarity, and experts say much more needs to be done.
• See more stories on Insider's business page.

Nearly 45 million people in the US have outstanding student-loan debt. That adds up to a $1.7 trillion problem.

President Joe Biden, who promised during his campaign to immediately tackle the crisis, has moved to do so via the Department of Education, clearing billions of dollars in debt in just a few months.

Biden's education secretary, Miguel Cardona, has canceled debt for about 72,000 borrowers defrauded by for-profit schools – about $1 billion worth – and moved to shake up how defrauded students go about loan forgiveness.

Cardona also waived a paperwork requirement to relieve loans for borrowers with disabilities. This affected 230,000 borrowers and canceled debt for 41,000 of them, providing $1.3 billion in student-loan relief.

But Biden hasn't taken the actions he promised as a presidential candidate, which include canceling $10,000 in student debt per person. And while Cardona's $2.3 billion in cumulative relief over three months might seem impressive, it comes to less than 0.2% of the outstanding student loans swimming through the system.

Finally, even if you qualify for debt relief, there's no guarantee you'll get it. Insider talked to borrowers directly affected by Cardona's actions, and they're not out of the woods yet. Experts say the student-debt crisis isn't close to being seriously tackled.

The Education Department did not respond to Insider's request for comment.

Defrauded borrowers still can't get relief

After about five years of waiting, Alexander Cockerham was approved for student-loan forgiveness.

From 2007 to 2009, Cockerham, now 38, attended the for-profit ITT Technical Institute, where he got an associate's degree. In 2015, the Securities and Exchange Commission sued ITT, accusing it of deceiving investors about late-payment rates and student-loan defaults, and the federal government cut off its access to federal loans and grants. The institution shut down shortly afterward.

Cockerham told Insider that he took out about $42,000 in private and federal loans to attend the school. He's paid off his private loans but still has about $26,000 in federal loans outstanding.

So he applied for student-loan forgiveness in late 2015 through the Department of Education's "borrower defense to loan repayment" program. Cockerham got his verdict in 2020.

"I was told I was approved for student-loan forgiveness but at only at a certain rate, because they said they felt that I did receive some benefit from my education there and that I wasn't completely defrauded," he said.

His forgiveness rate was 0%. "So absolutely nothing was forgiven at all," he said.

In September, 48 state attorneys general and the Consumer Financial Protection Bureau secured more than $330 million in private student-loan forgiveness for 35,000 former ITT Tech students.

If the full amount of his federal loans were relieved, Cockerham said, he'd try to finally buy a house. He's been married for nearly a decade and just had his first child. He said he'd tried looking at homes in the past, "but that student-loan debt just hung heavy over my head." It turned away financial servicers, who told him he needed to pay down more debt.

How the government can decide on a 0% forgiveness rate

The Trump administration would compare a defrauded borrower's income level to that of people in similar programs, alongside other factors, to determine how much of the loan to discharge. Betsy Mayotte, the president and founder of the Institute of Student Loan Advisors, said that led to some people being approved for the program but having 0% of their loans discharged, just like what happened to Cockerham.

Mayotte told Insider that the Trump administration "was very much opposed to the whole idea of borrower defense in the first place." She said she'd worked with people who've been waiting three or four years for their applications to even be processed.

"To tell somebody, 'Yup, we agree, you were defrauded by your school, and you still have to repay all of your debt' is insane," she said. "I mean, there's no other industry where they do that."

She said the recent action from the Biden administration made her "so happy," as it would be going back and discharging the full amount of partial discharges. People who are still pending won't be affected though, Mayotte said.

Cockerham, who might be affected by this latest discharge, said: "I've only seen what I've heard in the news. I haven't heard anything from the newest secretary of [education] or the Biden administration."

'I wish that they would have someone that would go over this a little more in depth'

Joshua Kronemeyer, 27, still has student debt from spending a semester and a half at the Art Institute of Phoenix at 16 years old.

Just getting relief from those loans - racked up at a now defunct for-profit member of the Art Institutes - would cut his student-loan debt by a fifth, he told Insider.

"Honestly, I wish that they would have someone that would go over this a little more in depth, as far as the hole you're digging yourself," Kronemeyer said.

Kronemeyer may be eligible to get his loans discharged; some former Art Institute students are eligible to get their loans canceled as the result of a lawsuit against the for-profit school and the Education Department. That suit argued that the department had illegally provided loans to Art Institute schools that weren't accredited at the time, so borrowers shouldn't have to pay them back.

Kronemeyer said that he was planning to look into debt relief soon but that he anticipated his application would be denied the first time around, since he'd heard of that happening to others in the same position.

Borrowers with disabilities who are eligible for relief struggle to access it

Cardona's action to relieve the burden for borrowers with disabilities shook up a three-year monitoring program in which borrowers had to submit income information every year to show that they didn't exceed a certain threshold.

Called the Total and Permanent Disability Discharge program, it would reinstate loans if a borrower's income rose above that level or if the borrower failed to submit income information.

Laura Speake, 26, might qualify for the program. They told Insider that they had about $30,000 in debt in both federal and private loans. They left college after three years but hope to return and finish a degree. She hopes to someday go to grad school and work in the book industry, perhaps as a small-town librarian.

But she has a concern with getting the loans discharged under the program: It's a disincentive for continuing education.

The Federal Student Aid website says that "if you are approved for TPD discharge based on SSA documentation or a physician's certification, and you request a new Direct Loan, Perkins Loan, or TEACH Grant during your 3-year post-discharge monitoring period, you must resume repayment on the previously discharged loans."

"I'm not lazy. I'm not looking for an easy way out," Speake said. "You know, I want to work. I want to learn. I want to make a difference in the world. I want to do my part. I want to pull my weight."

Experts told Insider that while Cardona's action on the program was worthwhile, it shouldn't have been necessary in the first place.

Bethany Lilly, the director of income policy at The Arc, an organization advocating for people with disabilities, told Insider that the Social Security Administration already has information verifying people's incomes, so there's no reason the Education Department should have required that information.

The department has "some very confusing and illogical standards that really hurt the beneficiaries," Lilly said.

To improve the process for forgiving student debt for borrowers with disabilities, Lilly said, the department should make it "as automatic as possible" and work with the SSA to permanently remove the requirement to provide income documentation.

Persis Yu, a staff attorney at the National Consumer Law Center and the director of its Student Loan Borrower Assistance Project, told Insider that Cardona was correcting something that shouldn't have occurred in the first place.

"I think it's disappointing that when the suspension period was put in place in the first place that these borrowers weren't captured," Yu said, referring to the 41,000 borrowers who had missed their paperwork. "I'm not sure how that happened, but it seems pretty obvious in retrospect, right?"

Yu also said that the design of the program was flawed from the start. "The monitoring period itself is a huge problem and a huge barrier for people with disabilities that qualify for the program actually accessing the program," she said. "So that is certainly again exacerbated by the pandemic, as so many things have been. But it is in itself just a feature that doesn't work."

A 'massively unimpressive' amount of canceled debt

Alan Collinge, the founder of Student Loan Justice, told Insider that compared with the scale of the student-debt crisis, canceling debt for defrauded borrowers and borrowers with disabilities is "massively unimpressive."

"We're in a pandemic, and we've lost tens of millions of jobs," Collinge said. "The people who are hurt the worst tend to be the people who have student-loan debt."

Democratic lawmakers have been keeping the pressure on Biden to cancel up to $50,000 in student debt per person. Sen. Elizabeth Warren of Massachusetts, who campaigned on the $50,000 figure, said in a press call last month that executive action was the quickest way to get it done.

In early April, Biden's chief of staff, Ron Klain, told Politico that the White House was "looking into" its legal authority to cancel $50,000 per person. Shortly afterward, the White House press secretary, Jen Psaki, said that option wasn't being ruled out. And the Education Department released data requested by Warren showing that $50,000 cancellations would wipe out 84% of the federal student-debt pile.

Insider polling from February asked how much debt respondents would want canceled. The most popular option among the 1,154 respondents wasn't Biden's $10,000 proposal (19% supported that amount) or Warren's $50,000 (13%), or no forgiveness at all (22%) - a quarter of the respondents said they supported forgiving all student loans.

As for Cockerham, he's working in a job he landed while attending community college to study computer science, a program he turned to after his ITT degree didn't bring him any job offers. His unpaid loans are still on his portal at Navient, the private entity the government has hired to manage some federally backed loans.

"We're hard-working Americans, like everyone else. We were taken advantage of. And we feel that what was done to us was just completely unfair," he said. "We need some help, and that forgiveness, for a lot of us, would just be a lifeline."

On Tuesday, when Warren, as the chair of the Senate Subcommittee on Economic Policy, held her first hearing on student-debt relief, she invited Navient CEO John Remondi.

Citing a decade of allegations of abusive and misleading practices, she said, "The federal government should absolutely fire Navient, and because this happened under your leadership, Navient should fire you."

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