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I have never paid more than 4% while my lowest fed interest rate was 5.8%. I am still paying those off and should be done in about 3 years.
That's interesting. My sons' (earliest college Fall 2013) lowest Stafford rate is 3.76% while the highest rate is 5.05%. However when our youngest needed a quick private loan from Wells Fargo it was 9.99% in Summer/Fall 2016. Seems like since the federal takeover, the banks have jacked up interest on private loans to make up for lost revenue.
I've seen the opinion by the general counsel, but I'm getting stuck on the accounting. From a perspective of government accounting, writing off assets on the balance sheet (a few hundred billion of receivables) would be recorded as an "expenditure", which would have to be in the DOE budget. The DOE certainly doesn't have this in their budget, and the budget is set by congress.
So for me the key question is- does DOE have the ability to "spend" in excess of its budget? And, what happens if they don't?
I disagree. Interest charged reflects a combination of the time-value-of-money and risk incurred above the risk-free rate of return. An interest rate of zero is inappropriate as it does not incorporate either the time-value-of-money or the risk to the taxpayers of the borrower defaulting.
Time value of money and risk are meaningless in context of a write-off. A zero percent interest, with a first right on federal or state tax rebates is far better than a full write-off.
It seems to me there are 3 layers of legal reasoning.
1) The white house is justifying it through the CARES Act, which does have language allowing such a thing, the justification being covid emergency powers given to the president. This is the broadest and most vague reasoning, and it's logical the white house would start with this.
2) Student loans are authorized and governed by the Higher Education Act of 1965. It does say that the Secretary of Education (then the Secretary of Health, Education and Welfare) has the power to forgive loans the department holds. It's arguable whether the intention was meant to be on a case by case basis, but the HEA makes clear the president is the boss of federal student loans. This is the legal reasoning Elizabeth Warren said she would use, and I suspect is Biden's backup plan if SCOTUS takes up the case and says CARES Act was meant to be temporary only.
3) Since the president is the boss of federal student loans, he/she can just decline to enforce repayment terms. The legislature or courts would have to compel him, or the next president can reverse that policy.
OK forget about whether certain borrowers (including my two adult sons) "deserve" a handout from the rest of us beyond the several years of zero-interest forbearance.
Is the giveaway even going to happen? Within the past year the Speaker of the House said that POTUS cannot simply wish away debt with an Executive Order. Given that it looks like the Speaker is right, what is Congress doing about it? Anything?
Edit: trying not to be political by keeping names out of it.
P.S. Can POTUS simply extend forbearance until the year 2099 or beyond, and dare a successor to rescind it?
So now the credit may not even be legal? Nice. It took Biden how long to even make the decision, he announces it, turns out it can't be done, ooops, sorry guys, Biden comes out looking better because he did originally say yes.
Question is, will it get them the votes they need? I guess we'll see.
Not having a loan payment all through COVID was a huge gift to everyone holding these loans. They're all clueless how much money it did save them.
The fact remains that something has to be done to overhaul the whole student loan system. The government shouldn't charge as much interest as they are. Someone paying three times what they borrowed is unrealistic to pay it back. T^hen again, why can some repay while others can't?
I guess it also needs to go back to, why are young people given these loans without qualifying?
Even if Biden put loans on hold until 2099, another POTUS can reverse it. Unless an act of congress forgives these loans, people will be on the hook.
I guess it also needs to go back to, why are young people given these loans without qualifying?
In fairness to the system of giving every incoming college student a $5,500 Stafford loan for freshman year if they ask for it, they are 17 or 18 when they apply and they are using it for college. There is no way for them to have a credit history, so everyone gets a loan. The only variable that I know of, is how much of that loan is "subsidized" (interest deferred while in school) vs "unsubsidized" (interest accrues while in school) which varies according to the family's financial situation.
That being said, they should have every intention of paying the loan(s) back after they graduate or drop out.
It may come down to 9 people in black robes deciding whether it can be done. And if the decision is less than 7-2 either way we can expect the usual chorus blaming either the SCOTUS Liberals or the SCOTUS Conservatives.
In order for the issue to make its way to SCOTUS, there must be litigation. It isn't clear who would have standing to initiate such a law suit such that it could make its way to SCOTUS.
In order for the issue to make its way to SCOTUS, there must be litigation. It isn't clear who would have standing to initiate such a law suit such that it could make its way to SCOTUS.
I would argue Congress. The Constitution limits the ability appropriate funds to Congress. The President executes the funded programs only within the limit of the funds appropriated. He cannot exceed the appropriation. Various laws and acts may have language that allows the Secretary of ED or the President to forgive loans, but I doubt has appropriated the roughly half a trillion dollars under discussion here. The President has only limited ability to move funds around within those appropriations as well.
So this is far from a done deal and will likely get challenged before it ever gets implemented.
In order for the issue to make its way to SCOTUS, there must be litigation. It isn't clear who would have standing to initiate such a law suit such that it could make its way to SCOTUS.
The EO has still not been published. I don't think anyone can bring a suit on something not published.
I would argue Congress. The Constitution limits the ability appropriate funds to Congress. The President executes the funded programs only within the limit of the funds appropriated. He cannot exceed the appropriation. Various laws and acts may have language that allows the Secretary of ED or the President to forgive loans, but I doubt has appropriated the roughly half a trillion dollars under discussion here. The President has only limited ability to move funds around within those appropriations as well.
So this is far from a done deal and will likely get challenged before it ever gets implemented.
Totally agree. I expect it to be challenged.
I saw an article (below) today that also said Biden is issuing a refund for anyone that paid student loans during the pause. They can get their payment money back. Of course their loan will increase from the missing payments plus interest will continued to accrue so it's not a smart move.
I see people who maybe paid off their loans being refunded the $10,000 of payments they made in order for the student loan forgiveness to wipe out that last $10k so they have cash in their pockets again. It does not say there is a limit to how much of their payments they can get back so they'd have to follow links in the article below.
Besides giving $10,000 to $20,000 in student-loan forgiveness to each federal borrower, President Biden's relief plan also allows borrowers to get a refund for any payments made during the pandemic.
According to the Federal Student Aid website, all you have to do is contact your loan servicer to get your refund, but it's not as simple as it seems.
While full details of the refund aren't available online yet, Insider confirmed with servicers MOHELA and Nelnet that the value of your refund can be added back to your principal balance.
In order to receive forgiveness, most federal student loan borrowers whose income qualifies will need to submit an application form detailing their income.
According to Kantrowitz, this can add time to the process, and we don’t yet know how complex the form is — it’s said to be available by early October. If loan forgiveness ends up being challenged in court, that might mean a delay, too.
The Federal Student Aid website says, however, that relief can be expected within four to six weeks of completing the application; the website also advises to apply before Nov. 15, 2022, in order to see your loans forgiven by the end of this year.
Some qualified borrowers, however, may see their forgiveness sooner. Those with income-driven repayment plans should receive their student loan forgiveness automatically since the Department of Education already has their income data, Kantrowitz explains. The Department of Education estimates 8 million borrowers to receive relief automatically since their income information is already on file.
In the meantime, federal student loan borrowers can sign up through the Department of Education subscription page to be notified when the forgiveness process officially opens and the application form goes live. The deadline to apply, which is noted on the Federal Student Aid website, is Dec. 31, 2023.
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