Student Loan Subsidies Could Have Dangerous, Unintended Side Effects
Andrea Smiley, a spokeswoman for the University of Phoenix, said the school was “proud of all of our one million graduates, and we employ several student support initiatives, including a tuition price guarantee, academic and career coaches, career services for life, and 24/7 online support, among other efforts.”
Many will benefit. President Biden’s executive order means the federal student loan balances of millions of people could fall by as much as $20,000. Here are answers to some common questions about how it will work:
Who qualifies for loan cancellation? Individuals who are single and earn $125,000 or less will qualify for the $10,000 in debt cancellation. If you’re married and file your taxes jointly or are a head of household, you qualify if your income is $250,000 or below. If you received a Pell Grant and meet these income requirements, you could qualify for an extra $10,000 in debt cancellation.
What’s the first thing I need to do if I qualify? Check with your loan servicer to make sure that your postal address, your email address and your mobile phone number are listed accurately, so you can receive guidance. Follow those instructions. If you don’t know who your servicer is, consult the Department of Education’s “Who is my loan servicer?” web page for instructions.
How do I prove that I qualify? If you’re already enrolled in some kind of income-driven repayment plan and have submitted your most recent tax return to certify that income, you should not need to do anything else. Still, keep an eye out for guidance from your servicer. For everyone else, the Education Department is expected to set up an application process by the end of the year.
When will payments for the outstanding balance restart? President Biden extended a Trump-era pause on payments, which are now not due until at least January. You should receive a billing notice at least three weeks before your first payment is due, but you can contact your loan servicer before then for specifics on what you owe and when payment is due.
She added that the school “adamantly” disagreed with any implication that it has ever acted improperly. The University of Phoenix did not comment on the Biden administration’s loan cancellation plan.
Experts say Mr. Biden’s new plan could increase schools’ incentives to saddle students with unreasonable amounts of debt.
“Debt cancellation and income-driven repayment can’t stand alone,” said Sarah Sattelmeyer, a higher-education project director at the think tank New America. “We need to pair these things with a really strong accountability structure.”
Past efforts to rein in poorly performing institutions have been derailed by lobbying, litigation and shifting political tides. The government’s most forceful hammer — a regulation put in place during the Obama administration known as the “gainful employment” rule, which threatened to cut off federal aid funds to for-profit schools whose students earned too little to pay off their loans — was scrapped in 2019 by Betsy DeVos, the education secretary under President Donald J. Trump.
The new subsidies could also make students less cautious about taking on high debt. The Education Department has not yet published the details of Mr. Biden’s new repayment plan, but the outline the president described last month could transform higher-education financing, especially for undergraduate degrees, by shifting more of the costs from borrowers to taxpayers.
Article source: https://www.nytimes.com/2022/09/18/business/biden-loans-for-profit-colleges.html