More than 70,000 students have qualified for student debt forgiveness since the Department of Education allocated $5 billion to forgive loans.
Potentially, as many as 550,000 people could apply for government aid. Many of them will have forgiveness because they accessed Federal Family Education Loans, a program that ended in 2010 and was made eligible for debt forgiveness by the Biden administration.
The program has had negative repercussions from education loan companies. The credit company Navient and the Pennsylvania Secondary Education Assistance Agency terminated their student loan contracts with the federal government.
As many as 16 million students had to be transferred to new services. A monumental task that has caused a sea of problems in the already congested Public Student Debt Relief Service.
In December, Biden announced that he would extend the moratorium on all federal student debt until May, according to the White House, due to the pandemic and rising consumer costs.
Despite debt forgiveness for a few thousand Americans, more than 44 million people continue to pay some form of student debt, totaling more than $1.7 trillion.
Last Thursday, Democrats in Congress hosted a town hall meeting with organizations such as the Student Debt Crisis Center to discuss a future student debt cancellation program. The event was chaired by Senate Majority Leader Chuck Schumer (D-NY), Senator Elizabeth Warren (D-MA) and Representative Ayanna Pressley (D-MA), among other lawmakers.
86 Democratic lawmakers are pushing for student debt cancellation of up to $50,000 per person as part of the extension of the pandemic bailout.
Despite the Democrats’ cries, up to $435 billion will eventually be forgiven, as under the pay-as-you-earn figure (established by Democrats in 2010) a graduate pays less than 10% of their tuition cost per year; if they are unemployed, they do not have to pay it; and after 20 years the debt is forgiven in full.
According to the Foundation for Economic Education (FEE), student debt cancellation could have unintended economic consequences, such as creating future commitments to pay off student debt for people who have not yet begun their college education.
In addition, universities may respond by increasing tuition on a proportional basis. According to FEE, “Tuition and fees were a pretty constant 18 to 19 percent of family income from the 1960s until 1978. In 1965, the federal government started guaranteeing student loans. In 1973, Congress established Sallie Mae and charged it with providing subsidized student loans. And by 1978, tuition and fees had started a steady march to 45 percent of family income today.”