As the debate on student loan forgiveness for all rages on, there is one subset of federal student loan borrowers who deserve immediate debt cancellation.
Income-driven repayment plans have existed for over 25 years now. As most borrowers know, if you make payments on an IDR plan for 20 or 25 years, depending on the IDR plan, your debt is forgiven.
The National Consumer Law Center estimates that over two million borrowers have been in repayment long enough to qualify for IDR forgiveness. Yet only 32 have actually qualified. The others still carry a balance.
Why have only .0016% of borrowers taken advantage of a plan that would have them debt-free today? According to the NCLC, the answer is poor student loan servicing. Had loan servicers provided quality guidance to borrowers, far more than 32 would have qualified for forgiveness.
The Solution: Cancel federal student debt for all borrowers that have been in repayment for at least 25 years.
Borrowers who have been in repayment for over 25 years
Every federal repayment plan calls for debt elimination within 25 years. Some achieve this goal by paying off the debt in full, while others have a forgiveness opportunity at the end.
A borrower who is still making payments after all this time was almost certainly on the wrong repayment plan at some point.
Blaming the borrowers for selecting the wrong plan doesn’t make sense in this case. If only a small portion of borrowers had issues, it might be more logical. With only 32 borrowers qualifying, there is clearly a systemic issue.
Federal student loan servicers are paid using tax dollars to guide borrowers. They failed. Now millions of borrowers are stuck carrying debt more than two decades old.
Forgiveness would be an excellent test case for cancellation
Many advocates for debt cancellation argue that erasing student debt would actually be good for the whole economy.
Former borrowers free of debt would be more likely to buy a car or a house and less dependant on other forms of government aid.
With approximately two million borrowers fitting the criteria for this proposed forgiveness, we can see how their lives are impacted and get a glimpse of the broader economic benefits.
If we cancel some student loans now and everyone benefits, it opens the door for more cancellations in the future.
Should we be canceling more, or even all, federal student loans?
I know many borrowers who would argue that far more forgiveness is necessary.
They have a point. Schools misled many borrowers. Loan servicers provided lousy information to many borrowers, not just the long-term borrowers. Far more than two million borrowers have a case for debt cancellation.
Unfortuantely, change in this country often moves very slow. The fastest route to broader student loan forgiveness could be targeting smaller groups initially and then expanding.
The argument for these two million borrowers is incredibly strong. Once the first phase proves to be a success, other borrowers will benefit.
Biden could forgive these loans without Congress
Part of the current student loan forgiveness debate revolves around whether it can happen via an executive order. It is a complex legal issue, and there is no consensus.
The pro-forgiveness argument gets far stronger when narrowed down to two million borrowers.
Instead of just erasing debt to help borrowers or the economy, Biden would be correcting an error by student loan servicers who failed to do their job.
How can borrowers help?
This particular group of borrowers has not received much attention. Borrowers should shine a light on this issue in whatever way they can.
- Write to your representatives in Congress.
- Share your thoughts on this issue on social media.
- Submit editorials to your local newspaper.
Hoping the government does the right thing will not be enough. Nothing will happen unless borrowers take action, and advocating for these two million borrowers is a worthy cause.
