Showing posts with label Miguel Cardona. Show all posts
Showing posts with label Miguel Cardona. Show all posts

Thursday, January 12, 2023

DOE plays Whack-a-Mole with the Student Loan Program: Not a safety net but a noose

According to Techopedia, the term “whack-a-mole” describes a process "where a pervasive problem keeps recurring after it is supposedly fixed."

That's a great description of what the Department of Education is doing with the federal student-loan program.  It's playing whack-a-mole.

Here's DOE's latest fun-house trick to create a "safety net" to "permanently fix a broken student loan system."

The Department is going to revamp its Rube Goldberg system of income-based repayment plans into a new program that will make college damn near free for millions of college students.

As DOE spokespeople explained, student debtors in income-based repayment plans will only be required to pay five percent of their discretionary income toward paying back their loans--no matter how much they borrow!

Pretty sweet. But the deal gets sweeter.  DOE's generous new repayment plan describes discretionary income as 225 percent of a person's income above the federal poverty level.

Here's an example of how DOE's new repayment scheme will work. Single student borrowers will only have to pay 5 percent of their annual income above $30,000 on their student debt. 

Let's suppose a single guy graduates from St. Nobody College owing $58,000 in student loans. (That's the average debt load for graduates of private schools.)

Let's further suppose our guy earns a salary of $55,000 a year, the average starting salary for a recent college graduate.

What will be our guy's monthly student-loan payment on the $58,000 he borrowed to attend St. Nobody? 

The math is simple. He will pay five percent of $25,000 ($55,000 minus $30,000). That's $1,250 a year or $104 a month.

And if our young scholar is married and has two children when he graduates from college, his discretionary income will be adjusted upward. He won't have to pay anything on his student loans--not one fuckin' dime!

Don't take my word for it. That's what DOE's January 10 press release reported. 

How about accruing interest? Under DOE's old income-based repayment plans, small monthly payments on student loans often don't cover accruing interest on the debt, so the debt grows larger with each passing month.

Again, no problem! Education Secretary Cardona's new student-loan bonanza won't charge you interest! 

In sum, Education Secretary Cardona is playing whack-a-mole with the student loan program. Instead of doing something to fix this trillion-dollar problem, he's rolling out a scheme that's designed so that most student borrowers don't have to pay back their debts.

James Kvall, Undersecretary of Education, described DOE's razzle-dazzle plan as a safety net.  But's he wrong. It's not a safety net; it's a noose designed to strangle American taxpayers.

Let's play whacka-mole!

Monday, January 9, 2023

Color Me Cynical. Department of Education Statement Out of Touch on Loan Forgiveness. Essay by Steve Rhode

Can we be honest for a minute?

The entire issue of forgiving student loans with a one-time approach is stupid. It does not address the systemic breakdown of the cost of higher education or the realities of the BS schools selling students into debt for the corporation’s benefit.

If the Biden student loan forgiveness plan were to be allowed, it would clear the debt of many, and the cycle would start over again.

Here is the POV from the Department of Education:

U.S. Secretary of Education Miguel Cardona issued the following statement after the Departments of Education and Justice filed a legal brief with the Supreme Court on the Biden-Harris Administration’s Student Debt Relief Program:
The Biden-Harris Administration remains committed to fighting to deliver essential student debt relief to tens of millions of Americans. As part of this commitment, today the Departments of Education and Justice filed a legal brief with the Supreme Court explaining our legal authority under the Higher Education Relief Opportunities for Students Act to carry out our program of one-time, targeted debt relief. We remain confident in our legal authority to adopt this program that will ensure the financial harms caused by the pandemic don’t drive borrowers into delinquency and default. We are unapologetically committed to helping borrowers recover from the pandemic and providing working families with the breathing room they need to prepare for student loan payments to resume. As previously announced, student loan payments and interests will remain paused until the Supreme Court resolves the case because it would be deeply unfair to ask borrowers to pay debt they wouldn’t have to pay, were it not for meritless lawsuits.”
If the Department of Education, Administration, and lawmakers were so committed to resolving this problem, it would take one action, allow all student loans to be dealt with in bankruptcy as any other debt.

Until that happens, the gyrations from what we want, and you can’t have camps, is just a waste of human energy and time.

The current student debt problem is not about federal student loans alone. This didn’t arise with the pandemic. This has been an epidemic in college financing and has been growing for decades.

I would love for student loan debtors today to have solutions and prevent future students from winding up in the same cesspit.

Someone needs to wipe the lipstick off of this pig.


This essay was originally posted on January 9, 2023, on the  Get Out of Debt Guy website. 

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve here.