Student loans have put business senior Michail in a precarious place financially. He estimates he will have $120,000 in student loan debt by the time he graduates, which will radically alter his life’s trajectory.
“I wish that I could move out of my parents’ home, afford a place to rent and travel while I am still young,” Michail said. “It was an unfortunate realization [for me] that I may not be able to do these things for a few years while I am still paying off my student loans.”
A new federal debt relief program launched on Oct. 15 by the Biden administration promised to cancel some of that debt for Michail and the other 44.7 million student and graduate borrowers like him.
However, the relief program has run into a major roadblock in the form of an emergency motion issued by the 8th circuit court of appeals. The emergency motion requires the Biden administration to pause “discharging student loan debt” while the court hears a lawsuit against the Department of Education. The lawsuit was launched in August by a coalition of six Republican-led states that would declare the forgiveness program unconstitutional.
The Biden administration launched the relief program through an executive order. The legal theory behind the executive order rests in the Higher Education Relief Opportunities for Students Act of 2003 (HEROES Act of 2003). The bill grants the Secretary of Education the ability to “‘waive or modify any statutory or regulatory provision applicable to federal student loan programs if the Secretary [of education] ‘deems’ such actions ‘necessary to ensure that certain statutory objectives are achieved,” according to the Department of Justice.
The Department of Justice’s interpretation of the HEROES Act of 2003 allows the Secretary of the Department of Education to modify payments on student loans. This power was invoked by Secretary of the Department of Education Betsy Devos in Sept. 2020 in the context of the COVID-19 pandemic.
The Biden administration has built off of the Department of Justice’s interpretation of the HEROES Act of 2003 to begin forgiving student loan debt, which has drawn in a series of court cases that seek to strip parts of the program or stop it in its entirety.
The program aimed to cancel $10,000 worth of debt for those who filed their taxes independently and make $125,000 or less annually. Those who received PELL grants would receive up to $20,000 in relief as long as they met the same required income thresholds. Loan forgiveness was available to current and former students who applied for loans before July 2022.
“If you qualify for this program, take advantage of it,” Gerrie Hatten, director of the Cal Poly Financial aid office, said. “It’s like you bought a car, and you’re making payments on the car, and your uncle says here I’ll cover half of it,” Hatten added.
28% of Cal Poly students have student loan debt, with a median $19,500 of debt, according to the Department of Education. This program would wipe out a significant portion of debt held by borrowers at Cal Poly, according to Hatten.
“My concern with debt forgiveness is that it’s a temporary fix,” Hatten said. “It doesn’t solve the problem; what the problem was in the first place was insufficient grant aid for students.”
Hatten argues that the PELL grant, a grant disbursed by the Department of Education for low-income students, has not kept up with inflation. 3,452 Cal Poly students had PELL grants in the 2020-2021 academic year, with an average of $4,796 being disbursed per PELL grant, according to the Department of Education. However, Cal Poly’s tuition fees alone in the 2020-2021 academic year totaled $10,071 for in-state students.
“They forgive students their $10,000, but what about the student who’s coming in next year?” Hatten said. “It feels like you’re mopping the floor knowing that a herd of kindergarteners are going to be walking over it in another few minutes.”
While many people will have a decent portion of their loans forgiven, there will still be many like Michail with debt over the $20,000 limit and many more to follow them in future classes.
“At this point, I think that I have come to terms with it,” Michail said. “I will have to forego living on my own for a few years, live frugally, avoid large purchases, hold off on getting a new car and even forego on contributing to my own retirement plan in my first few years to pay off my loans faster.”
For more information on how to apply for student loan debt forgiveness and the specificities of the program, visit https://studentaid.gov/debt-relief/application.