A new plan by President Joe Biden to cancel the debt of approximately 153,000 student loan borrowers has loan holders waiting in anticipation.
At a campaign stop in Culver City on Wednesday, Biden announced his administration had approved a plan to cancel $1.2 billion of debt for certain borrowers enrolled in the Saving on a Valuable Education (SAVE) repayment plan.
The new program cancels the debt only if borrowers enrolled in the program, borrowed less than $12,000 and began paying off debt at least a decade ago. College students currently accruing debt on federal aid are not eligible for this forgiveness. Neither are a majority of the 43 million borrowers across the country.
“I was hopeful,” said Kristen Zaleski, a clinical social worker at Kent Hospital in Rhode Island, who is still paying off about $190,000 in debt for her master’s degree from the USC School of Social Work from 2011. “But not optimistic.”
The latest round of loan forgiveness brings the total amount to about $138 billion, impacting close to 3.9 million student loan borrowers.
But that’s only a chip in the $1.6 trillion of federal loans owed. That debt makes up 92% of all student loans in the country.
The announcement comes at a critical time in Biden’s re-election campaign with student loan forgiveness having been frequently mentioned by the administration throughout his term. In March 2020, he pledged to cancel at least $10,000 in federal student loan debt per borrower.
The SAVE repayment plan, like many before it, bases monthly payments on the income and family size of borrowers. The plan also has an added benefit for borrowers whose payments are less than the monthly interest accrued: The federal government will cover the cost of any unpaid interest so the loan amount doesn’t continue to grow.
Borrowers like Zaleski have opted for careers with forgiveness built into their contracts.
Like many of her colleagues, she began paying off her debt as part of the Public Service Loan Forgiveness plan. By working at an eligible nonprofit, the federal government promised that her loans would be forgiven after she made the required payments.
“If I worked in a nonprofit for 10 years, I’d be forgiven,” she said. “And then I realized, if you miss a payment, it all resets. So I’m just like: 10 years, 10 years, 10 years.”
And Zaleski is not alone.
“I have several classmates that are still trying to get them forgiven, too. All of us are social workers,” she said.
Katy Murphy, the director of college counseling at Bellarmine College Preparatory in San Jose, California, said she supports income-based loan forgiveness for people who choose to go into certain professions.
“A lot of people have gone into teaching, social work and health services who are not making billions of dollars, and I wish that loan forgiveness could be pointed toward them,” Murphy said. “Their loan payments are a larger part of their salary than somebody that’s working on Wall Street.”
She said she tells her students to be cautious about how much they are willing to take out in loans as they prepare for college.
“You do not want to leave undergrad education with loans more than it would cost to buy a good Honda with a sunroof,” Murphy said. “Not a Tesla, not a Range Rover, not a Lexus. A good Honda with a sunroof. If you’re gonna leave your undergraduate owing more than that, you should not do this.”
She said rational loan borrowing is essential as student loan forgiveness plans stall.
Last July, the Supreme Court blocked an executive order by the Biden administration from its initial plan to cancel $430 billion in student loan debt. The 6-3 decision was grounded in the “major questions” doctrine, which mandates executive decisions first be authorized by Congress.
Still, the attention on student loan debt forgiveness will undoubtedly be on voters’ minds this fall.
Jon Knox, an enterprise account executive in Redondo Beach who graduated from USC in 2018, said he hopes Biden’s plan inspires more voters his age.
“There currently is not enough empathy for people in our age bracket. We’re not being represented on the highest scale,” Knox said. “A lot of people who are in politics are older. They grew up in a different era, a different time, where things were much more affordable.”
Though he has paid off the majority of his $25,000 debt, Knox said he’s glad to see an effort being made in the right direction for his friends who haven’t.
“I just hope that this gets more people involved [in politics], especially people who are impacted,” Knox continued. “I hope it shows them a more opportune, optimistic view of politics.”
Lindsey Miller contributed to this story.