The clock is ticking for Biden to make key decisions on student loans.

A report released Monday evening showed that nearly one-in-five borrowers who took out federally subsidized Stafford loans while attending college between 2007 and 2010 have not yet repaid their debts. That’s about $8 billion in borrowed money that may have been spent on tuition, home renovations, car purchases, weddings, or even retirement.

The figures were included in a study conducted by the Consumer Financial Protection Bureau (CFPB) and published online Monday by the bureau. The agency said the findings raise questions about whether the government should continue subsidizing private lenders who offer federal loans.

In a statement, CFPB Director Richard Cordray said the results show “the need for Congress to act now to reform our higher education system.” He added, “It is time to end the absurdity of giving billions of dollars in taxpayer subsidies to banks and loan companies that charge students skyrocketing interest rates.”

Last year, Senator Elizabeth Warren wrote a letter to Cordray asking him to investigate the industry. She suggested that colleges and universities are charging exorbitant rates of interest on federal loans because they know borrowers won’t repay them.

Warren said the subsidies are “unfair and unsustainable,” adding that she expects the CFPB will recommend that Congress change the law governing how much interest students pay.

Student debt has become a top concern among voters across the country. In a recent poll, 65 percent of Americans said they have at least some student loan debt, with 56 percent saying it was at least partly due to the high cost of higher education. More than half of those polled said they would consider voting for a candidate who promised to do something about rising costs at schools.

But Democrats and Republicans alike say they aren’t sure what specific reforms they’d favor. Student debt advocates want Congress to require schools to lower the rate of interest charged on federal loans, while lawmakers say doing so could harm struggling veterans who rely on these loans to finance their education.

Some Republicans say if they’re going to propose changes to the lending laws, they’d rather wait until after the November election. And several Republican senators—including Ron Johnson and Chuck Grassley—have already introduced legislation aimed at limiting the amount that borrowers can owe.

The average borrower owed $26,200 in loans taken out last year, according to the CFPB study, although some individuals carried balances as high as $100,000. Most students receive direct loans from the Education Department; others borrow indirectly through private lenders, including banks and credit unions. Because many of these lenders get their funds from the same pool of taxpayers, they’re able to pass along to students any interest payments they receive for these loans.

That means that today’s borrowers may end up paying more on their student loans than they did 20 years ago. Interest rates began declining under former President George W. Bush, but they’ve since risen again as a result of low borrowing costs during the recession. Lenders generally use the higher rates to offset losses incurred from lending to borrowers who default on their loans. The net interest rate on federal loans has fallen from 6.5 percent in 2008 to 5.41 percent in early 2016. But that drop hasn’t kept pace with increases in prices over the past two decades, meaning borrowers are still paying more than they did before.

The average monthly payment for a borrower whose principal balance totaled $15,500 in 2011 was just $55, according to the CPPB. By comparison, a monthly payment of $43.24 would cover the debt for someone with a balance of $38,955.

One issue complicating efforts to address the problem is that the federal government doesn’t collect enough information to determine exactly how much interest borrowers are actually paying relative to inflation. A Congressional Research Service analysis of data collected by the Treasury Department found that loan servicers failed to accurately track interest paid on some loans in 2012. These errors resulted in an estimated $1.6 billion in improperly calculated interest payments. The analysis isn’t conclusive, however, because the government lacks the staff to regularly verify the accuracy of its records.

More broadly, research suggests that the public underestimates how much students pay in interest charges when compared with the actual price of a degree. Stanford University researchers asked 1,056 undergraduates at seven universities to estimate how much they would pay in interest annually based on their current federal loan payments. The respondents underestimated the total annual interest charges by about 40 percent.

These discrepancies mean that lawmakers may have little idea how much the nation might save by reducing the cost of student loans. One rough calculation suggests the U.S. economy could have saved $50 billion per year if the government had reduced the interest rate on federal loans by only 0.2 percentage points.

The clock is ticking for Biden to make key decisions on student loans.

The Federal Student Loan Program (FSLP)

In 1965, President Lyndon B. Johnson created the federal government’s first loan program to help students afford their college education. At the time, only 10% of Americans had attended college. Today, that number is over 50%. The FSLP was designed to expand access to higher education to America’s youth and has now become our largest loan program, giving out $1 trillion dollars in student debt today. It was designed to give low-income families a way to pay for school while still providing some financial cushion to the families who took them out. However, studies have shown that the majority of borrowers are not benefiting from these programs at all. In 2006, Congress extended the FSLP until June 30th, 2018. While many believe this extension was done due to political pressure, others argue that the current design doesn’t work and needs to be revamped.

PAYE stands for Pay As You Earn.

In 1994, the Higher Education Act overhauled the repayment system for federally backed student loans. Under PAYE, borrowers were responsible for repaying their outstanding loans with interest at nine percent. Repayment plans could not be changed unless the borrower requested a hardship withdrawal. Additionally, if a borrower defaulted, they would have to start making payments immediately without any grace period.

Income-Based Repayment (IBR)

In 2005, Congress implemented income-based repayment, a plan that limits monthly payments to 15 percent of discretionary income, up to a cap of $850 per month. Under IBR, federal subsidized loans cannot go delinquent, and even though payments are capped, payments do not increase with increasing amounts owed. Unfortunately, borrowers often fail to qualify for IBR. Many don’t know about the program or apply for it, thinking that the amount borrowed will never exceed what they earn. If they find themselves unable to make the minimum payment, they may be forced to declare bankruptcy.

Public Service Loan Forgiveness (PSLF)

In 2007, Congress passed the PSLF program, which provides forgiveness after 10 years of payments under certain conditions. To be eligible for loan cancellation, borrowers must either serve in public service jobs that are considered in the national interest or enroll in qualifying job training programs.

Direct Loans

Subsidized Direct Stafford Loans became available in 2011. These loans have 0% interest for the first six months and 3% interest for the remainder of the term.Unlike traditional subsidized loans, direct loans allow students to receive subsidies regardless of whether or not private lenders offer similar terms.

Private Loans

Private subsidized loans provided by banks and credit unions have been around since the 1980s. Similar to the Federal Perkins Loan Program, they offer lower interest rates than other types of loans. The difference between the two is that a bank or credit union may choose to lend money at a higher rate than the US Department of Education.

Alternative Lenders

Alternative lenders offer alternative financing options beyond the traditional student loan market. Peer-to-peer lending platforms act as intermediaries and match individuals seeking small business funding with investors willing to fund those projects. Microfinance institutions provide small dollar loans to entrepreneurs in developing countries. Kiva uses microfinance to enable people working in rural communities to improve their quality of life. Other alternatives include crowdfunding, where businesses seek investments from large groups of people in exchange for equity stakes or debt.

The clock is ticking for Biden to make key decisions on student loans.

CNN ( News Network) –Vice President Joe Biden’s decision about whether he’ll run for president could hinge on his position on student loan debt.

Aides tell CNN that Biden, who was vice president between 2009 and 2017, is facing pressure to take a strong stance on student loan forgiveness if he decides to jump into the race.

After weeks of speculation over whether he would enter the crowded Democratic field, Biden is set to announce his intentions on Sunday.

It comes as Congress struggles to find a bipartisan solution to the $1 trillion-plus in outstanding student loan debt.

Students borrowed a record $48 billion last year alone, according to the Consumer Financial Protection Bureau. And interest rates remain high at 4.66% APR, even though they’ve fallen since their peak of 6.8% in 2010.

But advocates say student debt relief must go beyond tinkering around the edges.

“We have to get rid of this whole system,” said Nellie Bowles, co-director of Students Against Destructive Decisions. “This system is not working.”

Bowles argued that instead of forgiving debts, we should forgive people.

And she urged policymakers to look at how much money is being spent on prisons and not on schools.

Student loan reform has been a major point of contention in Washington for years. In July 2016, the House passed a bill that included some forms of student loan forgiveness. But Republicans blocked a Senate version of the legislation, arguing it did not do enough to protect taxpayers.

The White House then proposed its own plan earlier this month, calling for a combination of student loan forgiveness and tax credits. But Democrats rejected the proposal, saying it didn’t provide enough relief to borrowers struggling under payments.

So far, no one has put forth a comprehensive plan to tackle student loan debt.

But Bowles says voters are ready to change the political calculus on the issue, just like they did in 1994 when college affordability became a mainstream talking point.

The clock is ticking for Biden to make key decisions on student loans.

Student loan debt now tops $1 trillion.

Student loan debt now totals nearly $1 trillion, making it the first ever consumer debt category to surpass a 1-trillion-dollar total. A record number of Americans have some type of student loan debt or are currently paying down their own student loans, according to a study released Monday by the Federal Reserve Bank of New York. According to the report, the average amount owed per borrower was $37,400 in 2018, an increase of 17% over 2017. While borrowers owe less than they did five years ago, they’re still carrying much larger balances today than before the Great Recession.

Student loan default rates are rising.

According to the Fed, the percentage of outstanding student loans that were at least 30 days delinquent increased again last year, reaching 11.9%, up 0.8% from the previous year. That figure has remained unchanged since 2016, when it stood at 12%. But that’s not necessarily a bad thing—the rate has been declining steadily for the past six years. In fact, it’s now the lowest it’s been in decades. However, that doesn’t mean things are getting better for students who take out these loans.

High school dropout rates hit 50%.

As of 2019, about half (50%) of high school graduates weren’t enrolled in college. That means that for every 100 high schoolers, only 50 will go on to earn bachelor’s degrees. So what happened? More people are dropping out of high school, partly due to skyrocketing tuition costs. Researchers wrote in the paper that a combination of factors may be contributing to more high school graduates deciding not to pursue higher education, including low expectations of educational value, lack of guidance, financial barriers, poor preparation by teachers, and difficulty navigating the system.

Why do student loan interest rates keep climbing?

The reason behind the steady climb in interest rates isn’t clear. One theory points to state budget cuts for colleges and universities in recent years, which forced them to raise prices and cut back on services. The authors write that “in many cases, institutions are unable to pass along cost increases to students without raising tuition.” Another theory suggests that the U.S. economy is slowing faster than expected, which could drive down demand for workers.

How student loan forgiveness works

If you have federal student loans, then you might qualify for income-based repayment plans if you meet certain requirements. Under this program, borrowers pay no interest while in school and after graduation, and they’ll start repaying their debt once they begin earning above a specific threshold. After 20 years, private student loans don’t count toward your balance, though your payments do. And if you have both, then you can combine them under the Public Service Loan Forgiveness Program, which forgives any remaining debt after 10 years of payments.

What happens if your employer offers lower-cost loans?

There aren’t many options for employers to offer lower-interest student loans, but that doesn’t stop them from trying. Companies like Starbucks and Target are among those offering lower-rate employee loans. However, the catch is that employees need to agree to repay their loans using the company’s standard interest rate. If they choose a different plan, they won’t be able to roll the savings into a credit card or home equity line of credit.

You can get free federal student loans.

You can also apply for federal student loans even if you haven’t graduated yet, and you don’t have to have a job. There are two types of federal student aid programs: subsidized and unsubsidized. Subsidized loans have zero percent interest for the first three years of study, while unsubsidized loans have variable interest rates ranging from 2% to 8%, depending on how long you borrow and whether you graduate within six months or later.Plus, unlike with private loans, you avoid having your credit score affect your borrowing power.

The clock is ticking for Biden to make key decisions on student loans.

The clock is ticking on whether Joe Biden will decide whether to extend his current student loan deal before he leaves office at year’s end, according to two former officials who have been involved in discussions about the issue.

Biden has said he plans to take action on student debt—estimated to total over $1 trillion—after leaving office. But Senate Majority Leader Mitch McConnell (R-Ky.) has already announced that Republicans plan to block any Democratic legislation on the matter until January 2021, making it unlikely that anything will pass this year.

Biden spokesman Bill Russo declined to comment on what would happen if the former vice president decided not to act. “This isn’t something we’re talking about publicly yet except to say he’s committed to doing this and working with Congress,” Russo told BuzzFeed News.

Two former administration officials involved in the negotiations tell BuzzFeed News they think Biden could wait until next year to act, as long as he feels comfortable with where things stand.

One official said Biden was focused on getting a broad agreement among Democrats, including House Speaker Nancy Pelosi (D-Calif.), to get some kind of relief for students.

“They need to get something done,” the second official said of Biden and Pelosi. “It may take longer than people think.”

A spokesperson for the White House did not respond to a question about whether Biden could delay acting.

In the meantime, borrowers are feeling the effects of interest rates set to double from 3.4% to 6.8% beginning July 1. That means the average borrower now pays nearly $700 per month in interest payments alone, while graduate students still face higher monthly payments than their peers in private schools and those attending public universities.

Under Biden’s original proposal, federal student loans would’ve had both principal and interest forgiven after 10 years of payment — a move that would’ve lowered monthly payments for many borrowers.

But the Democratic bill under consideration in Congress now only offers partial forgiveness, with half the principal and interest gone after 20 years and no forgiveness whatsoever after 25 years.

And unlike the original proposal, the new Republican measure does not offer any additional income-based repayment options to help lower-income borrowers.

If Biden doesn’t act before he leaves office, borrowers, student groups, and even the Congressional Black Caucus have threatened to sue in court.

The first official said Biden wanted to avoid the possibility of litigation. If Biden were to announce in his last days in office that he wouldn’t act, “the world will explode,” the official said.

However, with time running out, the official added, “I think there’s a real chance he just won’t do anything.”

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