Meet a borrower of student loans who owes $101,000 and feels hopeless due to Biden's new loan forgiveness plan: "I will never be able to do that."
Protesters in support of student-debt relief outside the Supreme Court. Patrick Semansky/AP© Provided by Business Insider
- With $101,000 in student loan debt, 38-year-old Jarrett was hoping that Joe Biden would forgive his debt.
- However, Biden isn't feeling upbeat after the Supreme Court rejected his initial plan.
- He didn't believe that borrowers would benefit from Biden's new relief plan.
The 38-year-old Jarrett is not overly enthusiastic about President Joe Biden's new student loan forgiveness scheme.
Jarrett, whose identity is known to Insider but who has asked for his last name to be withheld for privacy, lost his job after earning his undergraduate degree during the 2008 financial crisis. He concluded that getting an MBA would increase his employability, so he pursued it and, with the aid of student loans, graduated with his advanced degree in 2012.
But according to Jarrett, the degree didn't have the desired effect. He had trouble finding a job for years after graduating, so he put his initial student loan balance of roughly $60,000 on forbearance. Interest continued to accrue during that time he was not making payments, pushing his balance up to roughly $80,000.
According to documents examined by Insider, Jarrett currently owes just over $101,000 in student loans, and he has no intention of ever making it up.
According to Jarrett, "I'm never going to be able to pay it down," Insider was informed. "I am in a situation where I can't possibly get out of because of the interest rates on them. It's impossible to escape if you're not being paid at a far higher level than I've been if the interest is building up faster than I can put any money down on it."
Since Jarrett is currently employed by the federal government, he is eligible for the Public Service Loan Forgiveness program, which, after ten years of qualifying payments, forgives student loans for employees of the government and nonprofit organizations. During the pause in student loan payments, he said he felt "fortunate" to be able to live comfortably on his salary; however, since federal payments have resumed in October,He made the decision to wait to make any payments in order to benefit from the Education Department's 12-month "on-ramp" period, which prevents credit agencies from learning about any late payments. Considering that the Supreme Court overturned the president's proposal to waive up to $20,000 in student loan debt for federal borrowers at the end of June, he wants to be able to contribute as much money as possible to his savings.
Biden unveiled a new plan shortly after the high court's decision: his Education Department would attempt to obtain relief for millions of borrowers by utilizing the Higher Education Act, a 1965 law. The department stated that there would be a significant delay in this process compared to the previous one.
"Once I start having to make payments again, that's going to eat into a considerable amount of my ability to save up or put money towards a car, or anything along those lines," Jarrett stated. "I'm going to be heavily impacted, for sure."
Furthermore, things are made worse by the ambiguity surrounding whether or when borrowers will receive significant student loan relief.
"I have no hope at all."
Given that the Higher Education Act's language grants the education secretary the authority to "enforce, pay, compromise, waive, or release any right, title, claim, lien, or demand" pertaining to federal student debt, Biden has voiced confidence in the act's legality.
"This new path is legally sound," Biden declared following the ruling by the Supreme Court. "It will require more time, but in my opinion, this is the most viable option for serving the greatest number of borrowers. However, I'm giving my team instructions to proceed with the law as soon as possible."
The administration must hold public hearings and request input on the plan as part of the law's negotiated rulemaking process, which could take several months at the very least. Jarrett has little faith that the plan will materialize in the near future.
"I am devoid of hope. It's not enough, in my opinion," Jarrett remarked. "I don't think the effects of student debt on the nation as a whole are truly understood by those in positions of authority. And some cryptic statement about how they're going to begin investigating this new path doesn't really make sense to me. He doesn't seem to be taking the initiative on this matter that I believe we need him to."
Additionally, Biden is being pushed by certain Democratic lawmakers to provide more relief. Rep. Ro Khanna has urged Biden to prolong the student loan payment pause until borrowers receive widespread relief, despite the fact that the debt-ceiling bill that Biden recently signed into law codified the end of the payment pause. Rep. Alexandria Ocasio-Cortez, for example, urged Biden on CNN to pause interest during the 12-month "on-ramp" period.
The Education Department stated that "the Secretary has directed his staff to explore policy options for debt relief that will help as many people as possible." Biden has not yet responded to any of those requests in the public eye. The department has identified four groups of borrowers that it wants to give priority to for the next round of loan forgiveness, and it has held two negotiation sessions with stakeholders to determine what the new relief should look like.
Nevertheless, Jarrett expressed "extremely low" confidence in receiving relief anytime soon.
"I think everything that Biden's shown in his actions is that he isn't really prepared or willing to make a major step to relieve people's issues," Jarrett stated.
"The $10,000 or $20,000 initial debt forgiveness wasn't anywhere near enough for me," he stated. "And I am aware that it is insufficient for millions upon millions of people. Since I don't think his previous plan sufficiently addressed the issue, it just seems to me that he's not willing to actually address it. Furthermore, I don't believe that what he's doing right now will resolve the problem."
