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David Negaard never had much exposure to classic literature when he was growing up in Southern California, so as an English teacher at Baldwin High School on Maui he gets a special thrill by introducing his students to the beauty of the written word, communicated over the centuries.
“When they discover Shakespeare — that it’s intelligible, and has something special for them, that’s a joyful moment for me,” Negaard, 62, said recently. “I love being a teacher. I love public school and the kids need me here.”
But despite the satisfaction he finds on the job, the debt Negaard accumulated in his quest to become a teacher has hung over his life like a shadow. More than 30 years ago, he took out about $75,000 in loans to pay for college, including tuition and living expenses. Financial setbacks compelled him to defer the steep monthly payments on several occasions and the total debt and accumulated interest eventually ballooned to $115,000, leaving him to wonder whether he would ever be able to retire.
“I’ve been treading water,” he said, recounting the long years of payments, decade over decade.
But now Negaard has new reason for optimism: He recently learned he is likely eligible for substantial debt cancellation — perhaps as much as $90,000 — under a temporary expansion and reform, announced by the U.S. Education Department last month, of the long-dysfunctional Public Service Loan Forgiveness program.
The expansion, which has a one-year window pegged to the Covid-19 crisis, is expected to make it easier for more than 550,000 borrowers nationwide to get their student loans reduced or erased if they work or have worked in nonprofit jobs as teachers, firefighters, nurses, active-duty service members or employees of government agencies. It permits these workers to receive loan forgiveness on federal loans if they make regular payments for ten years while doing the kinds of work that qualifies as meeting community needs.
It’s not yet clear how many people in Hawaii will be eligible. About 120,300 state residents have student loans, according to the U.S. Department of Education, and collectively owe about $4.4 billion. The average debt runs about $37,000. Almost 10,000 owe more than $100,000.
Student debt has been described as a ticking time bomb, not just for students but for the overall economy. According to the Federal Reserve, student borrowers are carrying some $1.6 trillion in debt, in many cases making it hard for them to buy homes or save for retirement.
It is also very difficult, though not impossible, to escape through bankruptcy, leaving them weighed down with a semi-permanent kind of debt, taken out while young but carried well into middle-age or later.
Many people in the state have not only been watching the government deliberations over loan forgiveness from afar but also taking action. More than 100 state residents, some of whom said they come from low-income families and paid for college with student loans, have written to the Department of Education in recent months, begging them to make the changes that were announced a few weeks ago.
Some were teachers, including many working in public schools in Hawaii, struggling with student debt and the high cost of living. One described herself as saddled with $250,000 debt for herself and her adult children.
“I taught for 18 years, and still have this high debt,” one long-time educator wrote in late September. “The federal government bailed out big business, it is time you bail out the workers, the laborers, the teachers.”
Another said she could afford only a studio apartment and she had trouble paying for food because her monthly student loan bill was so high.
Hawaii Attorney General Clare Connors added her voice to the pleas by joining with 19 other attorneys general to urge reform of the program, which passed with bipartisan support in 2007 but became infamously difficult to access, with a 99% denial rate on applications for forgiveness, according to the U.S. Government Accountability Office.
“Drastic action by the Department is required to make the promise of loan forgiveness through the PSLF program a reality for the nation’s dedicated public servants,” Connors and the others wrote in a joint letter to Biden administration Education Secretary Miguel Cardona in late September.
The easing of the forgiveness program comes as the student debt burden is suddenly becoming more burdensome. The Covid crisis gave borrowers a hiatus from making loan payments for almost two years.
Under the CARES Act, which passed with bipartisan support in March 2020, most federal loans were placed into “administrative forbearance,” at zero percent interest. That meant that borrowers who were unemployed could stop making payments and that those who kept their jobs were able to make substantial progress against their debts because they would be repaying principal and not interest.
All that is about to end. As the harshest part of the Covid crisis has passed, the federal government will again demand repayment of loans, starting Jan. 31. Borrowers are expected to begin making payments again the following month. Some government officials fear that many may be unwilling or unable to do so. About 40 million people were delinquent on loans even before Covid struck.
Nobody knows how students will respond. At a hearing in Washington Oct. 27, lawmakers peppered Richard Cordray, chief operating officer of Federal Student Aid at the U.S. Department of Education and former director of the Consumer Financial Protection Bureau, with questions about what he thought would happen. He said that the department is boosting outreach to borrowers, vendors and loan servicers that handle payments to make sure all are ready when debt repayment resumes.
“We know this will not be an easy transition for borrowers,” he said. “This is a defining moment for FSA, and it is crucially important to millions of Americans that we succeed.”
In 2020, many student-loan borrowers took hope in the campaign promises of presidential candidate Joe Biden, who pledged to help lift their debt burden. The White House is considering a memo drafted by the Justice Department, Department of Education and other agencies that considers the ramifications of Biden canceling up to $50,000 in student debt to all students, not just ones in public jobs, Cordray said, offering lawmakers no further insight into the possible outcome of that debate.
It comes as a number of Biden’s initiatives are generating big price tags, drawing fierce debate inside Democratic circles about which priorities should be highest.
The cost of cancelling student debt is a challenge, a prospect that even the liberal-leaning Brookings Institution has called “staggeringly expensive.” Forgiving all student debt would cost $1.6 trillion, canceling $50,000 debt per person would cost $1 trillion and limiting loan forgiveness to $10,000 per student would cost $373 billion, according to Brookings.
Republican critics, meanwhile, say President Biden doesn’t have the authority to enact such a sweeping executive action and that it is unfair because it benefits one group at the expense of others.
At the hearing, Republican Rep. Gregory F. Murphy of North Carolina called Biden’s efforts to reduce student debt a “massive overreach” of executive authority. “This policy is fundamentally unjust. It puts millions of taxpayers — the majority of whom do not own a college degree — on the hook for billions of dollars in student loans.”
Hawaii’s two senators, however, are pressing Biden to move forward on that promise. Senate Resolution 46, which was introduced in February, is a Democratic-backed measure that calls on the president to take executive action to “broadly cancel Federal student loan debt,” up to $50,000 per borrower, because the Covid pandemic and resulting recession and unemployment have exacerbated the underlying debt crisis.
The senators say they believe that the president has the authority to do so under Section 432 (a) of the 1965 Higher Education Act, which allows the Secretary of the Department of Education to “compromise, waive, or release any right, title, claim, lien or demand … including any right of redemption.”
Sen. Mazie Hirono, along with Sen. Brian Schatz, are co-sponsors of the bill, which was introduced by Charles Schumer of New York and has 14 other Democratic co-sponsors, including Elizabeth Warren, a long-time proponent of finding ways to reduce student debt.
“Student loan debt is making it hard for Hawaii residents to start a business, support their family, purchase a home, or save for retirement,” Hirono told Civil Beat in a statement. “The time to act is now.”
Schatz is taking the lead among a group of Democratic lawmakers who proposed legislation to make college free by providing states financial incentives for making matching grants that benefit borrowers. It would also provide educational grants to immigrants, who are not at present eligible for federal student loans.
Schatz did not respond to a request for comment on the bill or answer questions about how much it would cost, but he made a statement in a press release in April:
“If we are going to be serious about solving the student loan debt crisis, we need to focus on the real cost to students and their families — and that includes books, room and board, and supplies,” Schatz said in the press release. “Our bill brings states back to the table and leverages federal dollars to reinvest in public education, and help people cover the full cost of college.”
The debate in Washington over student loans is raising a multitude of complex issues.
Among the topics addressed in hearings in June at the Department of Education are whether requiring students to borrow money for higher education is a fair or useful strategy for building the country’s workforce; whether it is prudent for students to borrow money for an esoteric education unlikely to produce a middle-class wage; how college loan officers are steering students into taking on debt they will struggle to repay; low-quality, for-profit colleges that take students’ money and then shut down; callous or corrupt loan-servicing companies that misinform borrowers about ways they could reduce their debts; well-heeled college administrators at elite institutions raking in large salaries while adjunct professors work multiple jobs to cobble together a living; and the failure of state legislatures to maintain their commitment to supporting higher education, pushing more financial burden onto students.
Regardless of what happens longer term, however, many Hawaii residents have been cheered by the news of the reform of the public service loan forgiveness program, after more than a dozen years when it failed to fulfill its promise.
The temporary modifications by the Department of Education allow all prior federal loan obligations to qualify for forgiveness, regardless of the program; make it easier to qualify; eliminate barriers for service members so that active duty military service automatically counts toward qualification; and offer a fresh review to forgiveness applications that were rejected in the past.
“It was a dramatic announcement,” Cordray said at the hearing. The modifications to the program are “game-changing, and will benefit a lot of people. I believe it will bring relief to hundreds of thousands of people.”
The amount of forgiveness could be substantial. According to the GAO study, the average size of loans approved in the past was more than $59,000 per borrower. At the hearing Oct. 27, Republican Rep. Mariannette Miller-Meeks of Iowa said data from the Education Department shows the average loan forgiveness to be $83,000.
The Education Department is still evaluating what kinds of work should qualify for forgiveness. At the subcommittee hearing, Miller-Meeks questioned whether workers at well-funded non-profits would be eligible, even if they aren’t directly serving the public.
“We don’t want people to be taking advantage of the program who don’t really deserve public service loan eligibility,” Cordray responded.
The news of the change is already percolating in Hawaii. Some young students in the state have been inspired to reconsider public service as the word circulates that an effort is afoot to make the loan-forgiveness program more broadly available.
Mei Ling Chen of Kaneohe, 19, a sophomore at Hawaii Pacific University who is studying business administration, recalls that she and some of her fellow students at James Castle High School on Oahu wanted to become teachers but had heard the loan-forgiveness program didn’t work well enough to be dependable.
“In the past it was not too successful,” Chen said. “There were too many requirements. Now they are trying to make it easier … I think it would encourage more people to go into nonprofits. My friends and I used to say ‘I’d love to be a teacher,’ but I can’t afford to live on that salary.”
Negaard had applied for the program in the past and found it byzantine and complicated, with loan servicers unable or unwilling to help borrowers. He has already applied for the program under the new rules and recently received verification that he had completed all the qualifying payments for two loans. Now he is waiting for final word on what his level of forgiveness might be.
“It’s nice to have hope,” he said. “I’ve been paying student loans for most of the past 25 years and I owe more than I ever borrowed. The payments have affected my ability to lead a middle-class life. I’m ready for relief. We all are.”
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