Kurt’s Email, Lizzy, and the Last of His Years in Debt: A Realistic Account Adjustment After an NPR Investigation
This version of debt cancellation was the result of a complex “account adjustment” the Education Department promised after advocates and an NPR investigation revealed widespread mistakes and mismanagement of income-driven repayment (IDR) plans, including millions of borrowers spending long periods of time in forbearance. The adjustment gave borrowers credit for that time toward IDR’s promise of loan forgiveness. And for those 804,000 borrowers – and nearly another 100,000 since – it was enough to qualify them for debt cancellation.
Kurt’s wife, Lizzy, toasts the email that says his loans will be in his past, while he sleeps in the other room after Kurt hangs up.
To be eligible for forgiveness under the IDR do-over, borrowers have to have been in repayment for at least 20 years. Kurt had made 233, though that was a conservative estimate, ignoring a few months that had disappeared with the poor records of servicers.
Kurt said he couldn’t go back to sleep that quickly because she was lying on his chest. So I check my email, and as soon as I saw the subject I thought, ‘Oh my God, this is it!'”
Kurt woke up early in the middle of November to see a friend who had a cold. He lay on the couch and tried to get her to fall asleep.
Going beyond the big relief: Putting Biden’s repayment plan to the test with the first student loan debt forgiveness borrowers in the U.S.
“I am too close to you!” he laughed back. “When you were looking at the spreadsheet, I was like, ‘We need to get to 240, please.’ And then I saw 233 I was like, “Nooo!”
Kurt and I hopped on Zoom again in August. This time, Pauline was about 10 months old, and she sat on his lap as I showed them the spreadsheet I’d made.
After that first Zoom, last December, Kurt pulled together his entire payment history. We kept in touch through spring, as I plugged hundreds of his payments into a spreadsheet. In June, the Supreme Court struck down Biden’s big relief plan. Kurt’s Plan A was gone. It was time to put Plan B to the test.
We met Kurt Panton who’d been paying off his loans for 19 years. He could qualify for loan forgiveness under this do-over. That’s technically correct. But no one quite understood how or when this do-over would happen, and the U.S. Department of Education was still completely focused on the fate of Biden’s larger debt relief plan.
Two weeks after NPR published its investigation, the Biden administration said it would review the payment histories of millions of borrowers and give them credit toward the promise of loan forgiveness if they were found to have made mistakes.
On top of that, advocates had been sounding the alarm for millions of borrowers who could have benefited from these repayment plans — like Kurt — but were never told about them or, worse, were put into forbearance instead.
What’s more, the plan promises multiple windows for loan forgiveness, starting after just 10 years for borrowers with $12,000 or less in loan debts – which means many borrowers will end up paying far less over time on SAVE than they would have on old plans. The department knows that low-income borrowers who used a previous plan repaid on average $10,959 for every $10,000 they paid back. Under SAVE, they will pay back just $6,121.
The plans were supposed to benefit lower-income borrowers by peging their monthly payments to their income so that they have less to pay each month. They were supposed to keep struggling borrowers from Defaulting on their Loans.
Kurt and I both knew Biden’s plan for debt relief was difficult to come by and I was thinking of complicated formulas. And I wondered if Kurt’s loans might qualify for another, lesser-understood form of debt relief that did not have to survive the courts.
The Proof of Kurt Panton’s Frustration with the Free Application for Federal Student Aid: When Loans and Debts vanish
He said that he doesn’t have to think about whether he qualifies under the complicated formulas.
Kurt laughed a lot during our first Zoom conversation, in December of 2022, when he was worried about his $18,000 in outstanding loan debt, but also during our last conversation, just a few days ago, when he told me those debts had suddenly disappeared.
Kurt Panton is 43. He grew up in Miami with his brother and their mother, Barbara. After graduating from college in 2003, Kurt taught high school until 2016, when he moved to Germany, married Lizzy, who is German, and tried his hand at copywriting.
After his baby daughter babbles playfully, Kurt Panton’s laugh, surprising and unguarded, erupts. But also when you don’t — after he confesses frustration with the federal student loan system.
The question for 2024 is whether that will change, and whether the department can muster the people, time and money required to turn its many high-stakes promises (from SAVE to Fresh Start to FAFSA) into functioning, concrete programs.
The Education Department told NPR in a recent statement that they have not received the funds to implement the split as soon as they wanted.
There’s also this bill, passed by Congress and signed into law by President Biden in late 2022, that finally allows former spouses to separate loans they had consolidated while married. The move was a big win for many women who left abusive relationships only to find themselves still tied to their abusers’ student loan debts. While the law achieved the impossible – squeezing through Congress’ partisan eye of the needle – it has stalled in the queue of big ideas the Education Department is trying to implement with finite staff and a grinding budget crisis.
Case in point: Congress charged the department with overhauling the Free Application for Federal Student Aid. In October, the form is released so students understand their financial aid options before applying to colleges. The new, overhauled FAFSA will be delayed until December. That’s bad news for families. What’s more, in the rush to finish the redesign, a mistake has been made that could mean many students and their families qualify for less federal student aid.
The debt relief plan isn’t finished yet, but girded the Defenders of Biden’s plan argue that it was worth the fight. In government, pushing one new idea usually takes time and attention away from something else. And the Education Department has a lot of something else on its hands.
By the end of November, 50% of the borrowers with bills due in October had made a payment. Biden administration sources see these numbers as a win, knowing they could have been much worse. But no one’s throwing a party, considering more than 8 million borrowers did not make a payment on-time and FSA’s running out of money.
Servicers are making a mess of changes and hurting borrowers according to some in the Biden administration. Sources with the servicers, as well as a few within the administration itself, complain that the education department wants them to do impossible things, launching servicers from a catapult and building an airplane in mid-air, then shame them when they fall.
The crisis has arrived a year later. If Congress fails to agree on a funding solution soon, the office of Federal Student Aid will have to tell loan servicers to scale back their support for borrowers.
What has this budget crisis meant for borrowers? Last January, with no one yet required to make student loan payments, the risk to the system was abstract. Today, it’s crushing.
The federal agency responsible for implementing these changes in policy was facing the possibility of having to do it all with no extra funding, as I wrote back in January.
These are changes to the system. They may not result in immediate loan forgiveness, but they are absolutely meant to make for a kinder, gentler repayment system.
The SAVE change is only one of the many changes the Biden administration has rolled out. The Fresh Start program is intended to help the many student loan borrowers who are at risk of default. Fresh Start makes it easier for borrowers to improve their credit and gives them immediate access to the SAVE repayment plan – for many borrowers, a welcome alternative to the old days of forced collections and wage garnishment.
I teamed up with Planet Money’s Kenny Malone for a deep-dive episode into SAVE and what it will mean for borrowers in the long-run. You can listen to it here.
Unconstitutional Student Loan Forgiveness in the 21st Century: Inflation vs. The U.S. Supreme Court
Virginia said that America’s student loan system is broken and that this reckless, inflationary and illegal expansion of executive authority would ensure it’s doomed beyond repair.
The SAVE plan eliminates interest that accumulates beyond what a loan can afford and exempts more of a borrowers income from the monthly payment math. The interest on borrowers with low or $0 payments doubled under previous plans. With SAVE, that stops.
But that same day, Biden announced “a new path consistent with today’s ruling to provide student debt relief to as many borrowers as possible as quickly as possible.” What does that mean? Many borrowers simply shrugged, assuming Biden was trying to save face.
The Biden administration erased $38 billion of debt for 804,000 borrowers on July 14, two weeks after the Supreme Court declared the plan unconstitutional.
It is a long process, and whatever debt relief emerges from it won’t feel much different than Biden’s first proposal. It will likely survive until it faces more conservative legal challenges.
He was or he wasn’t. The Education Department is using a different law, the Higher Education Act, and a bureaucratic process to explore what kind of legal authority the Secretary of Education has to cancel student debts.
If the ghost of Herman Melville could write a story about a white whale dragging borrowers into the cold water, he would have made it clear that millions of Americans are still waiting for their student loans to be forgiven.
It was a year that lived in the past. A year that will be studied for decades, as the inflection point between one unprecedented era – a pandemic payment pause punctuated by the U.S. Supreme Court’s scuttling of President Biden’s debt relief promises – and another – the rollout of sweeping new repayment policies just as millions of muddled borrowers return to a system hobbled by partisan bickering and budget cuts.
The idea of student loan forgiveness was dead on the bench of the Supreme Court in 2023.