Borrowers for Income-Driven Repayment: Kurt’s Debt Annihilation with Lizzy and Kurt Almost-Wise
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. It was enough to qualify 804,000 borrowers for debt cancellation.
After Kurt hangs up, his wife, Lizzy, grabbed a small bottle of wine from the fridge and discussed an email that said Kurt’s loans will soon be in his past, while his future sleeps quietly in another room.
To be eligible for forgiveness, a person needs to have been in default for at least 20 years with a monthly payment of at least 240. By our count, Kurt had made 233, though that was a conservative estimate, ignoring a few months that had disappeared with servicers’ poor record-keeping.
Kurt says she is lying on the couch and cannot go back to sleep quickly. 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 the month with a friend who was sick. He fed her, changed her diaper, and lay down on the couch with her, hoping she’d fall back asleep.
The Era of Loan Forgiveness: A Closer Look at Biden’s Debt Relief Plan and the Panton-Panton Do-Over
“I am so close!” He chuckled. “When you were scrolling down on the spreadsheet, I was like, ‘Please get to 240, please.’ And then I saw the number 233. I was like ‘Nooo!’
In August, Kurt and I were on Zoom again. This time, Pauline was about 10 months old, and she sat on his lap as I showed them the spreadsheet I’d made.
When we first met, last December, Kurt told me he had been repaying his loans consistently since late 2003, and he knew that if President Biden’s big plan to erase hundreds of billions of dollars in federal student loans could survive a barrage of legal challenges, it would erase every penny of his remaining debts. (Pell Grant recipients like Kurt would have qualified for $20,000 in debt cancellation.)
Which brings us full circle to Kurt Panton, who’d been repaying his loans for 19 years when we met. Under this do-over, he could technically qualify for loan forgiveness in one more year. Technically. The US Department of Education was still focused on the fate of Biden’s debt relief plan, and no one understood how or when it would happen.
Two weeks after NPR released its investigation, the Biden administration committed to a sweeping IDR overhaul, promising to review the payment histories of millions of borrowers, find and fix these mistakes, and give borrowers retroactive credit toward IDR’s promise of loan forgiveness.
If millions of borrowers like Kurt hadn’t been warned about the repayment plans, they would have been put into forbearance instead.
A list of shocking problems, that were hurting, not helping borrowers was revealed by NPR. Though these plans promised loan forgiveness after 20 or 25 years, NPR found that some loan servicers weren’t counting payments, meaning they had no idea if, or when, a borrower qualified for forgiveness. Servicers were also miscounting payments, not always giving borrowers credit.
These IDR plans were meant to help lower-income borrowers by pegging their monthly payments to their income: The less they earn, the less they have to pay each month. They were supposed to keep struggling borrowers out of default on their loans.
Kurt and I both knew Biden’s plan for debt relief was not certain, so 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.
What’s happening to Kurt Panton when he and his wife share a laugh: The failure of the FAFSA to properly separate loans, but not enough to save them
“That’s going to make an immediate effect,” he told me back then, “and I don’t have to sit here and think about whether I qualify under all these 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 was raised in Miami with his brother and mother. 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.
Kurt Panton’s laugh, surprising and unguarded, erupts when you expect it — after his baby daughter, Pauline, babbles adorably. But also when you don’t — after he confesses frustration with the federal student loan system.
It is questionable if the department will be able to muster the time and money required to turn its many high-stakes promises into concrete programs.
As the Education Department told NPR in a recent statement, “We simply have not received the resources to implement this split as soon as we would have 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. It was a big win for women who ended abusive relationships but were still tied to their abusers’ student loan debts. The law achieved the impossible and squeezed through Congress’ partisan eye of the needle, but it has stopped in the queue of big ideas the Education Department is trying to implement.
Case in point: Congress charged the department with overhauling the Free Application for Federal Student Aid. The form is usually released in October, in time for students to understand their federal financial aid options before getting acceptance letters from colleges. The new, overhauled FAFSA will be delayed until December. That is 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.
Defenders of Biden’s debt relief plan argue it was a critical fight, even if it didn’t end as they’d hoped. Though it is also a reminder that, in government, pushing one new idea – especially an idea as big as debt relief – inevitably takes time and attention away from something else. And the Education Department has a lot of something else on its hands.
The department recently announced that almost two-thirds of the 22 million borrowers with bills due in October made a payment by November. Biden administration sources see these numbers as a win, knowing they could have been much worse. No one is throwing a party because 8 million borrowers didn’t make their payments on-time and the funds from the FSA are running out.
Some in the Biden administration complain that servicers are making a mess of the changes and hurting borrowers. But sources with the servicers, as well as a few within the administration itself, complain the Education Department is asking them to do the impossible, launching servicers from a catapult and telling them to build an airplane in mid-air, then shaming them when they fall.
Well, here we are, a year later, and the crisis has arrived. The office of Federal Student Aid could have to tell loan servicers to scale back borrower support again if congress doesn’t agree to funding a solution soon.
What should we make of it all? I’m a correspondent who’s spent many years covering the federal student loan system, and my editors wanted me to reflect on the year. I have three.
The agency that was responsible for implementing the return to repayment was facing the chance of not having enough money to do it all, as I reported back in January.
These are significant 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.
And SAVE isn’t the only big repayment change the Biden administration rolled out. The Fresh Start program is intended to help 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.
Did House Education Committee Chairman Jay Biden Forgive an Unconstitutional Student Loan Expansion? The Case for Underpaying Students in the U.S.
“America’s student loan system is broken, and this reckless, inflationary, and illegal expansion of executive authority will all but ensure it’s doomed beyond repair,” stated the Republican chair of the House Education Committee.
The plan exempts more of a borrower’s income from the monthly payment math than previous plans, and, under SAVE, interest no longer accumulates beyond what a borrower can afford to pay each month. Under previous plans, borrowers with low or $0 payments — too low to cover their monthly interest — saw that interest explode. With SAVE, that stops.
Biden Education Department says it has approved nearly $132 billion in debt relief for 3.6 million borrowers, and those results are due to changes the Biden administration made to other forgiveness programs. It is an enormous amount of student loan forgiveness, regardless of what you think of it, so whether you think it is a kindness or a waste of taxpayer dollars, it is.
For example: On July 14, an otherwise quiet, summer Friday two weeks after the Supreme Court declared Biden’s plan unconstitutional, the Biden administration announced it was nevertheless erasing $39 billion of debt for 804,000 borrowers.
This is a long, muddy process, and whatever debt relief emerges from it, likely in 2024, will feel smaller than Biden’s first, expansive proposal. But something will likely survive, at least until it faces a fresh round of conservative legal challenges.
He was, and he wasn’t. The U.S. Education Department is now working slowly, using a different law (the Higher Education Act) and a bureaucratic process known as negotiated rulemaking, to explore what kind of legal authority the education secretary does have to cancel student debts.
If the ghost of Herman Melville could write a story about how the first six months of the year are not good for students, he’d plunge borrowers into the frigid depths with a white whale that embodies the disappointment of millions of Americans.
Whale analogies aside, it was a year for the ages. 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.
Many, perhaps most borrowers will tell you that 2023 was the year the idea of “student loan forgiveness” died atop the mahogany bench of the Supreme Court.