Only 20% of student loan borrowers will have debt cancelled through relief programme by 2026, report finds

Federal programme to cancel remaining debts for public workers will likely fail ‘vast majority’ of borrowers

More than 1 million Americans have applied to a federal programme to cancel their student loan debt after 10 years of on-time payments while working in public sector jobs.

But only 20 per cent of those borrowers are on track to have their debt cancelled by 2026, nearly 10 years after they would start to become eligible for relief, according to an analysis from the Student Borrower Protection Center.

The Public Service Loan Forgiveness programme, created in 2007, aimed to provide relief for teachers, healthcare workers and other public workers who took on student loans in exchange for at least a decade of service work.

Following an analysis of programme data obtained through Freedom of Information Act requests from the Department of Education and Pennsylvania Higher Education Assistance Authority, which handles the programme, fewer than 300,000 borrowers will be eligible for relief by 2026 – nearly 10 years after 2017, the year that eligible borrowers could begin to see their debts cancelled.

Without “bold and swift action” from Education Secretary Miguel Cardona and President Joe Biden, the programme “is likely to fail the vast majority of borrowers working in public service over the long term,” according to the centre’s Ben Kaufman.

Projections uncovered by the group reveal that “on our current path, four of every five borrowers will still not have secured promised loan forgiveness,” he said, and that the Education Department “and its contractors know it.”

The centre estimates 2.2 million borrowers will seek loan forgiveness through the programme by January 2026, but the current rate suggests that only one-in-eight borrowers will be eligible, “making the one-in-five figure mentioned above an unfortunate best-case scenario unless the Biden administration intervenes,” the report says.

The government has disputed the centre’s findings with the programme, which relies on a complex eligibility criteria applicable only to federally held loans.

But the findings have added to a growing list of reports reaching damning conclusions about the effectiveness of relief programmes and incremental efforts to pause or eliminate debt.

A report from the National Consumer Law Center found that only 32 people have ever qualified for loan cancellation through an income-based repayment plan that promises to cancel remaining debt after payments up to 25 years.

More than 8 million people have enrolled in income-driven repayment plans, and roughly 2 million people have been in repayment for more than 20 years, still holding debt – with interest – tied to their undergraduate tuition.

The latest report also adds fuel to a growing call demanding the Biden administration take stronger action against the debt crisis, which has ballooned to 45 million Americans holding more than $1.8 trillion in debt. Most of that debt – $1.5 trillion – is in federal loans.

A bulk of that debt surged over the last decade as private university enrolment grew and federal and state governments made steep cuts to higher-education funding against growing wealth inequality.

The president pledged to cancel up to $10,000 in federal loan debt before he entered the White House, adding that it “should be done immediately” upon taking office.

Mr Biden extended the coronavirus pandemic pause on federal student loan payments through September, and Secretary Cardona has rolled back a policy implemented by his predecessor Betsy DeVos to provide full debt relief for borrowers defrauded by for-profit schools.

Last month, the agency announced that it would automatically discharge debt for 323,000 student loan borrowers with disabilities, cancelling more than $5.8bn in student debt.

The education platform outlined in Mr Biden’s American Families Plan would provide up to two years of tuition-free community college and universal preschool, but the plan does not include the debt relief measures outlined during his campaign.

As progressive lawmakers weigh congressional action, administration officials are reportedly mulling whether the president has authority – as many debt cancellation advocates have argued – to unilaterally cancel debt through executive action.