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Brian Lehrer: Brian Lehrer on WNYC. Attention anyone with student loan debt or anyone who knows and cares about anyone with student loan debt. Okay. Now, we have everybody's attention. You could be forgiven for being very confused right now about your status under President Biden's loan forgiveness program.

$10,000 for most people making under $125,000 a year. $20,000 of debt forgiveness if you got Pell Grants, which are for undergrad students with serious financial needs. The forgiveness program is tied up in court and heading to the Supreme Court. Uh-oh, if you're on Biden's side. Yesterday in the latest development, the President announced a six-month extension of the student loan repayment pause, the temporary program. Here's the President yesterday.

President Joe Biden: I'm completely confident my plan is legal. Right now, it's on hold because of these lawsuits. We're not going to back down though on our fight to give families breathing room. That's why the Department of Justice is asking the Supreme Court in the United States to rule on the case, but it isn’t fair to ask tens of millions of borrowers who are eligible for relief to resume their student debt payments while the courts consider the lawsuit.

Brian Lehrer: Therefore, this latest pause is through next June. Now, it's the eighth time the restart date for loan repayments has been moved back since the start of the pandemic. How does this all affect you and affect the country as a whole? With me now is Danielle Douglas-Gabriel, who covers the economics of higher education for The Washington Post. Danielle, happy thanksgiving in advance, and thanks for coming on WNYC today.

Danielle Douglas-Gabriel: Same to you and thanks for having me.

Brian Lehrer: Let's start with the new news. Anything to add to what President Biden announced yesterday and what people with debt should do as a result?

Danielle Douglas-Gabriel: It's kind of interesting while the top headline has been that the payments start won't happen till the end of June. Actually, it might be a little longer than that. What the administration is saying is payments will resume 60 days after the department is allowed to implement the program or litigation is resolved. If it's done sooner than June, then your payments can start in May potentially. If that doesn't happen by June 30th, payments will resume 60 days later or on September 1st.

I think that's a kind of a clarion call to all borrowers to pay close attention to what's happening in the courts right now. Certainly, a lot of borrowers I've spoken to fall into three camps. There are those who have been saving up the money that would have otherwise gone to their payments to purchase homes for saving up for down payments or to actually start padding their retirement funds because their student loan payments precluded them from being able to really save.

Then there are others who had set aside the money in hopes of starting to really attack that debt before payments restarted and take advantage of not having to pay interest. Then there are just people who are just happy that they don't have to be stressed over these payments and just living life right now. I think all of those folks are very curious to see what's going to happen. I think yesterday's announcement is a way for the administration to hedge their bets on what the courts might do.

While, certainly, this Supreme Court is quite conservative, there are a lot of legal scholars who are watching the moves of the court and wondering whether they might reinstate this program. It's not a foregone conclusion that they're going to strike down this plan. I think it's really important for everyone to pay attention to what's happening in the space if they have debt or if they care about people who do have debt.

Brian Lehrer: Does the pause mean all student debt repayment for every borrower is paused now through the end of June?

Danielle Douglas-Gabriel: Well, no, so it's interesting. While the vast majority like 95% of people with federal student loans, that's loans that were made originated by the federal government, have benefited from this pause, there are still roughly about four million people who have a type of federal loan that's owned by private entities. They never got to take advantage of this pause. They had to continue to make payments on their loans. Plus there is millions of other borrowers who also have private student loans that were originated by banks and other types of lenders. They are also not eligible for this particular pause.

Brian Lehrer: Listeners, your questions on the status of your student loans or the student loan forgiveness policy, welcome here for Danielle Douglas-Gabriel, who covers the economics of higher education for The Washington Post. 212-433-WNYC, 212-433-9692, or tweet @BrianLehrer. Danielle, can you remind us in a little more detail of the legal status of the main debt forgiveness program that Biden originally announced as it heads to the Supreme Court? I know you're an economics of higher education reporter. You're not a legal analyst, but can you summarize the legal argument by the Republican-led states who are taking this to court and how Biden is trying to fend that off?

Danielle Douglas-Gabriel: Sure, so there are six Republican-led states that sued as a coalition trying to block this plan and their arguments are twofold. One is that the President lacks the authority to unilaterally and effectively create policy without congressional involvement. Then the other is that many of these states like Missouri and Nebraska either have some quasi-state entities that own federal student loans or invest in that same kind of federal student loans I've mentioned previously that are owned by private entities.

Their fear was that if you enact this program, people are going to consolidate those loans in order to be eligible for this program. They're going to lose a lot of money. Also, for some of those states with that same quasi-state entity that services federal student loans, meaning they make money by collecting and applying the payments on behalf of the federal government, they will also lose money.

Because if 20 million people have their loans completely wiped away, well, that's 20 million less accounts that those servicers will have as a part of their business portfolio. Initially, that particular case was dismissed by a lower court because the judge, in that case, said, "These people don't have standing. They can't really prove harm here, that they're going to be harmed by this policy," and so he dismissed the case. Naturally, they appealed to the Eighth Circuit. The Eighth Circuit initially imposed a state putting that lower court ruling on pause.

Then most recently, last week, they imposed a preliminary injunction, which effectively bars the Department of Education from accepting more applications under this program and discharging any debt. At the same time, in a totally separate case with the same kind of objective of upending this debt relief plan, a federal judge in Texas actually said, "Yes, I agree. The President does not have the authority to unilaterally create this program without congressional support. I'm going to strike down this program and call it unlawful."

In that Texas case, it involves two bars. One of whom was ineligible because she had the type of federal loan that's held by private entities. The other was a borrower who did not have a Pell Grant and couldn't qualify for the full $20,000. Their argument in part was that not only what the President did was illegal because he doesn't have the authority, but also the program is especially arbitrary. How did you come up with these particular parameters? How is this fair to the borrowers who have debt? The judge sided with them.

Naturally, the Department of Justice has appealed that case as well, that ruling. That case landed in the Fifth Circuit where the department is now asking the appeals court to stay that order, essentially put it on hold, and allow them to move forward with the program. Those are the two most important cases that are unfolding right now. There were seven lawsuits seeking to abolish this program. Those two cases are the ones that have gotten the furthest. In the Eighth Circuit one, that's where the Justice Department has asked the Supreme Court to intervene and reinstate the debt relief program.

Brian Lehrer: Boy, that is a lot of moving parts.

Danielle Douglas-Gabriel: Good Lord, it is. [laughs]

Brian Lehrer: No wonder people are confused about the status of their student loan forgiveness. I take back what I said before. If you ever get tired of being a higher-ed economics reporter, you obviously could be a legal analyst.

Danielle Douglas-Gabriel: [laughs] I have lots of good sources who are kind to me and let me ask them any questions at odd hours, yes.

Brian Lehrer: Olivia in Brooklyn, you're on WNYC. Hi, Olivia.

Olivia: Hi, so I took out federal student loans for this academic year and I did take out a Pell Grant. I was given a Pell Grant, excuse me, and I also took out unsubsidized student loans. I think I'm just a little confused about whether any of this is going to end up applying to me.

Brian Lehrer: Can you help Olivia, Danielle?

Danielle Douglas-Gabriel: Sure. Olivia, if your loans were originated before June of this year-- I think, actually, no, the end of July 1st. By July 1st of this year, then you would qualify for the debt relief program, right? It not only applies to people who have left school, it also applies to a lot of people like yourself who are still in school and took out loans for this academic year.

In that instance, if you are within those parameters, then you should be eligible. That unsubsidized loan, it's all still federal loan, still a direct loan. All it means is that the Department of Education or federal government is not paying the interest on your loans while you're in school. For some people, yes, they will pay your interest while you're in school, depending on what your financial need is, but that's a direct loan. If it was originated before July 1st, then you're good.

Brian Lehrer: Olivia, I hope that helps. Thank you very much. Kevin on Staten Island, you're on WNYC. Hi, Kevin.

Kevin: Hi, good morning. I have a question about something in this legislation or this deal that a lot of people don't talk about, and that's bringing people who are in default on their student loans' current, and if that is still part of the policy and if you know of any mechanics of exactly how that's going to work.

Danielle Douglas-Gabriel: Sure. Actually, that's a separate policy. There was a lot of policies coming out of this administration that kept us all very busy. We write about it. This is a program called Fresh Start, right? The idea here was to bring people who are default on their federal loans back into good standing, remove that negative mark off their credit report. The department is still working on that plan.

Their aim is to have that completely done before the resumption of payments. That is still in the works. I think they had said maybe about seven or eight million people would benefit from this if their loans were in default before the pandemic pause was imposed in March of 2020. If you are in that camp, then you will still benefit from that program. It hasn't been completed yet, but it is in the works.

Brian Lehrer: Hope that's helpful, Kevin. Here's a tweet from a listener with an interesting question. Tell me if you've heard this one before. Listener writes, "The pause is negatively impacting my credit score. If my loan will potentially be forgiven, I don't want to make those payments if I don't have to. The more forgiveness is delayed, the more impact on my credit score." Is that a common problem?

Danielle Douglas-Gabriel: Not one that I've heard necessarily because the department's supposed to be informing the credit bureaus that this is not a delinquency, right? It's not supposed to appear like you're not making those payments. If you're in this what's called "administrative forbearance," which is what this period is for people who are eligible, then it shouldn't show up negatively on the credit report. I would encourage the listener to call the ombudsman's office. This is a branch of the Department of Education where they can walk you through these problems and also potentially file a complaint if needed.

Brian Lehrer: The ombudsman from the federal Department of Education will actually answer an individual's call and give them a substantive response?

Danielle Douglas-Gabriel: Yes, they do. It is a surprisingly effective part of the federal government, yes. I've directed many people there and they have reported back to me that that was the best help that they've received was through the ombudsman's office, yes.

Brian Lehrer: We'll continue in a minute with our guest, Danielle Douglas-Gabriel, who covers the economics of higher education for The Washington Post and more of your calls on these moving parts on student loan debt forgiveness. 212-423-WNYC, 433-9692, or tweet @BrianLehrer.

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Brian Lehrer: Brian Lehrer on WNYC as we talk about President Biden and the Republicans and the courts. Many moving parts on student loan forgiveness. Latest development, Biden announcing yesterday, a six-month pause on those who've been affected by the pause to date during the pandemic on having to pay back your student loans as the main student debt forgiveness program works its way up to the Supreme Court.

Listeners, how many of you have just gotten a letter like this from the federal government as a friend of mine did just yesterday? It says, "Dear so and so," I said "so and so" so I don't name my friend, "We received your application or have the income information to process you for loan relief. You do not need to take any further action at this time. Unfortunately, a number of lawsuits have been filed challenging the program, which have blocked our ability to discharge your debt at present. We believe strongly that the lawsuits are meritless and the Department of Justice has appealed on our behalf."

Excuse me. "We will keep your application information and we'll continue our review of your eligibility if and when we prevail in court. We will update you when there are new developments. The Biden-Harris administration is committed to helping borrowers as they recover from the pandemic. Education is a great equalizer and we will never stop fighting for you. In service, Miguel A. Cardona, US Secretary of Education." That is quite a letter, Danielle, that I guess millions of people have received in the last few days basically saying, "Yes, we were going to give you the loan forgiveness, but never mind."

Danielle Douglas-Gabriel: About 16 million people actually have received that. Essentially, what it says and I think what it was trying to convey was that while these cases have put a pause on the program, before it was paused, the department had actually reviewed and approved the applications of 16 million people. I get the sense that from a marketing standpoint, the administration wants people to know that we're ready.

Whenever these lawsuits are resolved in our favor, we're ready to do the work that we promised to do. However, some borrowers who received that letter were pretty stressed by the fact that this is within reach and there's a good possibility that they may never get it. I don't know if the strategy may have backfired in some quarters as much as it perhaps showed people that the administration is committed to this policy. It was a dicey move on their part.

Brian Lehrer: We had an Olivia in Brooklyn calling in in this segment. Now, we have an Olivia in Manhattan unless you're the same person and you just crossed the Williamsburg Bridge. Olivia, you're on WNYC. Hi.

Olivia: Hi, Brian. Second-time caller, long-time sustainer. I am in Manhattan. I'm another Olivia who has student loan distress. My thanksgiving wish is people would stop saying "loan forgiveness." I paid my undergraduate and then I got my doctorate at a CUNY school, CUNY Graduate Center. I borrowed $94,000. In seven years, I've paid back $68,000. I still owe $83,000. I wish my predatory student loan rate of 7% was more like an SBA loan from the government at like 0.1%. During this pause, I was actually able to take care of some dentists. I paid a local dentist $6,000.

That was the best gift that I could have ever gotten from the government to be able to take care of myself instead of paying back this exorbitant interest. I worked for a not-for-profit hospital. I made a non-living wage so that I could be a candidate for the William D. Ford Act from Obama. I had a second job to pay my student loans and make ends meet. My wish is to stop saying "forgiveness" and maybe start recalculating people's interest rate and giving them some credit for the interest that they paid and put it toward the principal. Thank you to you, Danielle, your guest, and thank you, Brian.

Brian Lehrer: Thank you very much. Well, that's two great calls from people named Olivia in this segment. Danielle, wow, have you had any other complaints like that about-- This wouldn't be on you. This is on Biden, I guess, who calls it a "forgiveness" program. Have they talked about, "Just let's recalculate this, what feels to so many people like predatory interest rates like 7%"?

Danielle Douglas-Gabriel: Certainly, there have been a lot of people who have stressed, "This is relief. This isn't forgiveness. This is relief from a system that is largely quite broken." It would take an act of Congress to reset those interest rates. Your caller is right. Graduate loans come at 6%, 7%, 8%. Congress enacted legislation to make sure it would never go past 9%, but it is remarkably high relative to what you could find in the mortgage market. Well, probably not at this stage, but previously and elsewhere and even a car loan, it's a tremendously expensive loan. Plus not only that--

Brian Lehrer: Why was it that high until the recent issues with inflation? Most interest rates were close to zero.

Danielle Douglas-Gabriel: Well, it's an interesting program, right? The federal student loan program is always trying to figure out if it's an entitlement program or if it's just a less expensive way for people to finance their education. For undergraduates, it's kind of an entitlement program because rates are kept so much lower than for graduates and for parents. The level of underwriting for these loans are not comparable to what you would find in the private market.

They're a lot more relaxed. As a result of that, the government tends to charge a lot more, particularly for graduate loans and for parent PLUS loans that you find in that 6%, 7% interest rate range. Also, they charge origination fees. You have to pay money for the government to originate that loan, which is a percentage of your total amount borrowed, plus that high interest rate. It's a really difficult financial prospect for a lot of people and Congress needs to address it.

They haven't reauthorized the Higher Education Act since 2008. There have been individual bills trying to figure out ways to lower that interest rate. They haven't really gone anywhere. Don't know if we'll see that anytime soon as leadership changes. I do know Republicans have raised questions about the way graduate loans are structured and the fact that you can borrow to the full cost of attendance. I suspect that we will hear more about reforming the system in that way.

Brian Lehrer: A few more minutes with Danielle Douglas-Gabriel, who covers the economics of higher education for The Washington Post, as we talk about all the moving parts on student loan policy right now. Jag in Queens, you're on WNYC. Hi, Jag.

Jag: Hey, how's it going? This is just a quick question similar to Olivia. I really enjoyed the hold on paying loans. I was able to do other things and save up some money. I'm also trying to do the PSLF program, which is the loan forgiveness program because I'm really in debt. I wonder, what is the opposition to loan forgiveness? Let's say it's $10,000 like you said if you make $125,000. Why is it that we're struggling to get this passed? What is the opposition saying? Is it private ties? Is it deeper than that?

Danielle Douglas-Gabriel: The opposition is bifold. The first one, of course, is having the President do this relief program through an executive order and bypass Congress is a point of contention. The other one is the fairness part. For people who have paid their loans off or never had to borrow, why should they have to foot the bill for those who did borrow? The other aspect is potentially creating a system in which people believe there will be forgiveness again, and then continue to borrow too much money.

That's what the argument constantly is that I hear. Then also that this is a pointless policy in the sense that it does nothing to fix the system as is and is just a government giveaway to the detriment of the majority of Americans. Then I guess the fifth one that we've heard in part is how arbitrary the terms of this program debt relief program is in that $20,000 for people with Pell, $10,000 for folks who did not have it.

While many people see that kind of Pell bonus as a targeted way of getting to folks who come from low-income backgrounds in order to help them ameliorate some of the financial tension created by their student debt, others just see this as an unfair way of redistributing wealth to folks. I guess a sixth issue I've heard quite a bit is college-educated people do not need help. They're the ones who are able to stay employed through economic crisis. Why do they need this assistance?

The reality is nearly 40% of people with student loans actually never graduated college. For many of those people, the debt that they're paying back never afforded them the benefit of the education that they were seeking. Those are some of the things that I've heard in terms of people who are against this debt relief and just broadly against any kind of student debt cancellation, whether it's from this program or others.

Brian Lehrer: That's a pretty serious list of critiques. Some of which sound like they're thoughtful and not just selfishly political. Does the Biden administration have any particularly good or bad responses to-- and you don't have to go down the whole list again.

Danielle Douglas-Gabriel: [chuckles] That was long.

Brian Lehrer: Maybe pick out one or two and say how they would respond.

Danielle Douglas-Gabriel: Well, the aspect of not fixing the system, right? The Biden administration, when they announced this debt relief program, also announced a repayment program that will be in effect next year that allows borrowers, particularly those with undergraduate loans, to pay back no more than 5% of their discretionary income. That's a measure that's set to, in this case, I think, 250% above the poverty line is how they make that calculation.

This would allow for folks not to have to eat into their full-on income in order to pay off their student loans. It would probably ease a lot of the budgets for a lot of Americans who have student debt. For those with graduate loans, I think they're doing a sliding scale of sorts where if you have undergrad and grad, it's somewhere between 5% and 10% of your discretionary income.

Either way, this plan is supposed to be far more generous than what exists and allow for people not to have to pay back their loans well into their retirement. It caps it at a certain number of years before the remaining balance is forgiven. That's one way. I think another thing that the administration would say is, "Hey, we're trying to find every way that is within the education department's authority without needing Congress to make this program a lot more beneficial to students and to borrowers."

Another way is capping what's called interest capitalization. This is where if you put your loans in forbearance, say you had to postpone those payments, and while you're doing that, interest continues to accrue. Now, when you start repaying those loans, the interest that was accruing to that time is added onto the principal. Then you are paying interest on top of interest essentially and that can balloon your balance. This happens to a lot of people as they struggle to pay back their loans, as they move from different repayment plans.

The administration's trying to find ways to make the lending system more functional for borrowers, but a lot of the heavy lifting to really change this program has to be done in Congress. What's concerning at this stage is that the way that this debt relief program has become so heavily politicized, and so there's just so much vitriol around this program right now in Congress. I feel like there's a good chance that we won't see the kind of bipartisan cooperation that's needed to really affect the big changes in the federal student loan program.

Brian Lehrer: Is there a political analysis to be had that says, "College-educated people tend to vote more for Democrats"? Whereas non-college-educated people, which is still the majority of the public that doesn't have four-year degrees, non-college-educated people tend more to vote for Republicans, and so the Republicans oppose and the Democrats embrace this program?

Danielle Douglas-Gabriel: That is certainly a possible aspect of the argument here. I am the education reporter, not the political reporter, so I try not to overstep my bounds here. Certainly, that is a part of the argument as I've heard. Well, what's fascinating to me is that a lot of Republicans will still fight for the colleges and universities that are in their districts, right? I think we saw this most interestingly with Mitch McConnell and the way that he treated Berea College in Kentucky, trying to make sure they got a carve-out from a tax on their endowment in part because of the work that they do, but also in part because it's an institution that many people in his district are very proud of.

While there's all this discussion about higher education indoctrinating people and just being a bastion for liberalism, when you start talking about the schools that are in their communities, it becomes a very different conversation. I think once you start to break down some of the politics and the bluster, people feel very protective about the community colleges and regional schools and universities that are in their region. They will fight for them and their needs.

Brian Lehrer: Well, in fact, when you bring up the criticism that the loan forgiveness does nothing to structurally change the high cost of education, arguably, the biggest story in this category should be disinvestment by the states and their state universities and community college systems. Have you reported on that recently?

Danielle Douglas-Gabriel: Oh, definitely. That's a constant reframe as to why we are where we are, right? The level of appropriations for public institutions are just dramatically much lower than they were, say, a generation ago. Even as the appropriations creep up, they still are nowhere close to what they were before the Great Recession of 2008, 2009. That makes a difference. When schools don't have that money, then they use the only lever they can in order to offset the loss, which is tuition. You see tuition increase.

There's other reasons why tuition is what it is. Certainly, the cost of delivering education is very expensive. Paying instructors, health care, pension plans, wrap-around services like mental health services, all of those things factor into why college costs what it costs. Then in some instances, certainly, the constant competition for students, making sure you have the facilities and grounds that are attractive to families that can pay near full freight because you need their dollars as well to offset the money that you're not getting from elsewhere.

All of those things kind of come into play there. One thing I think is really fascinating about all of this debt release conversation is that it's forcing hard discussions at colleges and universities about pricing and about the costs and what they're going to do in order to make university more accessible and affordable to families, not just low-income ones, but middle-income ones. Even folks who have money paying near $250,000 for a four-year degree is an inordinate amount of money. I don't know any family that can just easily pay that off.

Brian Lehrer: Last question and it comes from two listeners on Twitter. One writes, "We'd love to hear if your guest thinks there's any chance for relief for those of us who had to take out private high-interest loans with private lenders such as Sallie Mae." Then another listener kind of puts an exclamation point on that and just writes, "Danielle, none of this applies to private student loans?"

Danielle Douglas-Gabriel: Yes, unfortunately, it does not. However, I will say, not that I am in any way endorsing this as a strategy, but I know that there is congressional bills and legislation seeking to try to ease the restrictions on bankruptcy, student loans in bankruptcy, particularly the private student loans in bankruptcy. Unfortunately, that has not gotten as much attention as the federal trying to discharge your federal student loans in bankruptcy.

Recently, the administration tried to ease the policy on that as well as legislation trying to do the same, but there aren't a lot of options for people with private student loans. It's a very challenging market. The best that a lot of folks can do is refinance into lower-interest loans, but even that is difficult because you don't have the same level of consumer protections that federal student loans afford.

Brian Lehrer: There we end our conversation on the many moving parts right now on student loan debt relief, forgiveness, call it what you will, those not included in that like those with private loans as our guest just said. We leave it there with Danielle Douglas-Gabriel, who covers the economics of higher education for The Washington Post. Thanks for your great reporting, and great talking about your reporting.

Danielle Douglas-Gabriel: Thank you so much for having me. I always enjoy it.

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