Biden Cancels Billions in Student Debt But Hurdles Remain
Many have called on Biden to ramp up his efforts to forgive student debt as the COVID protections for borrowers near expiration.
Biden Ramps Up Debt Forgiveness
President Joe Biden has made headlines over the past few weeks for erasing student debt for certain groups.
At the end of August, he forgave $5.8 billion for student loan borrowers with a total and permanent disability, as well as $1.1 billion for defrauded borrowers, bringing his total debt cancellation to $9.5 billion since taking office.
While many cheered the move, others noted that the figure is just about 0.6% of the $1.7 trillion in accumulated student debt.
“If this continues at the same pace, Biden will be on track to cancel about 4.8% of total student debt by the end of his term,” Business Insider noted.
As a result, some have argued that Biden, so far, has fallen short of his campaign promise to reform the student loan system and forgive $10,000 in student debt per borrower.
Notably, Biden’s administration has taken some significant efforts on this front. In addition to reversing a Trump-era rule that prevented borrowers who had been defrauded by for-profit universities from accessing forgiveness they were eligible for, the Department of Education has also waived administrative hurdles for borrowers with disabilities.
While the administration is still working towards broader forgiveness, Biden has said he does not have the legal power to cancel student debt unilaterally without authorization from Congress, and he has urged Democratic lawmakers to act.
However, key leaders, including Senate Majority Leader Chuck Schumer (D-N.Y.), have argued that the president does have the power to forgive the debt, and called on him to erase $50,000 per borrower.
At the same time, House Speaker Nancy Pelosi (D-Ca.) has backed Biden’s claim that he does not have the ability to cancel student debt.
The resulting stalemate comes at a time of increased pressure to act on student debt as the U.S. comes closer and closer to a massive cliff: the expiration of loan relief benefits put in place during the pandemic.
For the last year-plus, around 40 million borrowers have been exempt from mandatory federal payments, interest rates, and collection on loans in default.
While those protections have been extended under both former President Donald Trump and President Biden, they are set to expire at the end of this coming January, and there is little political will among Republicans in Congress to extend the benefits again.
Impact on Future and Incoming Students
With the student loan crisis expected to resume at full swing — if not at an even worse rate than before — many young Americans are being driven away from four-year universities.
A recent survey of high school students by ECMC Group, a nonprofit that helps student borrowers, found that the likelihood of attending a four-year school fell from 71% to 53% in less than a year.
At the same time, another study by College Ave Student Loans, which provides private student loans, found that 55% of families said they plan to borrow this year.
Taking out loans may be the right move for some people who desire certain degrees to obtain specific jobs that will then allow them to pay off their loans, but that is not true for many young people.
According to data from the Economic Policy Institute, college degree earners make just over 50% more than someone with only a high school diploma.
But that might not be worth it for those who would have to spend decades paying off loans, especially as more and more large employers like Apple, Bank of America, Google, and IBM, have stopped requiring college degrees for entry-level jobs.
Still, that decision is highly personal and requires a lot of foresight — something that is an incredible imposition on a 17- or 18-year old who has to make the decision of a lifetime after facing years of pressure and expectations.
The choice is further complicated by the fact that the U.S. does not have anything close to an adequate structure for financial literacy to guide young people to conduct such cost-benefit analysis.
The lack of a cohesive system has led countless people to take on debt when they do not fully grasp the magnitude of how much they will owe and how it might affect their entire lives.
Efforts to Increase Financial Literacy
Furthermore, numerous families lack financial literacy, and only 21 states require high school students to take a course in personal finance education.
As a result, many argue that the dearth of financial education is intentional, especially given the implications for minority and immigrant families. Regardless, it is clear that this is a systematic and intergenerational issue.
Of note, there are a number of efforts to increase youth financial literacy.
At the statewide level, several initiatives have been taken this year. For example, Alabama enacted legislation that requires financial literacy for student-athletes who earn compensation. Hawaii’s legislature also adopted resolutions urging relevant agencies to implement a graduation requirement for a financial literacy credit.
The initiatives that will arguably have a bigger impact, however, are those in the private sector.
Recently, a number of mobile apps aimed at boosting financial literacy among younger Americans have been cropping up.
This includes Copper, which describes itself as “the only bank that teaches teens about money,” and offers short, energetic educational videos and a financial literacy quiz. Step, another app for teens, provides brief videos and catchy articles to its two million users.
While both products are specifically targeted at teens, they are simply part of the broader, growing market of apps that are designed to help all Americans, regardless of age, improve their financial management.
See what others are saying: (Forbes) (Business Insider) (CNBC)
Survey and Census Data Shows Record Number of Americans are Struggling Financially
Americans are choosing not to pursue medical treatment more and more frequently as they encounter money troubles.
A recent federal survey shows that a record number of Americans were worse off financially in 2022 than a year prior.
Coupled with recent census data showing pervasive poverty across much of the country, Americans are forced to make difficult decisions, like foregoing expensive healthcare.
According to a recent Federal Reserve Bureau survey, 35% of adults say they were worse off in 2022 than 2021, which is the highest share ever recorded since the question was raised in 2014.
Additionally, half of adults reported their budget was majorly affected by rising prices across the country, and that number is even higher among minority communities and parents living with their children.
According to recent census data, more than 10% of the counties in the U.S. are experiencing persistent poverty, meaning the area has had a poverty rate of 20% or higher between 1989 and 2019.
16 states report at least 10% of their population living in persistent poverty. But most of the suffering counties were found in the South — which accounts for over half the people living in persistent poverty, despite making up less than 40% of the population.
These financial realities have placed many Americans in the unfortunate situation of choosing between medical treatment and survival. The Federal Reserve study found that the share of Americans who skipped medical treatment because of the cost has drastically increased since 2020.
The reflection of this can be found in the overall health of households in different income brackets. 75% of households with an income of $25,000 or less report being in good health – compared to the 91% of households with $100,000 or more income.
See what others are saying: (Axios) (The Hill) (Federal Reserve)
Montana Governor Signs TikTok Ban
The ban will likely face legal challenges before it is officially enacted next year.
First Statewide Ban of TikTok
Montana became the first state to ban TikTok on Wednesday after Gov. Greg Gianforte (R) signed legislation aimed at protecting “Montanans’ personal and private data from the Chinese Communist Party.”
The ban will go into effect on Jan. 1, 2024, though the law will likely face a handful of legal challenges before that date.
Under the law, citizens of the state will not be held liable for using the app, but companies that offer the app on their platforms, like Apple and Google, will face a $10,000 fine per day of violations. TikTok would also be subject to the hefty daily fine.
Questions remain about how tech companies will practically enforce this law. During a hearing earlier this year, a representative from TechNet said that these platforms don’t have the ability to “geofence” apps by state.
Roger Entner, an analyst at Recon Analytics, told the Associated Press that app stores could have the capability to enforce the restriction, but it would be difficult to carry out and there would be a variety of loopholes by tools like VPNs.
Montana’s law comes as U.S. politicians have taken aim at TikTok over its alleged ties to the CCP. Earlier this year, the White House directed federal agencies to remove TikTok from government devices. Conservatives, in particular, have been increasingly working to restrict the app.
“The Chinese Communist Party using TikTok to spy on Americans, violate their privacy, and collect their personal, private, and sensitive information is well-documented,” Gov. Gianforte said in a Wednesday statement.
Criticism of Montana Law
TikTok, however, has repeatedly denied that it gives user data to the government. The company released a statement claiming Montana’s law “infringes on the First Amendment rights of the people” in the state.
“We want to reassure Montanans that they can continue using TikTok to express themselves, earn a living, and find community as we continue working to defend the rights of our users inside and outside of Montana,” the company said.
The American Civil Liberties Union condemned Montana’s law for similar reasons.
“This law tramples on our free speech rights under the guise of national security and lays the groundwork for excessive government control over the internet,” the ACLU tweeted. “Elected officials do not have the right to selectively censor entire social media apps based on their country of origin.”
Per the AP, there are 200,000 TikTok users in Montana, and another 6,000 businesses use the platform as well. Lawsuits are expected to be filed against the law in the near future.
See what others are saying: (Associated Press) (Fast Company) (CBS News)
How a Disney-Loving Former Youth Pastor Landed on The FBI’s “Most Wanted” List
“Do what is best, not for yourself, for once. Think about everyone else,” Chris Burns’ 19-year-old son pleaded to his father via The Daily Beast.
Multi-Million Dollar Scheme
Former youth pastor turned financial advisor Chris Burns remains at large since going on the run in September of 2020 to avoid a Securities Exchange Commission investigation into his businesses.
Despite his fugitive status, the Justice Department recently indicted Burns with several more charges on top of the $12 million default judgment he received from the SEC.
Burns allegedly sold false promissory notes to investors across Georgia, North Carolina, and Florida. The SEC claims he told the investors they were participating in a “peer to peer” lending program where businesses that needed capital would borrow money and then repay it with interest as high as 20%. Burns allegedly also reassured investors that the businesses had collateral so the investment was low-risk.
The SEC says that Burns instead took that money for personal use.
Burns began his adult life as a youth pastor back in 2007 before transitioning into financial planning a few years later. By 2017, he launched his own radio show, The Chris Burns Show, which was funded by one of his companies, Dynamic Money – where every week Burns would “unpack how this week’s headlines practically impact your life, wallet, and future,” according to the description. He also frequently appeared on television and online, talking about finances and politics.
The SEC alleges that he used his public appearances to elevate his status as a financial advisor and maximize his reach to investors.
His family told The Daily Beast that he became obsessed with success and he reportedly bought hand-made clothes, a million-dollar lakehouse, a boat, several cars, and took his family on several trips to Disney World. His eldest son and wife said that Burns was paying thousands of dollars a day for VIP tours and once paid for the neighbors to come along.
Then in September 2020, he reportedly told his wife that he was being investigated by the Securities Exchange Commission but he told her not to worry.
The day that he was supposed to turn over his business documents to the SEC, he disappeared, telling his wife he was just going to take a trip to North Carolina to tell his parents about the investigation. Then, the car was found abandoned in a parking lot with several cashier’s checks totaling $78,000
FBI’s Most Wanted
The default judgment in the SEC complaint orders Burns, if he’s ever found, to pay $12 million to his victims, as well as over $650,000 in a civil penalty. Additionally, a federal criminal complaint charged him with mail fraud. Burns is currently on the FBI’s Most Wanted list.
Last week, the Justice Department indicted him on several other charges including 10 counts of wire fraud and two counts of mail fraud.
“Burns is charged for allegedly stealing millions of dollars from clients in an illegal investment fraud scheme,” Keri Farley, Special Agent in Charge of FBI Atlanta, said in a statement to The Daily Beast. “Financial crimes of this nature can cause significant disruptions to the lives of those who are victimized, and the FBI is dedicated to holding these criminals accountable.”
His family maintains that they knew nothing of Burns’ schemes. His wife reportedly returned over $300,000 that he had given to her.
She and their eldest son, who is now 19, told The Daily Beast they just want Burns to turn himself in, take responsibility for his actions, and try to help the people he hurt.
“Do what is best, not for yourself, for once. Think about everyone else,” Burns’ son said in a message to his father via The Daily Beast.