Sept. 21, 2022 – By any measure, student loan debt has mushroomed over the last four decades.
According to a 2021 report issued by the Georgetown University Center on Education and the Workforce, the average cost of tuition, fees, and room and board for an undergraduate degree rose by 169% from 1980 to 2020.
Tuition at Marquette Law School for 2022 was $49,170 per year. Tuition at U.W. Law School for 2022 was $33,084 for residents and $51,780 for non-residents. None of those amounts includes books or living expenses.
Student debt is driven by more than just tuition increases. Living expenses take up an increasing share of education costs, and the purchasing power of federal grant aid has declined significantly.
According to the Federal Reserve, the average student debt in the U.S. is $32,731 – an increase of about 20% since 2015-16.
While most borrowers owe between $25,000 and $50,000, about 600,000 borrowers owe more than $200,000 each. Overall, student debt is up 302% since 2004.
The total amount of student loan debt in the U.S. is $1.52 trillion, an amount roughly equal to the GDP of Russia.
According to the report issued by a task force appointed by Gov. Tony Evers in 2020, Wisconsin students carried $24.4 billion in outstanding student loan debt. That’s an amount roughly equal to Iceland’s estimated GDP for the same year.
According to Measure One, 7.1% of student loan debt is held by private lenders.
Law students and others seeking advanced degrees often graduate with more debt than those with bachelor’s degrees, with scheduled repayments stretching over 20 or 30 years.
Task Force Recommendations
In its report, Gov. Evers’ task force made eight recommendations to address student loan debt.
One of the recommendations was to create additional loan forgiveness programs. Currently under Wisconsin law, doctors and teachers who work in poor areas or areas experiencing a shortage of, respectively, doctors or teachers, are eligible for loan forgiveness.
Another recommendation was to increase the amount of financial aid to low-income and underrepresented students.
In support of that recommendation, the task force noted that in the 1970s, a federal Pell Grant covered about 75% of the cost of attending a four-year public university. Today, it covers only about 30%.
Loan Forgiveness Programs
Lawyers and other workers carrying federal student loan debt may qualify for debt forgiveness under an executive order issued by President Joe Biden last month.
Karen M. Bauer, U.W. 2009, is an attorney with the Legal Aid Society of Milwaukee. Bauer was a member of Gov. Tony Evers’ Task Force on Student Debt.
Jeff M. Brown is a legal writer for the State Bar of Wisconsin, Madison. He can be reached by email or by phone at (608) 250-6126.
Under the terms of the order, borrowers who make less than $125,000 annually and married couples or heads of households who make less than $250,000 annually are eligible to have up to $10,000 of their federal student loans forgiven, if they did not receive a Pell Grant as an undergraduate. For students who did receive a Pell Grant as an undergraduate, the amount is $20,000.
According to Federal Student Aid, borrowers who qualify will be able to apply for loan forgiveness before the repayment pause, implemented after the onset of the pandemic, ends on Dec. 31. To be notified when the application is activated, borrowers should subscribe for updates from the U.S. Department of Education
For lawyers who don’t qualify for loan forgiveness under the terms of the executive order, the Public Service Loan Forgiveness (PSLF) Program may be an option.
The PSLF program was enacted under former President George W. Bush as part of the College Cost Reduction and Access Act of 2007.
To qualify for relief under the PSLF, a borrower must:
be employed full-time by a federal, state, local, or tribal government, a 501(c)(3) nonprofit organization or other qualifying employer;
have Direct Loans or other federal student loans consolidated into a Direct Loan;
repay loans under an income-driven repayment plan; and
make 120 monthly, on-time qualifying payments (10 years). Note that months spent in the current payment suspension count toward this number);
The Department of Education has temporarily waived the usual requirements about the types of payments that will qualify for PSLF.
To take advantage of this waiver, borrowers must submit a PSLF application before October 31, 2022. Payments that will now count towards PSLF include:
payments under the wrong payment plan (like the extended or graduated plans);
payments made late; and
partial payments/payments made for the wrong amount.
Those who have Perkins or FFELP loans can consolidate into the Direct Loan program before October 31, 2022 and submit the same PSLF application to have their payments qualify toward PSLF. Note that loans forgiven under PSLF are not taxable federally or in Wisconsin.
Loan Forgiveness Under Biden’s Executive Order
What to know about the new Biden Department of Education loan forgiveness:
Income must be less than $125,000 ($250,000 if married);
Only government-held loans qualify;
If you have privately held FFELP loans, you will have to consolidate them into the Direct Loan Program to qualify for this opportunity by going here: www.studentaid.gov;
Borrowers who meet the above qualifications will have $10,000 forgiven. If a borrower ever received a Pell grant, they will receive $20,000 in loan forgiveness;
Everyone will need to fill out an application that will available in early October 2022;
This is not taxable federally, but as of today, the State of Wisconsin will tax this loan forgiveness.
The suspension of repayment requirements on federally held student loans, initiated during the pandemic, is ending in 2022.
Payments for all borrowers will resume effective January 1, 2023. To ensure that you receive the information from your servicer regarding restarting payments, please go to their website and verify your contact information.
Many servicers are changing as the result of the federal contracts expiring so checking this information now will be beneficial.
Relief for Millions
Wisconsin lawyers can learn more about student loan relief by attending the State Bar of Wisconsin’s Solo and Small Firm Conference on Oct. 27-29 (a virtual replay is scheduled for Nov. 14-16). One of the plenary speakers is Stanley Tate, who specializes in student debt law.
Tate, based in St. Louis, said relief under Biden’s executive order will require some borrowers to take the initiative to receive any benefit.
“This is a really broad program that’s going to benefit millions of people,” Tate said. “Some people benefit automatically, but others will need to apply for it when the application is released sometime in mid-October.”
Some ‘Private Loans’ Qualify
The executive order is broader than many borrowers think, said Tate.
He pointed out that some borrowers who have already paid off their loans during the pandemic will qualify for relief, if they apply – even if they have what are commonly referred to as privately held loans.
“Most people say, ‘Oh I have private loans,’ and they’re saying that because their loan didn’t qualify for forbearance,” Tate said. “But if your loan is with Navient, for instance, more likely than not, you had a Federal Family Education Loan, which is quasi-private. They’re just a type of federal loan that didn’t qualify for the same benefits that everyone else had.”
“If you qualify for the cancellation, based on income limits, you may be able to get a refund,” Tate said. “But you have to apply for the cancellation when the application opens up in October.”
Additionally, even borrowers who paid off their students loans by refinancing them with a private lender during the pandemic can apply for debt relief under the terms of the executive order.
Other Debt Relief Programs
What about lawyers who carry student loan debt that’s greater than the relief amounts in the Biden executive order but who don’t qualify for relief under the PSLF program?
Tate said a federal program that began in the mid-2000s offers relief for those who qualify for income-based repayments.
“If you make payments based on your income for 20-plus years, the federal government writes off the remaining balance,” Tate said.
What’s more, the Biden Administration has changed the program so that it retroactively credits borrowers who qualify for income-based payments, even if they didn’t previously participate in the program.
“But you need to take certain steps to qualify,” Tate said.
He advises all borrowers to go to studentaid.gov, create an account or log in, and under “Settings” choose to receive informational emails.
That way, Tate said, borrowers will know when the government issues the application for debt relief under the Biden executive order and they can stay abreast of other changes in program requirements.
“The Biden Administration has done some major things that are going to lead to student loan relief for millions of more borrowers as well,” Tate said.
Challenges to Biden Executive Order
Biden’s executive order could be challenged in court. But Tate said that shouldn’t stop borrowers from applying for relief.
“What’s the worst case scenario?” Tate said. “You apply for it and get it, and then it’s taken off of your account and then later it’s reinstated.
“I guess you have an emotional harm there … but you really haven’t suffered a financial harm at that point. Let’s go get the relief that’s announced and let the law shake out how it’s supposed to.”
Tate said lawyers with student loan debt often make two mistakes when approaching their debt: they don’t know what they don’t know and they rely on old information.
“Be clear on what you don’t know and go find someone who does know it,” Tate said. “This is a really complicated area of law.”
Tate counsels debtors to stay up-to-date on relief program information.
“Don’t rely on old information. You assume something was true before – maybe you couldn’t get a house because of student loan debt – and that may have been true when the student loan program was in its infancy in the 1990s or early 2000s. But a lot has changed, especially in the last two years.”
Tate said he hopes lawyers who attend his plenary come “armed with questions.”