Biden’s Student Loan Freeze Shows Path to Erase Billions of Debt
2021-01-22 13:03:01.508 GMT
By Shahien Nasiripour
(Bloomberg) -- Thanks to vagaries of the accounting world,
Donald Trump’s administration had a chance in the final weeks of
the presidential race to cancel more than $200 billion of
student loans with no immediate hit to the Department of
Education’s massive portfolio. Yet it didn’t do it.
Now, perhaps Joe Biden will.
For years, bean counters at the department have been
writing down the value of its $1.4 trillion portfolio of student
debt as they adopted ever-more-pessimistic views of how much
borrowers will repay. In September, the analysts made their
biggest adjustment yet, valuing loans at just 82 cents on every
dollar owed, down from 104 cents in 2015, records show. The debt
is now worth $258 billion less than the amount outstanding.
Had officials under Education Secretary Betsy DeVos decided
to identify some of the borrowers least likely to repay, and
then forgiven those debts, it wouldn’t have put a major dent in
the remaining portfolio’s value. Such losses were,
theoretically, already reflected anyway.
By Wall Street standards, the government’s loan writedowns
are gigantic, amounting to $98 billion in September alone. While
they have gone virtually unnoticed in the political realm so
far, they are almost sure to attract attention now, as consumer
advocates urge Biden’s new administration to ease the burden on
young professionals and jump-start the pandemic-stricken
economy.
。。。。。。。
But there is a growing expectation in the public anyway
that relief is coming. In a December survey by the Federal
Reserve Bank of New York, respondents estimated there is a 39%
chance -- more than ever in five years of polling -- that the
federal government will cancel some amount of student loans over
the next year.
To contact the reporter on this story:
Shahien Nasiripour in New York at snasiripour1@bloomberg.net
To contact the editors responsible for this story:
Sally Bakewell at sbakewell1@bloomberg.net
David Scheer, Dan Reichl
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