WASHINGTON — President Biden’s program to erase large amounts of student loan debt attracted some criticism immediately after it was announced in August and, more recently, several lawsuits. Scammers have targeted borrowers. The administration has reduced the number of people eligible for forgiveness.
All before an application form for debt forgiveness even exists.
Many of the details were not yet complete when the plan, which was hailed by progressive Democrats and would forgive up to $20,000 in debt for individuals making under $150,000, was unveiled. The goal of the program was to instantly improve the finances of millions of Americans. For those outside the White House, the reality has been much more chaotic.
Department of Education officials are racing to create the application and get a public information campaign up and running without substantial additional resources, according to several people familiar with the process. White House officials stress they are meeting often and across departments to get the form completed in October.
Still, activists, borrowers and loan servicers worry that the program — the most costly executive action in history — might undergo more changes if problems continue to mount.
“It’s too soon to say that they’re doing anything wrong because we haven’t even seen the form come out,” said Natalia Abrams, a founder of the Student Debt Crisis Center, a nonprofit advocacy group. “I will say, this is why we and so many organizations called for this to be automatic.”
The confusion around applying for loan forgiveness — including questions about changes in income — has amplified calls from Ms. Abrams and others for the administration to dispense with applications and automatically forgive the debt of those who qualify for the program.
But that would leave the plan open to legal challenges: Opponents of automatic debt relief say that borrowers in some states would be forced to pay taxes on the forgiven debts. (This week, the administration updated its guidance to let borrowers know they could opt out of automatic relief.)
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Some borrowers have been excluded without much notice: On the same day officials in six Republican-led states filed a lawsuit accusing Mr. Biden of abusing his power and acting unlawfully, the administration updated eligibility guidance to say that borrowers whose federal loans are privately held were no longer part of the program. The effort was no coincidence — eliminating eligibility for those students could make it harder for a Republican attorney general to successfully attack the entire program in court.
There are other challenges: Conservatives have assailed the program’s price tag. This week, when the news came that the plan could cost around $400 billion, with the bulk of the effects to the economy felt over the next decade, administration had an unusual line of defense. The estimate, by the nonpartisan Congressional Budget Office, said that as many as 90 percent of the 37 million eligible borrowers would apply, but White House officials suggested the price of the program was likely to be lower because not all who were eligible would participate.
In August, officials offered a partial estimate of the cost that was based on 75 percent of eligible borrowers seeking forgiveness, suggesting that the administration thinks millions of eligible people may never take the government up on the offer.
Bharat Ramamurti, a deputy director of the National Economic Council, told reporters in a White House briefing that the 75 percent figure was “in line with the takeup rate of the most similar Education Department initiative that we could find.”
“We are hoping to get as close to 100 percent as possible,” he said. “But we — you know, for the purposes of putting out a preliminary estimate on this, we had to choose a number. And we felt like 75 percent was the most defensible.”
In a news release on Thursday evening, the Education Department issued its own estimate of the program’s cost: $30 billion a year over 10 years, with a total of $379 billion over the life of the program. White House officials had said in August it would cost around $24 billion per year. Department officials estimate that some 81 percent of eligible borrowers might apply for relief.
The administration’s admission that not every borrower will apply for forgiveness has alarmed debt relief activists, who urged the administration to make the process easier — and quicker — citing concerns about access for disabled people or people who do not speak English.
“The fear is even if it’s only 10 percent of people who don’t take advantage, it’s often the people who need it the most that won’t take advantage,” Ms. Abrams said.
Administration officials have said they were aware of requests for a multilingual application process but have not said whether one will be available.
In an email to 5 million people who had signed up for updates, the Education Department on Thursday that it would start sending weekly updates and that “a short online application” would be available beginning in October. Borrowers must earn less than $150,000 as individuals or $250,000 as a household to be eligible for $10,000 in federal student loan relief — or up to $20,000 if they received a Pell grant.
“There are big open questions about how people are going to connect the dots,” Mike Pierce, the executive director of the Student Borrower Protection Center, said in an interview. “But the track record for the student loan system isn’t good. In some ways, all the White House is doing here is reflecting the reality that the student loan system doesn’t provide people with a path to get their debts canceled 100 percent of the time.”
In an email, Kelly Leon, a Department of Education spokeswoman, said the administration “has consistently put strong emphasis on implementation across all of its priorities,” adding that the administration’s goal is to “provide borrowers a seamless and simple experience.”
Still, call centers and loan services have been flooded with calls from anxious and confused borrowers.
Scott Buchanan, the executive director of the Student Loan Servicing Alliance, a trade group representing loan servicers, said that since the program was announced, it has not been uncommon for call centers to begin the day with at least 2,000 people waiting to speak to someone who might have more information. There is little for servicers to do, he said, but encourage callers to sign up for Department of Education email updates.
As borrowers wait, debt forgiveness activists and loan servicers say misinformation is mushrooming and scammers are proliferating.
The Department of Education warned about fraud in its email promising weekly updates. “You might be contacted by a company saying they will help you get loan discharge, forgiveness, cancellation, or debt relief for a fee,” the message said. “You never have to pay for help with your federal student aid.”
Administration officials say they are in regular contact with the Consumer Financial Protection Bureau and the Federal Trade Commission to discuss ways to stay ahead of scammers, and that the F.T.C. has issued alerts to borrowers.
Borrowers are trying to help each other on TikTok and Facebook. Hundreds have contributed recordings of shady voice mail messages, encouraging others not to answer suspicious calls. Private Facebook groups where people share stories and solicit advice have drawn curious users.
Debby Carter, an artist who lives in St. Petersburg, Fla., said she received a voice mail message within hours of Mr. Biden’s announcement. Ms. Carter, 65, said she had gone back to school in her 50s and has about $60,000 in federal loans.
“This is a message from the Florida student loan center located in Tampa,” a man’s voice said. “Our records indicate you are eligible for a $10,000 removal on your account. Please give our Tampa office a call.”
Ms. Carter said she was confused by the message and did not call back.
Stacy Cowley and Jim Tankersley contributed reporting.