With student loan forgiveness stuck in courts, here's how feds are still erasing debt

The Education Department estimated it charged nearly $22 billion in interest capitalization in fiscal year 2019 alone. (No new interest has been charged on federal student loans since March 2020 thanks to a pause on student loan payments because of the pandemic.) 

“It accelerates balance growth and it’s really confusing,” said Sarah Sattelmeyer, a project director studying student loans at New America, a left of center think tank. “So getting rid of it is a win-win.”  

The administration intends to do away with that practice almost entirely, one of many changes to the student loan program formalized in recent weeks. The changes come as a federal district judge in Texas struck down the president's broad plan for student debt forgiveness on Thursday. The Education Department has stopped taking applications for the one-time debt relief, though the administration has said it's working to overturn the judge's ruling. About 26 million people had already applied, and the administration said it was ready to erase the debt of 16 million people. 

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