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Family Federal Education Loan Borrowers Get a Reprieve if They Have Defaulted

About a million student loan borrowers who were left out of earlier relief efforts are getting a reprieve — but only if they defaulted on their loans.

The Education Department said on Tuesday that it will temporarily stop collecting on defaulted loans that were made through the Family Federal Education Loans program and are privately held.

“Our goal is to enable these borrowers who are struggling in default to get the same protections previously made available to tens of millions of other borrowers,” said Education Secretary Miguel Cardona.

The change, however, still leaves millions of other borrowers in that program responsible for payments while the bulk of the country’s student loan borrowers have had theirs paused.

borrowers who are still making payments on those privately held F.F.E.L. loans or have fallen only a few months behind. There are around 5.4 million borrowers in that category, who together owe $134 billion, according to Education Department data.

Tuesday’s announcement is intended to prevent defaulted borrowers from having their tax refunds seized by the Treasury Department through a program that is often used to collect overdue student loan debts. Any seized refunds or wage garnishments that were taken since March 2020 will be retroactively refunded, the Education Department said.

The freeze will extend through Sept. 30, when collections are scheduled to restart on all federal student loans. Nearly everyone who is eligible for the freeze has taken advantage of it: Of the nearly 43 million people with federally owned loans, only 400,000 are still making payments, according to Education Department data.

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The Cost of a Stuck Ship

After almost a week of dredging, drigging and tugging — and with some help from the moon — salvage teams yesterday freed the giant container ship that had been stuck in the Suez Canal, one of the world’s most important shipping lanes.

As a result, traffic has resumed for the hundreds of ships waiting on both ends of the canal. And while estimates have varied wildly, the delay is also expensive. “The disruption has caused the canal authorities in Egypt losses of $95 million in revenue,” The Times’s Peter Goodman told me.

And even though the ship is free, the disruption isn’t over.

“It’s not just like flipping a switch,” Vivian Yee, the Times’s Cairo bureau chief, told me. Now that the ship is out of the way, the backlog will take at least a few days, maybe even weeks, to resolve.

High winds from a sandstorm caused the ship, the Ever Given, to turn sideways in the canal and get stuck, its operators said. But shipping experts have suggested that while the wind probably had a role in the crisis, human error might have, too.

few extra inches of tidal flow and gave workers the boost they needed to set the ship free.

It’s rare that a maritime disruption makes international news. But this was not your average mishap. For one, the Suez Canal isn’t like other waterways. “It is a vital channel linking the factories of Asia to the affluent customers of Europe, as well as a major conduit for oil,” Peter writes.

And the Ever Given is one of the world’s biggest container ships. “From a distance, it’s hard to comprehend how big it is,” Vivian told us. “From land, all the containers on top look like Legos — and then you realize each one of those Legos is 20 or 40 feet long.”

a backlog of goods sitting in factories, waiting to be put in boxes, Vivian says.

It took 10 years of hard labor — during which tens of thousands of Egyptian workers died — to build the canal in the 19th century.

For more: This is how giant container ships are built.

began yesterday.

  • The prosecution argued that Chauvin acted with excessive force, and played a video that showed him kneeling on Floyd’s neck for more than nine minutes. “You can believe your eyes that it’s homicide,” a prosecutor told the jury.

  • The defense argued that Floyd’s death was caused by underlying medical conditions and a drug overdose, and urged jurors to consider evidence beyond the video.

  • This two-minute video shows key moments from the first day of the trial.

  • After the Jan. 6 attack on the Capitol, does the U.S. need a domestic terrorism law?

    Makeover: The beauty industry has entered a phase of total pop-culture domination. Celebrities, social media stars and lifestyle influencers are changing the way the sell works.

    Lives Lived: A fierce advocate for New York’s disabled, Edith Prentiss fought to make the city she loved more navigable for everyone. She died at 69.

    suffered more during the pandemic than most other U.S. restaurants.

    Their business began declining sooner — in January of last year, when news broke that a new virus was circulating in Wuhan, China. The restaurants have also had to cope with a rise in anti-Asian racism — “vandalized, robbed, attacked online in racist Yelp reviews,” as The Washington Post reported. Xi’an Famous Foods in New York began closing early after two employees were punched in the face while commuting to and from work.

    Grace Young, a decorated author of cookbooks, is worried that traditional Chinatowns, like New York’s and San Francisco’s, will never recover from the pandemic, and she has spent months trying to call attention to the problem. “When you step into those restaurants, you are stepping back in time, and it’s a privilege,” Young said on a recent episode of “The Splendid Table,” a food podcast.

    For anyone who wants to help Chinese restaurants, Francis Lam, the host of “The Splendid Table,” offered a suggestion: “If you can, order yourself some Chinese takeout. Get extra. Leftovers are your friend.” In The Times, Bonnie Tsui has more tips for supporting restaurants. — David Leonhardt

    creamy asparagus pasta to the next level.

    See a short opera film starring the drag queen Sasha Velour, a “RuPaul’s Drag Race” winner and lip-syncing legend.

    Young artists are bypassing art schools and student loans, quitting their day jobs and pursuing careers as full-time artists on TikTok. But what happens when viewership plummets and copycats arrive?

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    A Novel Way to Finance School May Penalize Students from HBCU’s, Study Finds

    The typical student who borrows to attend college leaves with more than $30,000 in debt. Many struggle to keep up with their payments, and America’s ballooning tab for student loans — now $1.7 trillion, more than any other type of household debt except for mortgages — has become a political flash point.

    So a financing approach known as an income-share agreement, which promises to eliminate unaffordable student debt by tying repayment to income, has obvious appeal. But a new study has found that income share agreements can also mask race-based inequalities.

    The analysis, released on Thursday by the Student Borrower Protection Center, an advocacy group, found that borrowers at schools that focus on minority students can end up paying more than their peers at largely white campuses.

    Income-share agreements are offered mainly by schools, although some private financiers have started marketing them directly to students. The selling point of such agreements is that, unlike loans, they don’t accumulate interest, and they come with both a predetermined repayment period and a cap on the total amount that the lender can seek as repayment. To students leery of accumulating educational debt that can snowball and stick around for decades, income-share agreements can offer a more flexible alternative.

    Silicon Valley investors who are funding start-ups, as well as some policymakers. A growing number of colleges and vocational training programs are letting students finance some or all of their studies with such contracts. Purdue University was the first to offer them widely, starting in 2016. Private schools including Lackawanna College and Clarkson University have followed suit. Vemo Education, a venture that manages I.S.A. programs, said it has worked with 70 schools and training courses.

    But the market is opaque and lightly regulated, making it challenging for borrowers to find the kind of consumer-protection disclosures that typically accompany financial products. Financiers are generally not required to reveal any information on how much money they have lent and how those deals have worked out for borrowers.

    Student Borrower Protection Center researchers obtained data from the website of one private financier, Stride Funding in Dallas, and studied its agreements to illustrate how they can contain buried inequities. (Other companies that market the agreements directly to students include Align, Defynance and Lumni.)

    Like most lenders in this market, Stride varies its repayment terms depending on the borrower’s earning potential. An English major typically will need to fork over a higher percentage of salary than an engineering student. (Stride caps its maximum repayment amount at two times the amount that was borrowed. Its contracts typically require recipients to make payments for five to seven years.)

    repay 5.65 percent of their income for five years, according to a payment calculator on Stride’s website. But the same calculator showed that an economics student at Morehouse, an historically Black school in Atlanta, would be asked to repay 6.15 percent of their income.

    asked the Consumer Financial Protection Bureau last year to investigate several lenders that they said might be discriminating against women and minority borrowers by charging them higher rates, based on their lending algorithms.

    “The risk of discrimination arises because the lender is not evaluating the applicant based on their own characteristics, but instead based on the characteristics of other students at their school or who were in the same major or program,” the lawmakers wrote.

    Officials at the NAACP Legal Defense & Educational Fund got an early look at the Student Borrower Protection Center’s report and found it disturbing. Stride’s lending might run afoul of the Equal Credit Opportunity Act, they said in a letter sent to the company on Thursday morning.

    “Particularly given how the economic fallout of the ongoing Covid-19 pandemic has disproportionately hurt Black Americans, the need for equitable access to consumer financial products and services is more important than ever,” the fund said in the letter, which was also signed by Mr. Frotman’s group.

    Ms. Michaels said Stride “shares the goals” of the two groups and “is excited to have the chance to work with them on our shared mission of providing access to financial products to those who have long been left out of traditional credit marketplaces.”

    told Forbes that her company anticipated making loans to 1,800 students this year.

    Government regulators have been keeping a cautious eye on the emerging market. Rohit Chopra, President Biden’s nominee to run the Consumer Financial Protection Bureau — which is often the federal enforcer of fair-lending laws — has spoken frequently about the risk of bias in algorithmic lending decisions. (Mr. Chopra, a commissioner on the Federal Trade Commission, is awaiting a Senate vote on his nomination.)

    “Our student debt market is definitely broken, and it needs a massive overhaul,” Mr. Chopra said at a conference last year. “I’m not sure that new products like income share agreements will be an antidote, especially if they worsen disparities.”

    Ashok Chandran, a lawyer at the NAACP fund, said he hoped state and federal watchdogs would pay close attention to the novel lending products. “This market operates in such a regulatory dark space,” he said. “We’re pretty troubled by the report, and in particular by how stark the disparities are.”

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    Education Department scraps a Trump-era policy that limited debt relief for defrauded students.

    Tens of thousands of borrowers who attended for-profit schools like Corinthian Colleges and ITT Technical Institute that defrauded students will have their student loan debts eliminated after the Education Department rescinded some changes made during the Trump administration that gutted a relief program.

    “Borrowers deserve a simplified and fair path to relief when they have been harmed by their institution’s misconduct,” said Miguel Cardona, the education secretary. “We will grant them a fresh start from their debt.”

    The change will eliminate around $1 billion in student loan debt owed by around 72,000 borrowers, the department said. Most of them attended ITT and Corinthian, institutions that abruptly shut down years ago.

    The relief program, known as borrower defense, allows those who can demonstrate that they were substantially misled by their school to have their federal student loans forgiven. Once little-used, the system was flooded with claims during the Obama administration after a series of large for-profit chains collapsed following a government crackdown on schools that saddled their students with high debts for a low-quality education.

    imposed a complicated new methodology that led to only partial relief for many successful applicants. Some whose claims were approved were told they would get $0 in relief.

    Mr. Cardona said the department will abandon Ms. DeVos’s methodology and retroactively give those with approved claims a full discharge.

    “I’m in a state of shock right now,” said Albert Paul Cruz, who earned an associate degree in computer networking systems in 2010 but never worked in that field. Last year, he received a letter from the Education Department telling him that his borrower defense claim had been approved but that none of his debts would be eliminated.

    Mr. Cruz has around $60,000 in student loan debt; his late and missed payments on it have harmed his credit score and made it challenging to obtain a car loan. The debt was “nerve wracking” and kept him up at night — and the prospect of finally being free from it was amazing, he said.

    “If this does wipe all the negatives off my profile, I just may finally get a piece of the American dream,” Mr. Cruz said.

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    Congress Closes Loophole That Made Veterans a Target of For-Profit Schools

    The change won’t be effective until 2023, a delay that Carrie Wofford, the president of Veterans Education Success, an advocacy group, called “a bitter pill to swallow.” But the delay was necessary to reach a bipartisan deal. “It was the right decision,” she said.

    Career Education Colleges and Universities, the trade group of for-profit schools, said it supported the change.

    “We are thrilled to finally see a bipartisan consensus develop around the controversial 90/10 rule,” said Jason Altmire, the group’s chief executive. The delay, he said, “will allow time for a fair, rational and permanent solution for an issue that has been driven by partisan politics for far too long.”

    For-profit schools are already preparing. This week, American Public Education, which operates a collection of schools and training programs explicitly marketed to former service members, told investors on an earnings call that it would have enough time to adjust its business model in various ways, including through acquisitions, to stay compliant.

    Although for-profit schools have long been criticized for skirting federal rules, the revision takes a target off service members’ backs. “Schools might find ways to get around the rule, but at least they won’t be financially incentivized to pursue veterans,” Ms. Wofford said. “That’s a big win.”

    Ms. Berkhalter said she was delighted that future veterans would be protected from the kind of financial harm she suffered. After leaving the Army in 2005, she enrolled at ITT and earned a bachelor’s degree in criminal justice. She came close to landing her dream position — a case management role at a mental health treatment center — but when the employer discovered that her degree was from ITT, the offer vanished.

    ITT consumed her $75,000 in G.I. Bill funds and still left her with nearly $100,000 in student loan debt. Ms. Berkhalter hopes to have her federal loans eliminated through an Education Department program that is intended to wipe out the debt of students who were victims of fraud. Her application languished during the Trump administration, as Education Secretary Betsy DeVos strongly opposed the program and resisted approving applicants’ claims.

    Ms. Berkhalter hopes the Biden administration will be more forgiving. “I’m excited for all those service members ahead who will be helped by this,” she said. “But they still need to do something about those of us who have been going through this for so long.”

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