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Report Finds 100% of Incarcerated Borrowers in Default, Limiting their Access to Pell Grants

On July 1st, incarcerated Americans will re-gain access to Pell grants for the first time in nearly 30 years. Reformers have hailed the change as a critical step towards enabling people in prison to experience the myriad benefits of higher education.

But a new report has revealed that an important segment of this population may be largely left out: those who already have student loans.

The finding comes from a study by the Student Borrower Protection Center (SBPC), a nonprofit dedicated to reducing student debt. SBPC took data from over 300 incarcerated students in correctional facilities on the East Coast, 57 of whom owed federal student loans. What it found was shocking, if not surprising: every single one of these students had defaulted on their loans. These students are therefore not eligible for Pell grants, making it exceedingly difficult for them to access higher education.

“The vast majority of prison education programs are dependent on Pell funding,” said Amber Saddler, counsel at the SBPC. “If you’re in default, this new opportunity for prison education is closed to you.”

Amber Saddler, counsel at the SBPCAmber Saddler, counsel at the SBPCSaddler said that the 100% default rate was to be expected for incarcerated borrowers. People in prison are often unable to make money or earn less than a dollar an hour. They also often lack access to the internet and printers and are prevented from dialing toll-free numbers, like those for loan servicers, from the inside.

Keeping student loans in good standing is often a challenge for people who aren’t incarcerated, Saddler pointed out. It involves navigating confusing entities like the Department of Education and loan servicers, which have a reputation for miscommunication, and which can often take hours to reach on the phone.

“All of those things in the carceral context are insurmountable,” said Saddler.

Every incarcerated borrower in the SBPC’s study would be prevented from accessing Pell funds and thus, from participating in most higher ed in prison programs. But the consequences extend past the end of a sentence.

“For a long time, we’ve known that people who are able to access continuing education opportunities while incarcerated have better outcomes when they’re released,” said Saddler. “You’re more likely to be able to find stable housing. You’re more likely to find gainful employment. These are things that are critical to successful re-entry and to decreasing recidivism.”

Although the 100% default rate was found among a relatively small sample, experts said that it was likely indicative of the bigger picture in prisons across America.

“I would imagine that if you replicate this case study to other states that you’re going to see something quite similar,” said Dr. Erin L. Castro, an assistant professor of educational leadership and policy and co-director and founder of the Prison Education Project at the University of Utah. “Even if it’s not 100%, it’s going to be damn near 100%.”

“I can’t say I’ve ever heard of a student in prison with a loan that is not in default,” said Ruth Delaney, associate director of the Vera Institute’s Unlocking Potential Initiative, which aims to expand access to education in prisons.

The report argues that the solution to the problem is simple: cancel student debt. It estimates that because many incarcerated borrowers have low debt balances and were originally eligible for the Pell grant, 94% of them would have their liability entirely forgiven by President Joe Biden’s debt-relief plan. However, people in prison struggled to access the debt relief application when it was available, and the program is expected to be thrown out by the majority-conservative Supreme Court within days.

“The way forward is automatic loan cancellation for borrowers who are incarcerated,” said Saddler. “The automatic piece is really key because of the application hurdles: accessing the internet, stamps that cost money when you barely make any.”

Ruth Delaney, associate director of the Vera Institute’s Unlocking Potential InitiativeRuth Delaney, associate director of the Vera Institute’s Unlocking Potential InitiativeInstant debt forgiveness for people in prison may not be coming anytime soon, but Delaney had alternative suggestions for helping incarcerated borrowers. Currently, people in default can restore their good standing by making nine consecutive payments of as little as five dollars. Delaney recommended simplifying the payment logistics by allowing people in prison to pay in a single lump sum. She also suggested the creation of non-toll-free numbers for loan servicers so that incarcerated people could better access them.

The release of the report highlights just how little is known about incarcerated borrowers. How many there are is uncertain as well as how much they owe. Concurrent with the report, the SBPC announced a lawsuit against the Department of Education over their efforts to find out more.

According to the complaint, the SBPC made a Freedom of Information Act request to the Department in November 2021, seeking more information about a policy whereby the debts of anyone incarcerated for ten years or more were written off as uncollectible. It also sought records on the treatment of incarcerated borrowers generally, including information on the costs of collecting their debts.

The suit alleges that, after some initial interaction about the specifics of the request, the Department of Education went silent, not having communicated with the SBPC since January 2022. The SBPC is requesting either the information or an explanation of why they can’t have it.

Experts criticized the Department for not sharing the information.

“It is shameful that the SBPC has to sue to obtain basic government data to guide effective policymaking,” said Stacy Burnett, manager of Ithaka’s JSTOR Access in Prison Initiative. “The discovery phase of the SBPC litigation is something to watch closely.”

Castro agreed.

“The Department of Education should communicate,” she said. “They have a responsibility to make it available. It’s going to impede our ability to create better policy and to offer better programs.”

The Department of Education did not respond to a request for comment.

SBPC’s lawsuit will likely take months, at a minimum, to be resolved. In the meantime, advocates of higher education in prison are hoping that a solution for incarcerated borrowers in default can be found.

“If we can solve problems like this in a way that enables incarcerated people to enroll in college, we have the potential to reach more than 750,000 people in prison who have their high school credentials,” said Delaney. “If we don’t resolve these challenges, we’re not going to see the kind of impact that we could have. It would be a real missed opportunity.”

Jon Edelman can be reached at [email protected]

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