As the Biden administration again faces what could be an impending expiration of the federal moratorium on student loans, the Department of Education (ED) finds itself returning to questions over how it will go about managing the student loan portfolio.
While ED has implemented a number of targeted relief measures throughout the ongoing pause on repayment and interest accrual, the department must now contend with the growing list of administrative demands that hinge on the potential for broadscale loan forgiveness, a continuing backlog in the repayment system related to payment plans and accrued borrower defense claims, as well as the logistics of eventually transitioning borrowers back into repayment.
An event hosted by the Bipartisan Policy Center on Monday dug into this litany of issues with input from ED, as well as a number of higher education policy experts — including NASFAA President Justin Draeger — to help walk through what comes next for policy responses to increasing student debt levels.
During the panel discussions, ED Under Secretary James Kvaal did not offer any updates on the department’s decision concerning a potential extension of the moratorium or the administration’s plans to administer widespread loan forgiveness and instead pledged that many options were being actively discussed.
“We are working through a lot of different ideas of how to structure this,” Kvaal said of the department’s options for student loan debt relief.
Kvaal used his remarks to underscore that ED has prioritized implementing targeted student loan relief for defrauded borrowers.
“We are making really major progress in trying to make sure that students that are eligible for help are getting help, to make sure that people can trust that when there is a benefit that they are eligible for that we are going to deliver on that benefit,” Kvaal said. “There's a lot more work to do, but we’ve also made tremendous progress, more than every other previous administration combined has been able to do for students.”
In his remarks Kvaal also highlighted that the ongoing payment pause has allowed the department to catch up on backlogs within the system left by the previous administration and process relief for eligible borrowers.
“President Biden’s pause on student loan payments has saved a typical borrower $4,400 so far and it has also given us time so we are working to make these cancellation programs work,” Kvaal said of the borrower defense applications, as well as the Public Service Loan Forgiveness (PSLF) program waiver. “We are working on a new repayment plan that would substantially reduce debt burdens and we’re working to make sure that colleges are accountable for leaving students with debts that they cannot afford to repay.”
Kvaal also reiterated Biden’s commitment to doubling the Pell Grant, Federal Student Aid (FSA) building its capacity for student loan servicing, and hinted that the department was looking at concerns about increases in Grad and Parent PLUS student debt.
Kvaal said the department is examining previous periods of smaller scale loan pauses to prepare for the end of the moratorium and ensure borrowers will be protected.
“You can see from past circumstances, for example forbearances from natural disasters, it can be hard to reach students, and so that's why we are putting so much emphasis around new ways of trying to reach students, around evaluating the effectiveness of our communications and trying to continuously improve and really holding servicers accountable for — are they reaching students, are they preventing delinquencies and defaults,” Kvaal said. “It's a big job for sure.”
In a panel discussion following Kvaal’s remarks, a group of higher education policy experts detailed a number of proposals that would aim to prevent student loan debt from ballooning to the levels seen today.
Draeger applauded ED’s commitment to and implementation of student-centric relief that’s combined with policy reform to prevent the system from allowing adverse outcomes to proliferate, specifically citing ED’s commitment to reworking borrower defense in tandem with discharging $5.8 billion in borrower defense claims for borrowers who attended Corinthian Colleges.
Draeger also touted NASFAA’s recent May 2022 report, in partnership with more than 20 organizations, that urges policymakers to consider comprehensive student loan reform ideas aimed at fixing a broken system that leaves too many students and parents buried in student loan debt.
Panelists also highlighted how the administration needs to address questions surrounding its “fresh start” initiative for borrowers in default, modernizing FSA operations, and addressing equitable solutions to better ensure that vulnerable borrowers are not further hampered by the eventual winding down of the repayment pause.
While ED has a number of responsibilities, Congress also needs to weigh in for more concrete long-term solutions, though Draeger questioned that in the wake of administrative flexibility offered by the pandemic how much more the executive branch could do.
“If the president can forgive student loan debt for borrowers on Direct Loans, why can't the president do away with negative amortization into the future for all borrowers?” Draeger asked,expressing curiosity over how the administration will approach the loan portfolio at the end of the payment pause. “There used to be a time I would say that would require congressional authority. I'm not so sure it does anymore.”
In looking for a pathway forward to implement more cohesive and long-term reforms, Draeger said he’d like to see Congress commit to overhauling the system.
“The last time we had a reauthorization of the Higher Education Act was in 2008, so we've never comprehensively, sort of torn down the vestiges of that old system and rebuilt them around a student-focused and protected, student loan system that does have floors of accountability,” Draeger said. “I want to … sort of a plug for reauthorization that's not on the immediate horizon, but you know, hope springs eternal.”
Publication Date: 6/7/2022