ED to Publish Proposed Regulations for Borrower Defense, PSLF, and More Targeted Relief Programs

By Hugh T. Ferguson, NASFAA Managing Editor

The Department of Education (ED) on Wednesday announced that it will be publishing a highly anticipated Notice of Proposed Rulemaking (NPRM) on a number of regulations, including borrower defense, the Public Service Loan Forgiveness (PSLF) program, interest capitalization, total permanent disability discharges, closed school discharges, and false certification.

In a call with ED officials, Under Secretary James Kvaal detailed the latest update to the administration’s regulatory package and pledged to continue making changes to support a stronger, more equitable student aid system.

“We’ve heard from borrowers who have faced roadblocks when attempting to pursue the loan relief they’ve earned or are entitled to,” Kvaal said. “Whether it is for closed school discharges, borrower defense claims, PSLF, or relief after a total and permanent disability, borrowers have had to navigate narrow rules and a needlessly complicated system. …The regulations we’ve proposed today would remove many of those barriers and help create a federal student loan system that works better for borrowers.”

For borrower defense, ED’s proposed regulations would allow for group claims, eliminate “overly strict” limits on when borrowers can file a claim, expand the type of institutional misconduct that can lead to an approved claim to include aggressive and deceptive recruitment practices, and ensure borrowers receive timely decisions about their claims. On PSLF, the regulatory changes build on the limited PSLF waiver, allow more payments to qualify for PSLF, and would create a formal reconsideration process in the regulations for borrowers whose applications are denied.

ED also proposed removing instances of student loan interest capitalization wherever it is not required by statute, allowing for a broader set of disability statuses recognized by the Social Security Administration (SSA) to qualify for total and permanent disability loan discharge, revising the criteria for automatic loan discharges for borrowers impacted a school closure, and streamlining the rules for when a college falsely certifies a borrower’s eligibility for student loans when, in fact, the student was ineligible.

“These proposed rules all seek to do the same thing: ensure that student loan processes — both in terms of timeliness and fairness — can match our ideals when it comes to borrower protections,” said NASFAA President and CEO Justin Draeger. “We’re thrilled to see proposed regulations that will make it easier for borrowers with disabilities to receive debt relief. Additionally, reducing the overall cost of federal student loans by eliminating interest capitalization wherever possible will also be welcome news for borrowers. We’re also hopeful that the Department has proposed rules that balance the need for timely adjudication of borrower defense claims against institutions that willfully mislead students, while providing fairness in ensuring schools have an opportunity to respond to those claims.”

Draeger added that some of the proposed rules “need closer scrutiny.”

“As we dig in, we’re hoping to see proposals from the Department that will make permanent changes to the Public Service Loan Forgiveness program that will ultimately make it easier for borrowers to receive their promised benefits,” Draeger said.

A negotiated rulemaking committee met last year to discuss these underlying regulations and did not reach consensus on half of the proposed regulations during the session (borrower defense, PSLF, and closed school discharge), which is reflected in ED’s proposed rule.

According to ED, the proposed regulations will be published in the Federal Register in the coming days and the public is invited to comment for 30 days.

Kvaal said the department intends to finalize the proposals by Nov. 1, 2022 so they take effect by July 1, 2023. As a reminder, ED has already delayed the publication of five regulations that were included in the 2021-22 negotiated rulemaking agenda, until April of 2023.

Kvaal added that ED would be publishing another NPRM “later this summer” that will concern additional topics related to ensuring affordable student loan payments, access to Pell Grants for incarcerated individuals, institutional accountability, and better processes when colleges change owners.

NASFAA will be digging into these documents and would welcome member perspectives as we review and craft our own comments. Stay tuned to Today’s News for more details, along with an updated analysis from NASFAA.


Publication Date: 7/7/2022

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