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Biden’s Debt Relief Plan Heads to Negotiated Rulemaking Public Hearing

By Maria Carrasco, NASFAA Staff Reporter

As the Biden administration attempts to move its student debt relief plan through the negotiated rulemaking process, advocates, experts, and other stakeholders gathered on Tuesday to voice support and concerns at a Department of Education (ED) public hearing. 

Last month, the U.S. Supreme Court struck down President Joe Biden’s debt relief plan, which would have canceled up to $20,000 in student debt for eligible borrowers. Saying that he would “stop at nothing” to deliver debt relief to “hard-working middle-class families,” Biden the same day announced he would pursue his debt relief plan through negotiated rulemaking of the Higher Education Act (HEA). 

Under Secretary of Education James Kvaal opened the session saying the Biden administration is “committed to using every tool we have to provide borrowers with the necessary [debt] relief.” 

“We remain committed to the idea that a college credential is one of the best tools for building a stronger America,” Kvaal said. “But you can't bury the dreams unlocked by college under mountains of unaffordable debt. Through this process we will work swiftly and tirelessly to make that relief a reality for borrowers.” 

Additionally, Kvaal highlighted other initiatives the Biden administration has recently unveiled, including its new income-driven repayment plan and its 12-month on-ramp to student loan repayment

A large portion of the hearing included comments from individual stakeholders speaking out on concerns and worries with their own student loan debt. Mike Pierce, executive director and co-founder of the Student Borrower Protection Center (SBPC), urged ED to “keep its promises to student loan borrowers.” 

“Tens of millions of working people were promised student debt relief in August of 2022, only to have this promise of relief stripped away by the right-wing Supreme Court,” Pierce said. “We applaud this administration for swiftly committing to use the Higher Education Act to deliver debt relief and keep promises made to these borrowers.”

Pierce urged ED in the rulemaking process to use all authorities granted under HEA to follow through with student loan debt relief. Additionally, he stressed the need for ED to convene a diverse group of negotiators that reflect the student loan borrower population, and to manage the process in a timely manner. 

However, Mark Chenoweth, president and general counsel of the New Civil Liberties Alliance, said Public Service Loan Forgiveness (PSLF) employers may be negatively impacted by ED’s implementation of student loan debt relief, since the relief may disincentivize borrowers from working for those employers. He also encouraged the department to include the PSLF employers in the rulemaking process and that those employers will have standing to sue ED. 

Chenoweth argued that ED does not have the authority to carry out student debt relief, noting that the Constitution grants Congress all legislative powers and control over federal expenditures. His organization filed a lawsuit against ED in April over Biden’s student debt relief plan, arguing that ED lacked authority to implement the relief. 

“Finding blanket cancellation authority for student loan debt in the HEA, as this negotiated rulemaking aims to do, will amount to pulling a wooly mammoth out of a statutory mousehole never meant for such massive undertakings,” Chenoweth said. “A vote of Congress is required before such a program may be instituted.”

Rep. Maxwell Frost (D-Fla.) was the only lawmaker to speak at Tuesday’s hearing, highlighting concerns about student loan debt from his constituents, which he said is a top issue for them. 

“I do believe that [student debt relief] is about racial justice,” Frost said. “It is about economic justice. And at the end of the day, this is an issue that oftentimes is promoted as something that only impacts young people. And as you all know, that couldn't be further from the truth. This is something that is about young folks, older folks, and people across the country.”

Additionally, Betsy Mayotte, president of The Institute of Student Loan Advisors, said the issue of broad student loan forgiveness lies within guidance issued to Federal Family Education Loan (FFEL) guaranty agencies in December 1993. According to Mayotte, the tenets issued as part of that guidance should be codified and applied in a “consistent way” across the federal student loan portfolio. 

Specifically, those tenets include forgiving student loan debt for borrowers who are: repeatedly unemployed with no prospects of employment and have defaulted loans, consistent and repeated recipients of public assistance, limited in the amount of potential future earnings, and of an age that makes substantial gainful activity and full-time employment unlikely. Other tenets include writing off up to 30% of principal and interest on defaulted loans in exchange for payment in full, and writing off defaulted loans where the total balance, including interest and fees, is less than $1,000. 

“I want to commend President Biden and Secretary Cardona for continuing to ensure that the federal student loan programs are the step up that they were intended to be, rather than the setup that for many vulnerable borrowers they have become,” Mayotte said. 

ED officials noted that written comments can be submitted through Thursday, July 20. After written comments are submitted, ED will release a notice seeking nominations for negotiators and a schedule of negotiations. 

Stay tuned to Today’s News for more updates from NASFAA on this negotiated rulemaking process. 

 

Publication Date: 7/19/2023


David S | 7/19/2023 5:24:29 PM

Darren; student loans are regressive. They are designed to assist students who need financial assistance, but by their very nature, they make higher education more expensive for those who need that assistance. If you need to borrow the cost of your school's tuition because you can't write out a check for it, you will ultimately pay more than the student whose Mom and Dad can pay it out of pocket. In fact thanks to high interest rates, origination fees and negative amortization, you're going to pay a lot more, maybe double or triple what the out of pocket payer paid. In light of that, how can you say that the statement “It is about economic justice" is "ridiculous?" How is such a system just?

And given that we all know that students of color overwhelmingly come to our campuses from families with far less generational wealth and are therefore more likely to be forced to borrow, and then graduate into a workforce that pays them less than it pays white people in the same jobs, how can you characterize "[student debt relief] is about racial justice" as a "ridiculous" statement? How is that just?

Jeff A | 7/19/2023 1:38:01 PM

Agree Darren. Regarding the 5% of discretionary income cap on ICL payment plan....

What do our financial literacy efforts look like when the relationship between what you borrow and what you pay becomes so distorted that the most practical option is to borrow every dollar of federal student loans you can get your hands on. Esscrow what you don't need along with what you had saved for college. You will likely have a very nice grant leftover after using a portion of what you borrowed to repay the loans. Maybe someday a good portion will be forgiven right off the top as well.

Or...will all of this be struck down as illegal, and millions of borrowers are just pawns. What will repayment behavior look like given what is being dangled in front of them? IMO the student loan program is being compromised at the expense of students, not improved.

Darren C | 7/19/2023 11:54:14 AM

Once again, we see our elected officials and supposed leaders, showing a terrible example of themselves. They can't have a civil, honest conversation without throwing in labels and terms specifically meant to be divisive and emotional. Let's look at some examples.

"only to have this promise of relief stripped away by the right-wing Supreme Court,” "[student debt relief] is about racial justice,” “It is about economic justice." "rather than the setup that for many vulnerable borrowers they have become," These statements in generally are ridiculous and not constructive in any way.

When will our lawmakers grow up, have real discussions about the problems of the education system in this country and stop intentionally dividing everyone? My guess is never, but if we want change we need to keep calling it out.

Zach G | 7/19/2023 9:51:20 AM

According to https://educationdata.org/student-loan-forgiveness-statistics
1) Over 25% (41.2 million) of the labor force in the US is somehow employed in public service.
2) Prior to 2021, 2.99 million student loan borrowers were eligible to apply for PSLF (though only 7.6% applied, which is about 230,000 people).
Meaning, less than sixth-tenths (0.6%) of citizens employed in public service could be argued to have been pursuing that line of work on the basis of the PSLF benefit.

If people are relieved of significant debt and have more freedom to choose an employer based on their personal values and interests rather than the income the employer provides, it could be argued that available workers for public service would actually increase. Like with TEACH, working in a school district that pays $16,000/yr more in salary than a qualifying low-income district makes up the maximum benefit of TEACH so quickly as to dissuade most educators from actually pursuing it.
Arguing that these programs are actually accomplishing their intended effects doesn't seem correct, so to stand against reform on the basis that the programs will become less effective makes no sense.

Mark M | 7/19/2023 9:12:55 AM

To oppose student debt relief on the argument it may "disincentivize borrowers from working for those employers" (PSLF) is ludicrous. Where is the data that supports such an opinion? As one such borrower working for an eligible employer under PSLF, I love my job and my employer and any enhancement of student loan debt relief would not "disincentivize" my desire to maintain that employment.

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