ED Kicks Off First Negotiated Rulemaking Session for Student Debt Relief

By Maria Carrasco, NASFAA Staff Reporter

The Department of Education (ED) on Tuesday began its latest attempt to forge a path toward student loan cancellation through negotiated rulemaking, or “neg reg”— a regulatory process that brings together stakeholders from the higher education community with the goal of reaching consensus on regulatory language. 

After President Joe Biden’s student debt relief plan was struck down by the U.S. Supreme Court in June, the administration announced its intent to seek debt relief through the negotiated rulemaking process, and in September, ED released its list of non-federal negotiators and facilitators and an issue paper with questions for negotiators to consider on how the department may provide loan relief to five categories of borrowers. 

The notoriously tedious process will continue on Wednesday, and pick up again for additional sessions in November and December.

Education Under Secretary James Kvaal spoke at the beginning of Tuesday’s session, noting that higher education “benefits all Americans” in the form a stronger economy. However, he said, student debt in the U.S. has “grown so large that it siphons off the benefits of college for many students.”

“Debt burdens are shared by families and communities and discourage careers in public service, entrepreneurship,” Kvaal said. “They delay homeownership, cut into retirement savings, and make it harder for borrowers to save for their own children's college education. Some borrowers are left worse off than if they had never attended college at all.”

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

Kvaal clarified that while the Higher Education Act (HEA) gives the education secretary “authority to enforce, pay, compromise, waive, or release” any federal student loans, current regulations lack specificity to how that authority is applied. Kvaal said ED is “particularly focused on the waiver authority.”

“Creating clear regulations will ensure the authority to waive student debt is used in a fair and lawful manner,” Kvaal said. “We believe that doing so will strengthen the entire student loan system, help us tackle pervasive problems in the system, and help ensure that postsecondary education is a path to opportunity for more students.”

Tamy Abernathy, ED’s federal negotiator, stressed that the department is not looking to implement a broad-scale student loan cancellation policy. 

“We are not looking at a broad based debt cancellation where we are going to wipe off debt in its entirety,” Abernathy said. “We are looking at individual ways that the secretary can exercise his authority to grant waivers and the conditions by which the department can craft regulations that would solidify the actions of waiving specific debt.” 

The committee then moved to fill positions for two alternate negotiators for two constituencies. The committee approved Amber Gallup of New Mexico’s Higher Education Department to serve as an alternate for the state officials constituency group, and Carol Peterson, manager of enrollment and financial aid processes for Langston University's Prison Education Program, to serve as the alternate for the historically Black colleges and universities (HBCUs), tribal colleges and universities, and minority-serving institutions constituency group. 

Negotiators also introduced two additional constituency groups, one group for consumer advocates and another for individuals with disabilities or groups representing them. Representing consumer advocates are Jessica Ranucci, attorney at New York Legal Assistance Group, and Ed Boltz, director of the National Association of Consumer Bankruptcy Attorneys. Representing individuals with disabilities is John Whitelaw, advocacy director at Community Legal Aid Society.

During Tuesday’s session, negotiators discussed the first two questions of ED’s issue paper. The first question deals with ways to help borrowers who owe more in loans than originally borrowed that could put them on a better path for successful repayment.

A key issue brought up by several negotiators is compounding interest making it difficult for borrowers to repay the loan. Melissa Kunes, of the Pennsylvania State University and representing the public institutions group, said a possible solution could be looking at a borrower’s accumulation of debt over time and their initial principal balance, and forgiving the added interest. That way, the borrower would be only responsible for the principal loan, and not their interest. 

“I believe the key issue here is the inappropriate application of interest to borrowers over the years who have looked for ways and guidance from the government in order to alleviate or help mitigate their loan payments, while they were going through tough economic times,” Kunes said.

However, throughout the discussion, ED reminded non-federal negotiators that the interest rate charged on student loans is set by Congress that is not controlled by the department. 

Negotiators also raised concerns over how student debt impacts Black borrowers, other marginalized borrowers, and low-income borrowers. Wisdom Cole, the national director of the NAACP Youth & College Division, noted that nearly 75% of Black borrowers and 60% of Latino borrowers see their student loan balance grow over time, compared to 51% of white borrowers. The average Black graduate owes $53,000 in student debt, Cole said. That’s about $25,000 more than the average white student loan borrower, according to a study from the Brookings Institution.

“Something that I would like to just hone in on is that the elimination of all this debt presents an opportunity for America to reduce the racial wealth gap,” Cole said. “When we think about folks' opportunity to become homeowners, business owners, and build discretionary wealth, the total cancellation of student debt for all borrowers impacts all communities.”

Some negotiators also raised concerns about how borrowers with Parent PLUS and Federal Family Education Loan (FFEL) loans are excluded from different ED initiatives, including Biden’s initial student debt relief plan to cancel up to $20,000 in federal student loans, and ED’s new income-driven repayment (IDR) plan, the the Saving on Valuable Education (SAVE) plan. 

Listen to Under Secretary Kvaal speak about ED’s new SAVE income-driven repayment plan on NASFAA’s “Off the Cuff” podcast.

The second question of ED’s issue paper asked how the department could better assist borrowers who are eligible for forgiveness under programs such as IDR, but who do not apply for those programs.

A key point multiple negotiators raised is that ED should increase and better its communication with borrowers and loan servicers. Beyond that, ED should improve its ability to automatically apply eligible borrowers into certain forgiveness programs, such as through IDR or Public Service Loan Forgiveness (PSLF). Angelika Williams, FAAC®, representing private nonprofit institutions, suggested that ED can  eliminate the need for future borrowers to apply for repayment programs since the department will have these borrowers’ IRS tax information due to changes made through FAFSA simplification and the FUTURE Act.

The session for Tuesday concluded with a public comment portion, which included several individual borrowers sharing their own struggles and concerns with student loan debt, as well as possible solutions ED could take to provide relief. Those interested in watching Wednesday’s session can register to watch online. Additionally, updates in the negotiated rulemaking process will be available on ED’s website.

 

Publication Date: 10/11/2023


Frederick G | 10/11/2023 8:54:22 PM

Definitely. This is a big problem on the horizon (2026). Before January 1, 2026, the cancelled debt on an IDR is tax-free, but in 2026, it's taxable. And what will happen, when ED gets finished with its Godot version of IDR Adjustment (18 months since announcement), all these borrowers, mostly seniors and pre-seniors, will learn that they are in month 270-something of adjusted repayment. At Month 300, they will have a tax bill, unless they are "insolvent" due to other debt. What it's going to do is force seniors and pre-seniors to become what I call "Month 299 Forever Students". Always remaining enrolled in a program on at least a halftime basis. Full tax-free cancellation, out to the far future, should be sought in the Congress. And no "half a loaf" or "can't affords", with a $25,000 or $50,000 limit compromise!

Christina R | 10/11/2023 11:47:32 AM

The requirement to report forgiven amounts on taxes after completing an IDR repayment plan should also be discussed for those not doing PSLF.

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