The Department of Education (ED) on Wednesday hosted its second day of negotiated rulemaking – known as neg reg – to provide a path to student loan cancellation, and gave an update on what the process will look like in the coming months.
ED kicked off the neg reg process on Tuesday, gathering a committee of stakeholders from the higher education community representing 16 constituency groups. On Wednesday, the committee began the session by approving Waukecha Wilkerson, director of coaching for Cell-Ed, to represent the individuals with disabilities group.
Ben Miller, deputy under secretary for ED’s Office of the Under Secretary, also gave some opening remarks for the negotiators to consider as they discuss the three remaining questions of ED’s issue paper. In September, ED released an issue paper with questions for the negotiators to consider on how the department may provide loan relief to five categories of borrowers.
Miller said ED hopes negotiators can approach the remaining questions through different lenses, including if ED were to provide for partial cancellation for a borrower who falls into a category, how the negotiators would structure that regulatory provision. Additionally, negotiators were asked to consider what types of borrowers should be eligible for student loan cancellation and what the eligibility criteria should be.
“Think of each question as a group of borrowers where we might discharge some or all of their loan or loans,” Miller said. “As you consider that idea, what we're looking for is general support or opposition to the idea, and then ways you would refine or clarify it, so we can turn it into regulatory text and move toward seeking consensus.”
The committee began with the fourth question of the issue paper, which asked how ED should treat loans that first entered repayment many years ago. The question also asked how ED should apply the Federal Claims Collection Standards (FCCS) compromise principle to loans where the borrower is unable to repay in a reasonable amount of time.
Several negotiators asked ED to define what a “reasonable” amount of time is for the department to collect student loans. Melissa Kunes, a negotiator representing public institutions, noted that collecting student debt is an expense for the department.
“It is becoming more expensive to collect these debts for the government, for society, than it is that these debts will actually put money back into the government's coffers,” Kunes said. “So this has become a lose-lose proposition for our society. We're spending too much money to collect money we're not going to collect.”
Kyra Taylor, a negotiator representing legal assistance organizations, said that borrowers with older loans should be entitled to cancellation. Taylor pointed to 2021 research that found that out of 4.4 million borrowers who had been in repayment for 20 years or more, less than a quarter had received relief under the income-driven repayment (IDR) account adjustment.
“Broadly, the longer a borrower is in repayment, that raises questions about their ability to repay,” Taylor said. “These are borrowers who have had periods in forbearances, in deferments, because they were unable to make payments. These are also borrowers who are more likely to have periods of default.”
Lane Thompson, representing state officials, added that borrowers who have had non-Direct Loans for a long time, such as Federal Family Education Loans (FFEL) or Perkins Loans, may face issues understanding how much they owe due to loan servicer transfers. Another negotiator suggested ED consider July 1, 2010, as a marker for debt cancellation since that is when the FFEL program was eliminated.
“A lot of these other loans now have been consolidated and reconsolidated and have gone from one service to another and back again,” Thompson said. “That whole process has made the resulting balance really hard to understand. And I don't even just mean for borrowers, I mean, for servicers, and for the Department of Education to explain.”
The committee then moved back to the third question of the issue paper, which asked how ED should consider debts taken out by borrowers who attend programs with a low level of financial value. Multiple negotiators brought up ED’s new gainful employment rules as a possible resource for ED to provide relief to borrowers who attended programs with low financial value.
Taylor suggested ED consider non-completion as a basis to discharge borrower’s debt, in addition to schools where the income premium is not proportional to the amount of debt that the borrower has taken.
“Legal aids have long been in support of using things like the gainful employment rule to provide students with relief,” Taylor said. “I think that is extraordinarily important. However, I think we should also consider that borrowers who have debt and earn less than a high school graduate in their state should also be entitled to relief.”
Kathleen Dwyer, representing proprietary institutions, noted that there are some programs that borrowers may be interested in regardless of whether the program will “pay off financially.” She added that it may be hard for institutions to assure students which programs are going to pay off with any certainty.
“It would be difficult to regulate, knowing which programs are going to pay off financially for that student taking on that debt, because the complex landscape can really change on a dime, as we've kind of seen here lately,” Dwyer said.
The committee then moved to the fifth and final question, which asked about the potential types of hardship that borrowers may continue to face and how ED might address those cases of hardship.
Negotiators brought up several examples, including paying their own loans along with Parent PLUS loans, losing employment, medical debt, child care costs, and more. Multiple negotiators noted that incarcerated individuals and their families may also face challenges paying off student loan debt.
Tamy Abernathy, the federal negotiator for ED, provided updates to the rest of the committee, noting that ED will give the negotiators proposed regulatory text one week before the next rulemaking session in November. She asked the negotiators to read the text before the next session and to come with ideas and rationale of what is and isn’t working with the proposed rules.
“Our goal here is for us to reach consensus,” Abernathy said. “And we want to work alongside you and with you for that goal. … What we really have learned so much from you, during these past two days, is framing for our thought processes, and exploring the different ways that we intend to help borrowers.”
The session ended with public comments from multiple individuals. The committee is scheduled to meet again on November 6 and 7, and in December. Updates in the negotiated rulemaking process and a link to register to watch November's sessions online will be posted on ED’s website.
Publication Date: 10/12/2023