The Department of Education (ED) on Monday resumed its negotiated rulemaking — or “neg reg” — sessions on student loan debt relief. During Monday’s session stakeholders began to weigh in on the department’s first draft of regulatory text that seeks to administer new initiatives to carry out student loan cancellation for certain borrower populations it seeks to identify through the rulemaking process.
As a reminder, the draft regulatory text, unveiled last week, specifies several groups of borrowers who could be provided debt relief. That includes borrowers who: currently have outstanding federal student loan balances that exceed what they originally borrowed; have loans that first entered repayment 25 or more years ago; took out loans to attend career-training programs that created “unreasonable debt loads” or “provided insufficient earnings” for graduates; or who attended institutions with “unacceptably high student loan default rates.”
Additionally, the text stated that the secretary of education may be able to provide forgiveness to borrowers who would otherwise be eligible for forgiveness under existing programs but hadn’t applied. This would include borrowers who would have qualified for an income-driven repayment (IDR) plan and had reached the maximum number of payments to have their balance forgiven, targeted relief programs like Public Service Loan Forgiveness (PSLF), or closed school loan discharges.
To kick off Monday’s session, ED informed negotiators that the department had complied with a number of data requests made during the October sessions and that some requests concerning data on defaulted borrowers were still being compiled for negotiators.
ED also underscored that the latest round of issue papers sought to provide more specificity around the department’s waiver authority being used to carry out the new cancellation program.
Before digging into the regulatory text, Josh Divine from the Missouri Attorney General’s Office, the alternate negotiator for state attorneys general, expressed concern over the “tenor” of the previous negotiated rulemaking sessions. He argued that ED had not put enough focus on how their efforts to the negotiated rulemaking process to carry out student loan debt cancellation could survive legal challenges.
Divine also argued that the “fairness” concerns, previously raised by Chief Justice John Roberts with respect to individuals who did not attend college or who had already paid off college debt, would need to be addressed, or else the new program would likely meet the same fate as the administration’s last debt cancellation effort, which was blocked by the U.S. Supreme Court. ED later provided assurances that it was considering Divine’s concern that the voices of such individuals weren’t represented in negotiations and was working with the Federal Mediation and Conciliation Service (FMCS) to address it.
The committee then turned to the first section of the regulatory text, which included a brand new section to 34 CFR 30 titled “Waiver of Federal Student Loan Debts” that would enable the department to address specific instances where it could exercise its authority to waive debts.
First up was a discussion on borrowers with a current balance that exceeds their original principal balance. The goal, per ED, is to deliver targeted relief that would benefit borrowers who would have benefited from the Saving on A Valuable Education (SAVE) plan, had it been made available to them when they entered repayment.
In kicking off the discussion, ED requested negotiators to focus on language concerning the amount to be canceled and the borrower’s time in repayment necessary to qualify for cancellation, noting that it is common for a period of time post-completion for the outstanding balance to exceed the amount borrowed due to accrued interest during school, but that they are seeking to establish a reasonable time frame by which the borrower should have repaid that interest.
Some negotiators expressed concern that the language did not go far enough and wanted ED to focus on ways it could apply past interest payments to a borrower’s original principal.
The committee then moved on to proposed language concerning borrowers who have loans that first entered repayment 25 or more years ago.
For this section negotiators urged ED to consider applying the SAVE plan repayment time frame for smaller original loan balances. Negotiators also emphasized the need for precise language, pointing out, for instance, that tying qualification for cancellation on the date the borrower entered repayment could exclude borrowers who have defaulted, since default is not considered a repayment status.
Negotiators also pointed out the recordkeeping challenges associated with such older loans, and their desire to see language that is broad enough to capture borrowers whose loan data is incomplete or missing and, as such, would not be automatically identified by querying the National Student Loan Data System (NSLDS).
Scott Buchanan, of the Student Loan Servicing Alliance, also stressed that as the discussion over language continues during the session that in order for the package to work it has to actually reach borrowers and that ED must ensure the regulations survive judicial scrutiny. Otherwise the program will once again be blocked by the courts.
ED then turned to the regulatory text on borrowers who are eligible for relief under existing programs, but who did not apply to one of those programs, such as income driven repayment or PSLF. The department underscored that there are many instances where borrowers would get loan discharges under specific forgiveness programs but haven't applied. According to the department, this section of the regulatory text outlines that if ED can identify borrowers who are eligible for relief that it would administer the discharge after providing borrowers with an opportunity to opt-out.
During the discussion negotiators expressed concern on language stating eligible borrowers would include those who “otherwise meet eligibility requirements,” as it could open the door wider to other groups of borrowers, such as those who have been turned away for forgiveness. ED suggested negotiators provide the department with regulatory language to help address those concerns.
The department then turned to the final section for the day’s discussion, which touched on waiver authority for FFEL Program debt. ED told the committee that while the department is looking to provide more clarity on this section during the committee’s third session, the intent is to address the fact that there are many debt forgiveness programs that exist for Direct Loan (DL) borrowers that do not exist for FFEL borrowers, such as PSLF and SAVE, and that other student and borrower protections like the gainful employment regulations did not exist when loans were being made under the FFEL program.
The negotiators then turned to public comments, which took place over the course of an hour and primarily focused on borrower experiences with the student loan repayment system and touched on specific repayment plans like SAVE and PSLF. Comments also touched on concern that the committee did not include taxpayers who did not attend postsecondary education.
The committee is expected to wrap up its discussion of the issue papers tomorrow, November 7, with the morning session focused on cancelation for borrowers who attended programs that did not provide “financial value,” and the afternoon portion of the session diving into the discussion of the issue of other financial hardships that may impact a borrower’s ability to repay their loans, for which ED did yet not offer draft regulatory text.
ED urged negotiators to submit suggestions for changes to regulatory language by November 14 so the department could update the issue papers for the December sessions.
If necessary, ED will also unveil a communication plan detailing how a potential lapse in government funding, slated to expire on November 17, might impact the upcoming session.
Publication Date: 11/7/2023