Student Debt Relief Negotiators Dive into ‘Hardship’ Discussion in Second Day of Neg Reg

By Hugh T. Ferguson, NASFAA Senior Staff Reporter

The Department of Education (ED) on Tuesday wrapped up its second session of the student loan debt relief committee, as negotiators discussed drafted text and provided their insight on parameters for a “hardship” category of borrowers to be eligible for some sort of relief.

In kicking off Tuesday’s session, the committee immediately resumed its discussion of the regulatory text and picked up with a discussion on using the secretary’s waiver authority to administer debt relief for borrowers who took out loans to attend career training programs that created “unreasonable debt loads” or “provided insufficient earnings” for graduates, as well as borrowers who attended institutions with “unacceptably high student loan default rates.”

The primary focus of this section concerned using gainful employment (GE) metrics and cohort default rates (CDR) to determine student eligibility for debt relief, with the department proposing to use failure of the GE or CDR metrics as cause for loan cancellation for borrowers who were included in the failing cohorts for either of those measures.

Negotiators expressed concern with specific language related to GE failure that would preclude borrowers who had signed an acknowledgment that their program failed the debt-to-earnings (D/E) rate from qualifying for such relief. Some noted that this provision would force students to decide between continuing in their program of study or qualifying for potential future relief. ED promised to take that concern into consideration before the next session in December.

Negotiators urged ED to also consider an institution’s loss of Title IV eligibility for reasons other than GE or CDR failure to be a sufficient instance that would enable borrowers to access the waiver ED is proposing.

ED then turned to the issue paper concerning “hardship,” in which the department offered eight questions for discussion. ED urged the committee to provide concrete examples and, where available, research supporting their proposals. ED also stressed the need for negotiators  to take into consideration the feasibility of implementing their proposals. 

Under the first question, ED asked negotiators how bankruptcy standards could serve as a guide for defining instances of hardship, and urged the committee in its feedback to think about hardship that is not addressed by other areas of the issue papers.

Negotiators expressed concern that bankruptcy standards are not necessarily appropriate in the context of student loan cancellation, but that ED should perhaps rely on a few principles of the bankruptcy standards. Negotiators suggested using borrowers’ inability to make payments under the standard repayment plan, past inability to make scheduled payments, and evidence of good faith efforts to repay as examples of hardship that align with or borrow from the bankruptcy standards.

Additionally, negotiators detailed how the process for claiming hardship under bankruptcy guidelines can require an extensive documentation process, which can discourage borrowers and leave them unable to access relief because they abandon the process. Negotiators also implored ED to allow for self-certification and to not require a burdensome process. 

Other examples offered by negotiators as hardships to consider for debt cancellation included borrowers who have been in default, low Expected Family Contribution, students eligible for Supplemental Nutrition Assistance Program (SNAP) benefits, former foster youth, and Pell Grant eligibility (for students as well as for Parent PLUS borrowers if the student they borrowed for received a Pell Grant). Other possibilities included consideration for economic conditions in place when the borrower graudated, with examples of the Great Recession and the Covid-19 pandemic as years when borrowers may have experienced hardship if they were just entering the workforce and beginning to repay their loans. 

The committee then turned to the third question in the issue paper related to how ED should consider the Department’s operational limitations in adminstering a hardship process, particularly related to Federal Student Aid’s (FSA) flat funding and lack of certainty over the department’s future funding levels. 

Negotiators questioned whether resources were still available from the previous debt cancellation application and planned implementation, but ED indicated that, because they are subject to annual appropriations, they are unsure what resources they will have to devote to this effort.

In returning to the conversation on hardship and whether some upfront criteria should be put into place, negotiators expressed the opinion that ED should not automatically limit tborrowers from applying for relief, noting there are many hardships borrowers may be experiencing that will not be covered by these regulations, making it necessary to keep the application process available to all borrowers.

While working through the remaining outstanding questions in the issue paper, one negotiator brought up a public comment from Monday’s session when a borrower, after receiving a notice that they would be approved for student loan cancellation under Biden’s debt cancellation plan, left their job that was eligible for the Public Service Loan Forgiveness (PSLF) to start their own business. Now with that program blocked, the borrower is on the hook for the entirety of the loan and no longer covered by PSLF. The negotiator urged the department to consider this instance and others similar to this scenario as an example of hardship. 

Negotiators also expressed concern over how these new debt cancellation programs would be implemented and that they could become operationally a very manual process and encourage ED to look at how existing processes could be used to reduce complexity around implementation.

The issue paper also touched on using federal poverty guidelines to establish eligibility requirements for debt relief. During that conversation negotiators argued that federal poverty guidelines were not adequate to capture borrowers experiencing hardship since poverty guidelines do not account for regional cost of living variation. 

During public comments, which took place over the course of an hour, the committee heard from student loan borrowers detailing their experiences, policy experts highlighting student loan reporting and trends, and experiences with spousal joint consolidation loans.

The department is expected to release updated regulatory text in the coming weeks and will reconvene on December 11 to begin its third and final session.

As a reminder, the committee’s time frame could be impacted by a potential lapse in government funding, which is slated to expire on November 17, if Congress does not come to another agreement on the annual appropriations process. 


Publication Date: 11/8/2023

Frederick G | 11/21/2023 11:38:21 PM

The Neg Reg committee is finally going down the path that should have happened in the Obama Administration when RePAYE was instituted. It is beyond belief that the government hasn't written off loan balances that are more than 25 years old--regardless of whether the borrower entered the right paper chase or danced the right dance, to borrow their own or their family's tax money back at a premium rate. For decades, there have been numerous little rules written in so as not to cancel or make progress on amortizing debt. Now, finally, rules are being written to address the nonsense situations. And, like clockwork, the same people who ignore the hundreds of billions that the IRS doesn't collect each year due to underfunding, show up to start screaming about how fair rules on the student loan debt mean some disaster. And they threaten the lawsuits over it.

Ben R | 11/13/2023 9:30:31 AM

“Inability to make payments under the standard repayment plan” describes 75 percent of the federal portfolio. That was the situation pre-pandemic where for one reason or the other borrowers weren’t paying anything at all, or were paying pennies on the dollar under alternative payment arrangements such as IDR. It could be "hardship" for a doctor or lawyer making six figures to pay $2000/month on over $200,000 in student loans because they too have other bills to pay. On the other end of the spectrum, virtually all parent plus borrowers with a zero EFC would be considered in hardship from the outset, but that only begs the question on why we gave them the loan in the first place.

Jeff A | 11/8/2023 11:6:30 AM

Seems like the committee should continue their work until they have found a reason to forgive every student loan. Then going forward apply a presumption of likely hardship and forgive loans soon after they are disbursed.
How can they not apply the GE metrics to all programs and forgive all that fail the metric. Why just programs that are subject to GE. It has always been stated they were constrained by statutory authority to apply GE standards to all programs for eligibility purposes. That sure would not apply to the authority being used to forgiven loans.
I don't understand why they would not create a rule that would stand up to a legal test. They sure are headed in a direction that will end up being nullified with a legal challenge...once again.

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