Student Debt Relief Negotiators Discuss New Amendments in Third and Final Neg Reg Session
By Maria Carrasco, NASFAA Staff Reporter
The Department of Education (ED) on Monday inched closer to developing a regulatory framework for student loan debt relief as a stakeholder committee kicked off its final negotiated rulemaking session, discussing several updates ED made to the draft regulatory text, including provisions on which subsets of borrowers are eligible for debt forgiveness and what amount of student debt could be forgiven.
As part of the negotiated rulemaking process – known as neg reg – negotiators gathered on Monday to hear amendments ED made to its draft regulatory text, which was released earlier last week. Negotiators will meet again on Tuesday, December 12, to discuss other amendments and take a final consensus check, along with an additional conversation about financial hardship borrowers may face and possible relief that could be given.
Tamy Abernathy, ED’s federal negotiator, began the session by outlining technical changes made to the draft regulatory text and clarifying that the technical corrections are small and were made since many references are out of date.
Additionally, Abernathy stressed during the session that ED was focused on waiver authority to carry out the debt relief. She said that although negotiators proposed a number of changes to a section focusing on ED’s authority to discharge borrowers’ debt, the department was focused on waivers.
Kyra Taylor, a negotiator representing legal assistance organizations, and other negotiators voiced concerns that ED has yet to release any draft regulatory text on potential student loan forgiveness for borrowers facing financial hardships. Taylor encouraged ED to look into ways it can discharge borrowers’ debt.
“As we've seen time and time and time again, when the department has tried to provide targeted relief to borrowers, there are still borrowers who get left out,” Taylor said.
Abernathy clarified later in the session that the group would be having a discussion on hardship on Tuesday to hear feedback from negotiators.
From there, Abernathy outlined two additional amendments in the drafted regulatory text. One amendment proposes ED would cancel up to $20,000 of the amount above what a borrower owed when they entered repayment. Borrowers would be eligible for this forgiveness if they're enrolled in an income-driven repayment (IDR) plan and have income at or below 225% of the federal poverty guideline.
The other amendment would provide up to $20,000 in negative amortization relief for borrowers enrolled in the Saving on a Valuable Education (SAVE) repayment plan. Borrowers would be able to receive this waiver if their income is less than $125,000 for a single tax filer, or less than $250,000 for a household.
“Because we are addressing negative amortization going forward in the SAVE plan, we wanted to target this change for borrowers on the SAVE plan instead of all IDR plans,” Abernathy said.
Multiple negotiators expressed concerns with these two amendments, specifically with the cap that eligible borrowers could only see up to $20,000 in student loan forgiveness.
“I feel strongly that borrowers should have at least the amount that exceeds their original balance forgiven,” said Yael Shavit, a negotiator representing state attorneys general. “And it sounds like the department's explanation here was less technical and [more] administrative. But that doesn't explain to me why the department can't draft the text as it was drafted before and give itself the discretion to determine the appropriate amount of relief.”
Taylor also voiced concerns for this amendment, suggesting that ED could provide total loan forgiveness to targeted borrowers, such as Pell Grant recipients, those with low incomes, and those enrolled in the SAVE plan.
“This is especially true given the history of forbearance, steering folks who have been in low or $0 IDR plans where their balance has ballooned over time,” Taylor said. “I'm deeply concerned that this proposal will not provide those borrowers with appropriate relief.”
Other amendments discussed include updated language to provide relief for borrowers who attended programs or institutions that failed to deliver sufficient financial value. The updated regulatory text adds language to include situations where institutions or programs lose access to federal student aid due to actions that financially harm students. Additionally, there are amendments that would apply to borrowers who enrolled in programs or institutions that closed prior to determinations of misconduct.
Negotiators also discussed a proposal that would provide relief for borrowers who first entered repayment 20 or 25 years ago. Under the drafted text, borrowers with only undergraduate loans, or a federal consolidation loan or Direct consolidation loan, that first entered repayment on or before July 1, 2005, could have their entire balance waived. Borrowers with other types of loans, such as graduate loans, could have their entire balance waived if the loan first entered repayment on or before July 1, 2000.
Multiple negotiators expressed their concerns about this time frame, noting that many borrowers would not be able to receive forgiveness with the 2000 and 2005 cut-off dates.
“I think that one concern that I have is that borrowers who are just so close to [forgiveness] will just lose their shot,” said Jessica Ranucci, a negotiator representing consumer advocates. “A graduate borrower, for example, is 24 years and 10 months [away from forgiveness] and will not have that opportunity. I understand that there are line-drawing exercises the government has to do, but this seems like an incredibly stringent one and I hope that the department might consider some other alternatives.”
During the public comment section, Rep. Ayanna Pressley (D-Mass.) and Sen. Elizabeth Warren (D-Mass.) gave remarks, urging ED to take action to more broadly forgive student loan debt. Earlier on Monday, Pressley and Warren, along with other Democratic lawmakers, sent a letter to Education Secretary Miguel Cardona with several recommendations to expand student loan forgiveness.
“Statutory authority of the Higher Education Act should embolden this committee to do all that it can to ensure everyone experiencing financial hardship receives relief,” Pressley said during the session. “And we must recognize the very need to take out student debt in order to obtain a degree is in and of itself a financial hardship.”
Warren gave six recommendations that ED could implement, such as ED eliminating all debt that exceeds a borrower’s original principal balance. She added that ED should consider providing full cancellation – not just a waiver of excess interest – for borrowers who have repaid enough to cover their original principal.
Warren also recommended that ED eliminate the cliff that provides relief to borrowers who entered repayment by 2000 or 2005, and that ED should add a debt relief provision for borrowers with financial hardships. She added that borrowers should be able to apply for relief by directly showing hardship.
ED could also extend relief to borrowers who've been victims of misconduct by loan servicers, not just institutions or programs, Warren said. And finally, ED should make access to student loan forgiveness easy, ideally using information the department already has.
“Capping relief from runaway interest at $10,000 or $20,000 ties the secretary's hands unnecessarily,” Warren said. “ED should be able to give meaningful relief to the nurse or the teacher with an expensive degree, someone who's made steady loan payments but who can't even afford to cover the interest and now owes more than she originally borrowed.”
As for additional steps, ED outlined in its latest regulatory agenda last week that proposed final regulations for student debt relief will arrive in May. Stay tuned to Today’s News for more updates on negotiated rulemaking.
Publication Date: 12/12/2023
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