The Department of Education (ED) on Tuesday held its final negotiated rulemaking session on student loan debt relief, where the committee ultimately did not reach consensus on several proposals. Along with the votes on consensus, the committee discussed how ED could provide relief to borrowers experiencing financial hardships.
However, as the session concluded, negotiators pressed ED to have another session to further discuss the issue of hardship, since ED did not provide any regulatory text on the issue. ED did not commit to holding another session to discuss hardship at the time, but said it was a possibility.
Where the committee did reach consensus, the regulatory text ED publishes in its proposed rule will reflect the language the committee agreed to. The other portions, however, can be drafted as ED sees fit, presumably taking into account the comments and discussion from the neg reg committee. Once ED publishes a proposed rule — which is expected to come in May — there will be a public comment period before a final rule is issued. If the final rule is issued before Nov. 1, 2024, the rule will take effect July 1, 2025.
The session began with negotiators discussing two amendments. The first was a proposal from ED to forgive up to $10,000 of a borrower's balance that exceeds what they owed upon starting repayment. Tamy Abernathy, ED’s federal negotiator, noted that this waiver doesn’t have any set borrower eligibility requirements. However, borrowers would not be eligible for this waiver if they are already eligible for forgiveness from other waivers in the draft text.
When pressed on how ED landed on $10,000 in forgiveness, Abernathy said ED thought the amount was appropriate to provide for all borrowers and that lower income borrowers would have access to additional relief.
Multiple negotiators expressed their concerns with the forgiveness for this amendment being capped at $10,000. Yael Shavit, a negotiator representing state attorneys general, suggested that ED remove the $10,000 cap, saying it constrains ED’s ability to address the actual harms borrowers are experiencing.
“Certainly, we're aware of borrowers who have significantly higher accrued interest than this,” Shavit said. “My suggestion is that the department remove the cap, which serves no purpose other than to constrain its eligibility to be responsive in a manner that I think is to the benefit of both borrowers and the department.”
Wisdom Cole, a negotiator representing civil rights organizations, noted the disparity in interest accumulation in student loan debt for Black borrowers and urged for all interest to be forgiven.
“By setting interest caps, at this level, this doesn't provide an equitable solution to the members that I serve, to Black borrowers,” Cole said. “I want to turn our attention to some of the language that has been submitted by our colleagues here on this call, as well as Sen. Elizabeth Warren, asking for all interest to be eliminated. I think by doing that, that allows a greater accessibility to the waivers that we're putting in hand.”
Angelika Williams, a negotiator representing private nonprofit institutions of higher education, added that the proposal wouldn’t provide long-term relief to many borrowers who have ballooning interest on their student loans.
“As an individual who has practiced financial aid for 17 years, I don't think that limit is consistent with how we've seen interest applied to loans, meaning that we're just going to see the student in the same position they were previously in by the next interest quarter,” Williams said.
The other amendment discussed would provide relief for low-income borrowers who are not enrolled in an income-driven repayment (IDR) plan. The proposal would forgive up to $10,000 of a borrower’s balance if their total balance exceeds the amount when they first entered repayment. Low-income borrowers are defined as those making an income under 225% of the federal poverty guideline.
“The idea is that because these borrowers are not on IDR, they would have to provide their income information to us through an application,” Abernathy said. “But this could pick up low-income borrowers that are not otherwise able to sign up for IDR or are not on an IDR [plan].”
A negotiator asked Abernathy to clarify why ED is providing up to $10,000 forgiveness in this proposal, but for another proposal, low-income borrowers already enrolled in an IDR plan could receive up to $20,000 in forgiveness. Abernathy said that these borrowers would be eligible for up to $10,000 in this proposal, and could receive an additional $10,000 through another proposed category for relief.
During discussion of this proposal, multiple negotiators expressed to ED again their concerns with the $10,000 cap on forgiveness.
“Just want to note that this provision has the same problems that we've identified as with all the other interest provisions,” said Kyra Taylor, a negotiator representing legal assistance organizations. “There shouldn't be a cap here, especially for low-income borrowers. As I've noted previously, it should be full cancellation of the difference between the amount originally borrowed and the amount currently outstanding.”
From there, negotiators discussed updates in the regulatory text surrounding language for borrowers who have Federal Family Education Loan (FFEL) loans. Abernathy noted that the updates added procedures clarifying how ED would work with guarantors and lenders to deliver relief to borrowers, along with what types of borrowers would be captured under a waiver, among other things. A group of negotiators caucused privately with ED for most of the discussion on FFEL.
After that discussion, negotiators moved to have a consensus check on different proposals of ED’s regulatory text. The committee did reach consensus on multiple amendments, such as an amendment that ED could provide forgiveness when a loan is eligible based on repayment plan. Another amendment that reached consensus from the committee is that ED may waive the outstanding balance of a loan received by a borrower associated with gainful employment programs with high debt-to-earnings rates or low median earnings.
However, there were multiple proposals the committee did not reach consensus on, including the amendments discussed earlier that morning, which would provide up to $10,000 in relief to eligible borrowers. Some negotiators explained why they didn’t vote in support of amendments, noting that ED’s proposals don’t go far enough to provide relief to struggling borrowers.
“I think that there is language here that puts too many limits, and doesn't give enough broad cancellation in some of these provisions,” said Ashley Pizzuti, a negotiator representing student loan borrowers who attended programs of two years or less. “I want to make it clear that I'm not against anyone getting any cancellation.”
The session ended with a discussion on financial hardships that borrowers face and how ED could possibly provide relief to those borrowers. Part of the discussion included a presentation from Dalié Jiménez, the director of the University of California, Irvine’s Student Loan Law Initiative.
Jiménez’s presentation gave two recommendations to ED. The first is that ED should reduce borrowers’ student loan debt to $0 for borrowers at the bottom half of the U.S. income distribution, which is below $71,000. The other recommendation, Jiménez said, is that the ratio for a borrower’s income to their student loan debt should be less than 30%. Any ratio that is higher than 30% is a hardship, Jiménez said.
As the session wound down, multiple negotiators expressed their frustrations that ED had not released proposed regulatory text that included financial hardships. Borrowers said it was tough to have a discussion on the topic without the drafted text, and urged ED to schedule another session solely focused on financial hardships.
ED did not commit to another session devoted to financial hardships during Tuesday’s session. Abernathy said the department needs time to discuss what the next steps are and that if another session does happen, it will be announced on the Federal Register.
“We cannot come out right now and say any more details about what is going to happen,” Abernathy said. “We need to go back. We need to regroup. We have protocols, we have procedures that we have to follow, we have logistics that we have to look at. So I apologize that that is the best answer that we can give you. But that is the only answer we have right now.”
Publication Date: 12/13/2023