Student Loan Debt Negotiating Committee Reconvenes for Financial Hardship Discussion
By Hugh T. Ferguson, NASFAA Senior Staff Reporter
The student loan debt relief committee reconvened on Thursday for a fourth session of negotiated rulemaking to discuss how the Department of Education (ED) can provide student loan debt relief to borrowers facing financial hardships — a topic that was not fully addressed during the committee’s previous three sessions earlier this year.
The discussion built off of the department’s draft regulatory text that focused on defining instances of hardship, outlining 17 factors that the department proposed in determining whether a borrower meets conditions for loan forgiveness.
Education Under Secretary James Kvaal offered opening remarks on Thursday and highlighted how the committee’s previous work provided a roadmap to four pathways of student loan debt relief.
In convening this fourth session, Kvaal said that the department’s work to administer student loan debt relief was not yet complete because there are still people who need help with student loans who have been unable to access relief.
“Today we are turning over another stone with a focus on borrowers experiencing hardship,” Kvaal said. “Our goal here is to advance a regulatory proposal that focuses on the secretary’s existing and long standing waiver authority to clarify how the department will consistently and transparently deliver relief to borrowers.”
In their opening statement, department officials told negotiators that the conversations will be solely focused on the issue of hardship, and that due to the condensed nature of this final session, ED would not be able to deliver data requests and encouraged negotiators to provide the committee with their own drafted regulatory text for officials to consider.
Temperature checks will not be taken throughout the session. Instead, the department will plan to take a final consensus check on the entirety of its drafted text at the end of Friday’s session.
ED said its aim is to provide “multiple pathways” to student debt relief through the issue of hardship and the regulatory text would rely on the secretary’s waiver authority. ED also said the relief could be provided automatically or through an application.
The department said it was taking a broad approach to the definition of hardship and would use its regulatory text to cover ways in which borrowers have experienced, or are experiencing, hardship, and how varying factors would impact their ability to fully repay their loans.
The department is also looking to broadly approach the term “costs,” which is not defined in the text, and how it is associated with repayment. Some examples of costs are expenses that ED would incur to collect loans and how continued repayment of a loan, that may never be fully repaid, could impact a borrower’s financial well-being.
ED also clarified that these pathways to relief would only be considered for department-held loans, but that borrowers who consolidate into Direct loans could be eligible for relief.
Negotiators broadly approved of ED’s approach to the issue of hardship and expressed appreciation for the department’s decision to reconvene the committee.
Negotiators asked a number of clarifying questions about how the department would define terms like costs, households, disability, and borrowers’ ability to fully repay, and urged ED to take a broad approach.
ED told negotiators that the ongoing conversation would help the department better define and enhance what is being put on the table.
The discussion then turned to “factors that substantiate hardship,” where ED said it would be looking at federal data, like Pell Grant recipients, and information collected through the FAFSA. However, the department said it is still considering whether it will more broadly review all need-based aid, such as FSEOG and Federal Work-Study recipients.
ED also reminded negotiators that it also included language that would allow the secretary to consider “other indicators of hardship,” which they would define.
The discussion then turned to the text’s proposal for immediate relief to borrowers who are determined to be 80% likely to default. This determination would be made through a predictive model being developed by ED that would use historical data to determine the likelihood of a borrower defaulting on their loans within two years of the regulation being finalized. This relief would be a one-time benefit and borrowers who do not qualify for automatic relief would be able to apply.
Here, the department received pushback from Scott Buchanan, the executive director of the Student Loan Servicing Alliance, and primary negotiator for Federal Family Education Loan (FFEL) lenders, servicers, or guaranty agencies.
Buchanan argued that the department’s text is overly ambiguous and could even be a massive expansion of ED’s authority. Specifically, Buchanan questioned how the department would staff itself to implement this new relief effort and whether it would withstand judicial scrutiny.
Some negotiators challenged Buchanan’s perspective, arguing that many borrowers in default are in that situation as a result of errors by servicers.
ED then turned to language under its process for additional relief and discussed how an automatic or application-based relief process would use data in the department’s possession. Some of that data would include the age of loans, Pell Grant recipients, or supplemental data in ED’s possession. For an application-based approach, ED said its priority would be to minimize burden on borrowers and that it will also use public comments, offered during and after today’s session, to sort through what considerations the department may want to make.
The department also reiterated that it is seeking to have multiple pathways for borrowers to seek relief. In instances where it does not have data, ED stressed that it will need to get that information from the borrower and will need to have an application of some sort.
Buchanan requested that the department provide examples of borrowers who would and would not be eligible for pathways to debt relief being discussed as a part of the hardship discussion. Specifically, Buchanan asked ED to detail what characteristics a borrower would need to have or what thresholds they would need to meet in order to meet the scope of cancellation.
Yael Shavit, of the Office of the Massachusetts Attorney General, the primary negotiator for state attorneys general, argued that it is important for ED to keep its draft text broad so that the benefits being discussed are not limited to a single point in time. Otherwise, the department would be burdened to hold more negotiations in the future.
During public comments, participants shared their perspectives on student loan debt. The committee heard from more commentators than usual since it wrapped up its discussion of the regulatory text earlier than initially anticipated.
The committee will reconvene on Friday when it is expected to wrap up its hardship discussion and consider whether consensus can be reached.
Publication Date: 2/23/2024
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