ED Releases Draft Rules to Provide Student Debt Relief for Subsets of Borrowers

By Maria Carrasco, NASFAA Staff Reporter

The Department of Education (ED) on Wednesday published its first set of draft rules to provide targeted student debt relief to borrowers, just 10 months after the U.S. Supreme Court struck down the Biden administration’s initial student debt relief plan to cancel up to $20,000 of student debt for a wide swath of borrowers. 

Last week, President Joe Biden gave an initial outline of how the proposed rules would look after the negotiated rulemaking sessions for student debt relief were completed in February. 

The draft notice of proposed rulemaking published on Wednesday includes a number of distinct  provisions that would be applied using the Secretary of Education’s authority under the Higher Education Act (HEA) to waive student loan repayment. Most of the provisions would be applicable to federally held student loans, but a few would apply to commercially held loans in the Federal Family Education Loan (FFEL) program. 

According to ED, the draft rules, if implemented as proposed, along with the administration’s other student debt relief initiatives, would bring the total number of borrowers getting student loan relief under the Biden administration to more than 30 million. 

With the rules formally published on Wednesday, members of the public now have a 30-day comment period to voice their thoughts on the rules. ED noted that it is aiming to finalize these rules in time to start providing forgiveness to borrowers this fall. Additionally, the department said it will publish another draft rule focused on providing relief for borrowers experiencing hardship in the coming months. The negotiated rulemaking committee for student debt relief just wrapped up its session on financial hardship in February

“Today's announcement shows that the Biden-Harris Administration is continuing to fulfill our promises to fix a broken higher education system," said Education Secretary Miguel Cardona in a statement. "Student loan forgiveness isn't only about relief for today's borrowers. It's about social mobility, economic prosperity, and creating America that lives up to its highest ideals."

Under the draft rules, ED is proposing two paths to provide forgiveness to borrowers who owe more than they originally borrowed. The first would provide automatic forgiveness of the amount by which a borrower’s loans currently exceed what they owed upon starting repayment, up to a maximum of $20,000. ED clarified that this relief could be provided automatically to all types of federally held student loans, including Parent PLUS loans, consolidated loans, and loans in default.  

The other proposed path for borrowers whose payments had lagged behind interest accrual would permit ED’s secretary to forgive the full amount by which a borrower saw their balance grow after entering repayment if the borrower is enrolled in any income-driven repayment (IDR) plan and has annual income of or below $120,000 if they are single, or $240,000 if they are a married couple that files taxes jointly. According to ED, if these rules are implemented as proposed, borrowers would automatically receive this forgiveness and would not need to fill out an application. 

Another proposed provision aims to forgive student debt for borrowers who entered repayment at least 20 years ago. Specifically, the proposed rule would provide student debt forgiveness for borrowers who only have undergraduate debt if they first entered repayment at least 20 years ago — either on or before July 1, 2005 — and for borrowers who have any graduate school debt if they first entered repayment 25 or more years ago — on or before July 1, 2000. ED proposed that this relief would be provided automatically to any type of federally-held student loan, including Parent PLUS loans and consolidated loans. 

Additionally, ED proposed another provision that would authorize forgiveness to any borrower with a commercial loan in the FFEL program that first entered repayment on or before July 1, 2000. In a press release, ED clarified that it is seeking comments on how it could help borrowers who are close to the timeline for proposed relief while still encouraging them to make payments. FFEL borrowers would also qualify for forgiveness under the proposal in cases where they meet eligibility requirements for closed school discharge but have not successfully applied for one or attended an institution that lost its federal student aid eligibility due to a high cohort default rate (CDR) provided they were included in the cohort whose debt was used to calculate the CDR.

Automatic forgiveness would also be available to borrowers who are eligible for loan forgiveness under the Saving on a Valuable Education (SAVE) repayment plan, other IDR plans, closed school discharge, Public Service Loan Forgiveness (PSLF), or other forgiveness programs, but who have not enrolled. According to ED’s estimates, 1.7 million borrowers are eligible for student loan relief under the SAVE plan, and about 250,000 borrowers are eligible for forgiveness through closed school discharges but have not successfully applied. 

For the provisions listed directly above, automatic relief would only be permitted for loans that are otherwise eligible for forgiveness – meaning that Parent PLUS loans or non-Direct Loans could be excluded. Additionally, ED clarified that these provisions related to existing forgiveness programs for which the borrower qualified but had not applied could provide forgiveness on an ongoing basis to borrowers. 

Lastly, in Wednesday’s notice of proposed rulemaking, ED proposed regulatory language to provide forgiveness to borrowers who took out debt to attend “programs or institutions that failed to provide sufficient financial value.”

One provision could provide loan forgiveness for borrowers who received loans from institutions or programs that lost access to Title IV aid – with examples including “high student loan default rates, producing graduates whose debt represents too large a share of their income, graduates whose earnings are no better than those of a high school graduate, or were subject to a final agency action to terminate aid for failing to provide sufficient financial value.” Borrowers could also receive forgiveness if they attended institutions that would have lost access to Title IV aid but closed before ED could take final action against them.

In its press release, ED teased that it will be releasing additional proposed rules to provide student loan forgiveness to borrowers experiencing financial hardship in the coming months. According to ED, the proposed rules will include provisions for automatic forgiveness for borrowers at a “high risk of future default” and those who show hardship due to other indicators, which ED proposed could be high medical and caregiving expenses.

“These distinct forms of debt relief are designed for borrowers struggling with their loans – and that’s a lot of people,” Under Secretary of Education James Kvaal said in a statement. “There are 25 million borrowers whose interest is growing faster than they can pay it down. That fact alone shows how badly President Biden’s student loan relief is needed.”

Congressional Republicans on Tuesday responded to the draft rules, criticizing the Biden administration’s actions. Rep. Virginia Foxx (R-N.C.), chairwoman of the House Committee on Education and the Workforce, said the rules have “no legal ground to stand upon.”

“Like clockwork, the Biden administration continues to drag the nation into a debt spiral by forcing hardworking taxpayers — many of whom never stepped foot on a college campus — to foot the bill for this reckless and fiscally irresponsible action,” Foxx said in a statement. “Your scheme is not steeped in benevolence or goodwill. It is mired in utter contempt for the Supreme Court and every student, family, and hardworking taxpayer in this country.”

Sen. Bill Cassidy (R-La.), ranking member of the Senate Health, Education, Labor, and Pensions (HELP) Committee, noted that the U.S. Supreme Court already ruled on the issue of student loan forgiveness and that the Biden administration does not hold the authority to do so 

“Now, the Department of Education is completely rewriting the Higher Education Act piece by piece to resurrect this unconstitutional student loan scheme,” Cassidy said in a statement. “Where is the relief for the guy who didn’t go to college but is working to pay off the loan on the truck he takes to work? … Instead, the Biden administration is sticking these Americans with the bill of someone else’s student debt.”


Publication Date: 4/17/2024

Henry Q | 4/17/2024 2:58:47 PM

Comparing a student loan to a PPP loan is not the point. Every single student who ever borrowed a student loan at my institution in my 40+ year financial aid career signed a promissory note to repay what they borrowed, with interest.
1. Explain to me, as though I was five, how it is magically OK for those students to walk away from their obligation to repay the debt they took on willingly?
2. As financial aid administrators, we go to great lengths to ensure that students understand their obligation to repay via mandatory entrance and exit counseling. For years I performed these tasks in person, sometimes one on one, with prospective borrowers. How can all that effort be so easily invalidated?
3. The Supreme Court has already disallowed this loan forgiveness business. Why is ED wasting time on this instead of dealing with the much more pressing problem of getting FAFSA results out in a timely basis? Seems like they are majoring on the minors....

Paul F | 4/17/2024 8:58:11 AM

In response to Senators Foxx and Cassidy:
1. Please explain to me, as though I was five, how student loan forgiveness is somehow worse than PPP loan forgiveness.
2. The guy who took out a loan for a truck? His loan was based on his credit and his ability to pay. Student loans are offered in the hope that the student will be able to pay.

James C | 4/17/2024 8:16:09 AM

This is really tone deaf on the part of the Administration given the current FAFSA crisis and its silence and lack of accountability.

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