President Joe Biden and his administration are persisting in their endeavors to offer relief from student debt to as many borrowers as feasible.
Following the Supreme Court’s rejection of Biden’s proposal for widespread debt forgiveness last year, the administration pursued forgiveness through an alternate legal avenue — by amending the Higher Education Act via a procedure known as negotiated rulemaking.
At this juncture in the process — which entails numerous discussions with diverse stakeholders including borrowers, advocacy groups, lawmakers, and more — the rulemaking committee has pinpointed five categories of borrowers who should be considered for debt relief.
Borrowers who satisfy one or more of the following criteria would qualify for debt relief under the current proposal:
- Owe more than they borrowed
- Have been repaying loans for 20 years or more
- Attended institutions that haven’t demonstrated successful student outcomes
- Are eligible for loan forgiveness but haven’t applied
- Are experiencing financial hardship
The committee arrived at a consensus during its prior meetings regarding how loan waivers should operate for all the aforementioned groups except those undergoing financial hardship. It encountered difficulties in reaching an agreement on how to define hardship that would render a borrower eligible for relief.
Consequently, the administration prolonged negotiation discussions and appended sessions in February to tackle the issue of hardship. The committee reached a consensus during its concluding session on Feb. 23. A proposed draft regulatory text will imminently proceed to the Federal Register where the public will have the opportunity to comment and offer feedback before the new legislation takes effect.
The proposal would confer upon the Secretary of Education the authority to waive federal student loan debts for borrowers confronting hardship that “is likely to impair the borrower’s ability to fully repay the Federal government or the costs of enforcing the full amount of the debt are not justified by the expected benefits of continued collection of the entire debt,” the draft articulates.
It proceeds to enumerate 17 factors that could substantiate hardship. The Education Secretary may take into account any of the following factors:
- Household income
- Assets
- Type of loans and debt balance
- Current repayment status and history
- Total student debt balance and payments relative to income
- Total debt balances and required payments relative to income
- Receipt of Pell Grant and other information from the Free Application for Federal Student Aid
- Type and level of institution attended
- Student outcomes associated with programs attended
- Postsecondary education and relative federal financial assistance receive
- Age
- Disability
- Age of borrower’s loan based on first disbursement
- Receipt of means-tested public benefits
- High essential costs such as healthcare, caretaking, and household
- The extent to which hardship may persist
- Any other indicators of hardship identified by the Secretary
The draft also incorporates a provision enabling the Secretary to furnish “immediate relief” to borrowers who are “at least 80% likely to be in default in the next two years.” You might observe the absence of explicit thresholds for aspects such as “household income” or when considering debt-to-income ratios. This is because the Department of Education intends to preserve flexibility in determining whose debt it can discharge.
The final rule might encompass more precise language in its preamble rather than in the regulatory text. “Although the preamble language is not negotiated, the Department may agree during the negotiations to include in the preamble explanations of certain issues,” the Department’s website clarifies.
Upon the conclusion of the public comment period, the Department will release its final rule. Should it be issued before November of this year, the regulation could take effect in July of 2025.
