The Biden administration is shifting its approach to student loan relief by considering a more targeted plan that would focus on specific groups of borrowers. A leaked document from the Education Department reveals that new federal rules are being drafted to pave the way for a second attempt at providing relief to vulnerable borrowers. The plan aims to assist those who have high interest rates or face difficulties in repaying their loans due to low incomes or excessive debt.
While the full details of the proposal have yet to be disclosed, the department intends to provide relief to borrowers who have balances exceeding their original loan amounts, those who have been in repayment for 25 years or more, individuals who pursued career-training programs resulting in unmanageable debt or inadequate earnings, and those who are eligible for other loan forgiveness programs but failed to apply.
President Joe Biden’s original plan was more wide-ranging, aiming to cancel up to $20,000 in federal student loans for individuals with annual incomes below $125,000 or couples below $250,000. However, this plan was rejected by the Supreme Court, leading Biden to call for a different approach based on a distinct legal foundation.
The new proposal seeks to address key issues contributing to the escalating student debt crisis. It aims to alleviate the burden of interest that causes borrowers’ balances to exceed their initial loan amounts. It also aims to aid borrowers who attended for-profit college programs with poor outcomes and older borrowers who have struggled to repay their loans over several decades.
The Education Department will continue refining the proposal as it undergoes a federal rulemaking process. Next year, the public will have the opportunity to provide written feedback on the plan.
Even with a more limited relief plan, strong opposition from Republicans is expected, as they view loan cancellation as an unjust burden on taxpayers.
The latest attempt relies on the Higher Education Act of 1965, which grants the education secretary the authority to “compromise, waive, or release” certain debts. However, the law lacks clarity on how this authority should be exercised, leading to ongoing debates since Biden assumed office.
To resolve the legal uncertainty, the proposal aims to establish new federal rules outlining the criteria for loan cancellation. These rules will undergo scrutiny by a committee of external stakeholders in a process called negotiated rulemaking. The committee, which includes representatives from various perspectives on student loans, will convene next week.
The committee’s negotiators consist of students, college officials, loan servicers, state officials, and advocates such as the NAACP. The meetings, which began earlier this month, are scheduled to continue until December.
At the conclusion of the process, negotiators will vote on a proposed rule. If consensus is reached, the department will proceed with implementing it. If consensus cannot be reached, the agency will propose its own plan, which will undergo a public comment period before finalization.
Although Biden initially called for a plan to assist as many borrowers as possible, his administration appears to be moving away from the mass loan cancellation promised in August 2022. The cost of the second proposal remains uncertain, unlike the estimated $400 billion price tag of the initial plan.
(Note: This news article has been paraphrased and rewritten, and the information presented may not be accurate or up to date.)
