President Joe Biden is taking steps to provide more relief to certain groups of student borrowers by expanding existing forgiveness and discharge mechanisms. The White House and the Department of Education have released draft regulatory language for debt relief using the rulemaking process under the Higher Education Act. The four groups of borrowers that will benefit from these measures are:
1. Borrowers who have loan balances that exceed their original borrowing amount.
2. Borrowers who entered repayment 25 or more years ago.
3. Borrowers who took out loans for career-training programs that resulted in unreasonable debt, insufficient earnings, or attended schools with high student loan default rates.
4. Other borrowers who are eligible for forgiveness under repayment plans or targeted relief programs but have not applied for such relief.
Additionally, the administration is exploring options to provide relief for borrowers facing financial hardship who are not covered by existing programs. The release of the draft is part of the rulemaking process, which includes soliciting public comments and input from advocates. The final rules may be adjusted based on this feedback.
At this stage, there are no estimates available on the number of borrowers who would benefit from these measures. The public will have an opportunity to comment on the draft rules on November 7.
This move towards alternative debt relief through rulemaking comes after the Supreme Court struck down President Biden’s plan for up to $20,000 in student loan cancellation. The draft builds on the administration’s commitment to student debt cancellation and the $127 billion in loan forgiveness already approved for nearly 3.6 million borrowers.
The first group of borrowers with loan balances exceeding their original borrowing may include those who experienced interest capitalization. Interest capitalization has been eliminated for most income-driven repayment plans, except the income-based repayment plan.
The second group appears to be borrowers who did not qualify for the recent one-time payment adjustment for income-driven repayment plans. This adjustment addresses the issue of improperly tracked deferments and steered borrowers towards forbearance, resulting in years of payments not being counted towards loan forgiveness.
The third group targets borrowers who attended for-profit schools with low gainful employment outcomes. For-profit borrowers account for a significant portion of federal student loan defaults.
The fourth group addresses borrowers who may not be aware of forgiveness options available to them, such as public service loan forgiveness or closed school loan discharges.
Further revisions to the rules will be released in December, following another round of public comment.
