The Biden Administration Adopts a More Targeted Approach to Student Loan Relief

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The Biden Administration is refining its strategy on student loan relief, opting for a more targeted approach that focuses on particular borrower groups rather than the more expansive plan previously struck down by the Supreme Court in June. On Monday, the Department of Education unveiled a draft of new federal regulations, setting the stage for another attempt to ease the burden of student loans. This renewed initiative specifically aims to assist borrowers who are deemed particularly vulnerable, such as those with exorbitant interest rates or minuscule incomes that render full repayment improbable.

While complete details are still pending, the Department of Education has signaled its intention to forgive part or all of the student loans for specific categories of borrowers. These include individuals whose loan balances have surpassed the original amounts, those whose loans entered the repayment phase 25 or more years ago, and borrowers who acquired loans for career-training programs that resulted in either unreasonable debt or inadequate income. Additionally, it will target individuals who qualify for other loan forgiveness programs but have not applied. A fifth category under discussion focuses on borrowers experiencing financial hardship that current loan systems inadequately address.

“Committed to remedying the flaws in our nation’s fractured and cost-prohibitive student loan infrastructure, President Biden and I aim to ensure that student debt does not become an insurmountable obstacle to opportunity,” stated Education Secretary Miguel Cardona.

The original plan by President Biden was more inclusive, offering up to $20,000 in federal student loan forgiveness for individuals earning less than $125,000 annually or couples earning less than $250,000. However, this proposal was turned down by a majority-conservative Supreme Court, prompting the Department of Education to revisit the legal foundations of their approach.

The revised proposal seeks to address some of the most pressing issues contributing to the escalation of student debt. Among these are the accumulation of interest that exceeds the original loan amounts, the plight of borrowers who attended for-profit colleges with poor performance metrics, and the challenges facing older borrowers with longstanding loans.

As the draft proposal undergoes federal rulemaking processes, it will continue to be revised based on public feedback to be collected next year. The proposed regulations would empower the Department of Education to entirely cancel federal loans for borrowers falling under some of these categories. For example, for individuals who began repayments more than 25 years ago, the department may waive the remaining loan balance, effectively leading to complete loan cancellation.

The new initiative is not without its critics, particularly among Republicans who argue that such loan forgiveness places an undue burden on taxpayers. This attempt is based on the Higher Education Act of 1965, which gives the Secretary of Education the authority to waive, compromise, or release certain debts, though the extent of this authority remains a contentious legal issue.

Before the new rules are enacted, they will be subject to review by a diverse committee composed of stakeholders including students, college officials, loan servicers, state officials, and advocates such as the NAACP. The committee is scheduled to convene next week, with meetings set to continue until December. Following deliberation, if consensus is achieved, the department will proceed with the proposal. If not, the agency will put forth its own plan subject to a public comment period.

Despite President Biden’s earlier pledges for more sweeping debt cancellation, it appears that the Administration is gravitating towards a more constrained form of relief. The cost of the previous plan was estimated to be around $400 billion, whereas the financial implications of this revised approach are yet to be determined.

In related news, the Department of Education is withholding $7.2 million in payments to the student loan servicer MOHELA for failing to send timely billing statements to 2.5 million borrowers. As a corrective measure, all affected borrowers have been placed under forbearance until the issue is rectified.

Federal student loan repayments resumed this October, marking the first such resumption since the pandemic began. Industry insiders caution about possible disruptions as loan servicers, often understaffed, reintegrate millions of borrowers back into the repayment systems.

This report is produced by The Big Big News education team, supported by the Carnegie Corporation of New York. The AP retains sole responsibility for the content.

Frequently Asked Questions (FAQs) about targeted student loan relief

More about targeted student loan relief

• Higher Education Act of 1965
• Department of Education Official Statement on New Loan Relief Plan
• Supreme Court Ruling on Student Loan Relief
• Public Feedback on Federal Rulemaking Process
• Overview of President Biden’s Original Loan Relief Plan
• Opposition to Student Loan Forgiveness
• NAACP Position on Student Loans
• MOHELA Official Website
• Federal Student Aid: Repayment Plans
• Industry Warnings on Student Loan Repayment Resumption