Hardship could soon be a basis for student loan forgiveness. In a procedural victory for advocates, the Biden administration announced that it will convene a hearing to evaluate a new student debt relief option based on a borrower’s financial hardship.
Advocacy groups had been pushing the Education Department to allow for a robust discussion on this element of Biden’s new student debt relief plan currently under development so that stakeholders and the broader public could have a say in determining who will qualify. But until now, the Education Department had not allowed for a session dedicated to this topic.
Here’s the latest.
Biden Working On A New Student Loan Forgiveness Plan
Shortly after the Supreme Court struck down President Biden’s broad student debt relief plan last summer, which would have provided up to $20,000 in federal student loan forgiveness for millions of borrowers, the administration announced it would move forward with a “Plan B.” This new loan forgiveness program would be established under the Higher Education Act, an entirely different legal authority from the one that was the basis of Biden’s initial plan.
The HEA provides the Education Department with so-called “compromise and settlement” authority, which borrower advocates and progressive Democrats in Congress have long pointed to as a viable legal foundation for broad student loan forgiveness. To establish a new student debt relief plan under the HEA, the department has been engaged in a months-long negotiated rulemaking process. This involves a committee of key stakeholders convening in public hearings to discuss potential rules and regulations governing the new program.
To survive an anticipated legal challenge, the Biden administration is taking steps to ensure compliance with HEA rules regarding negotiated rulemaking, and providing periods for the public to weigh in. In addition, the department has proposed that the new HEA loan forgiveness plan be more narrowly-tailored to certain subsets of borrowers.
During the department first three negotiated rulemaking sessions held last fall, the rulemaking committee focused on four broad categories of borrowers: those who owe more now on their student loans than what they originally borrowed; those who have been in repayment for longer than 20 or 25 years; those who qualify for existing student loan forgiveness programs but have not applied; and former students who attended predatory schools.
Fifth Student Loan Forgiveness Category Based On Hardship
The Biden administration had also proposed that the new HEA student loan forgiveness program apply to a fifth category of of borrowers: those experiencing financial hardship. But the department provided minimal detail on what “hardship” could mean, and provided for little time at the prior negotiated rulemaking sessions to discuss what kind of hardships could qualify someone for relief.
After weeks of pressure, the Education Department announced on Wednesday that it has scheduled a new negotiated rulemaking session solely on the topic of hardship.
“After continued review, we have scheduled a fourth session of the committee to discuss regulatory language addressing the use of hardship as a basis for waiver of a student loan borrower’s loan,” says the department’s notice. “This session will solely focus on discussing the regulatory language related to hardship.”
Advocates for borrower praised the administration’s decision.
“We applaud the Biden Administration for once again heeding the calls of student loan borrowers and coming back to the negotiating table to ensure that all borrowers who are experiencing hardship are able to benefit from the President’s program,” said Persis Yu, Deputy Executive Director at Student Borrower Protection Center, in a statement. “Last year, when the Supreme Court callously robbed millions of working families of debt relief, President Biden stood with borrowers and assured them that he remained in the fight to cancel student debt using every remaining tool available. Today’s announcement marks an important step forward in delivering on that promise and will help ensure that the millions of borrowers crushed under the weight of student loan debt also have the chance for economic freedom from this crisis.”
What Hardships Could Qualify For Student Loan Forgiveness?
Borrower advocates and stakeholders on the rulemaking committee had previously proposed a variety of circumstances that could establish hardship for purposes of qualifying for student loan forgiveness under the HEA plan. These include borrowers who are in a bankruptcy status; those who are in default on their student loans; former students who received Pell Grants; borrowers who are receiving public assistance (such as food stamps, Medicaid, or Affordable Care Act subsidies); disabled borrowers; and those with a demonstrated history of earning minimal income.
Advocates for borrowers, other stakeholders, and the Education Department will have to balance competing goals: providing expansive relief to borrowers while keeping the application process simple, and providing automatic loan forgiveness wherever possible. The department will also likely want to keep the parameters narrow enough to potentially survive an expected legal challenge.
The new negotiated rulemaking session on hardship is scheduled for February 22 and 23. “Public comment will be held for one hour starting at 3 p.m. on the first day only,” says the department. Draft regulatory language on hardship categories is expected to be released the week prior to the hearing, which will provide initial insight into what Biden administration officials are thinking.
After this latest negotiated rulemaking session concludes, the Education Department could release final regulations governing the HEA student loan forgiveness plan this May.
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