New
rules proposed by the Biden administration on Wednesday would make it easier
for borrowers to get their federal student debt forgiven through several
existing programs.
The action is intended to overhaul relief programs that have been criticized
for their burdensome paperwork requirements and long processing times. It
builds on the administration’s efforts to expand targeted debt cancellation for
certain borrowers while President Joe Biden considers broader student debt
forgiveness.
“We are committed to fixing a broken system,” Education Secretary Miguel
Cardona said in a statement. “If a borrower qualifies for student loan relief,
it shouldn’t take mountains of paperwork or a law degree to obtain it.”
The proposal would reshape a debt forgiveness process for students whose
colleges deceive them, along with other programs for borrowers who are disabled
and those with careers in public service.
It’s unlikely to open debt forgiveness to huge swaths of borrowers, but it’s
meant to make it easier for those who already qualify. The Education Department
plans to finalize the rules no later than July 1, 2023.
Some of the most significant changes are to the borrower defense program, which
allows students to get their loans erased if their colleges lie to them or
otherwise commit fraud.
The program has seen an explosion of claims over the last decade starting with
an Obama-era crackdown on for-profit colleges. But political and legal battles
have led to a backlog of more than 200,000 applications, with some borrowers
waiting years for a decision.
Instead of requiring the government to review each claim individually - a rule
set by the Trump administration - the new proposal would allow the Education
Department to review and decide groups of similar claims together.
If a chain of colleges is found to have deceived students about their job
prospects after graduating, for example, the department would be able to
combine all claims from that school and approve them in one action. That option
would be available if there's evidence of widespread fraud by a school,
determined by state or federal authorities or through a class-action lawsuit.
In a change of policy, the Biden administration also hopes to hold more
colleges financially liable for their students’ canceled loans. In the past,
loan cancellation has typically been passed to taxpayers, but the proposal
rules would make it clear that the department plans to recoup costs from
colleges that commit fraud.
The new plan drew condemnation from the for-profit college industry, which
faced intense scrutiny from the Obama administration but later found an ally in
President Donald Trump.
Jason Altmire, president and CEO of the industry trade group Career Education
Colleges and Universities, said the policy would be an “unprecedented
expansion” of the Education Department’s authority.
“Today’s proposed rule sends a clear and troubling message that the Department
intends to use the rulemaking process to discharge federal student loans en
masse while hurting unfavored institutions and their students,” Altmire said.
Also targeted for an overhaul is the Public Service Loan Forgiveness program,
which was created by Congress as an incentive for government and nonprofit
workers but has been criticized for having overly rigid requirements.
Under the current rules, workers in eligible jobs who make 120 monthly payments
can get the rest of their federal student debt erased. Those payments must be
made in full and within 15 days of their due date, otherwise they don’t count
toward the 120 payments.
The new action would erase the 15-day rule, allowing payments to count even if
they are made late or in multiple installments. It also would allow borrowers
to make up to a year of payments in advance instead of making monthly payments.
For the first time, borrowers in certain situations could also make progress
toward loan forgiveness even if they don’t pay. Those who get their loans
paused for cancer treatment, military service or to join the Peace Corps, for
example, would be treated as if they were still making monthly payments during
that time.
While the changes would add flexibility, they don’t go as far as a temporary
overhaul the Biden administration instituted last year in response to the
pandemic.
That short-term fix allows borrowers to get past payments counted toward loan
forgiveness even if the money went toward loans that aren’t eligible under the
program’s rules. That change is in effect until Oct. 31, and the Education
Department urged borrowers to use it before it expires.
More flexibility would also be added for a separate program intended to help
borrowers with disabilities.
That program offers to cancel federal student debt for people who are
permanently disabled and unable to generate significant income. But many who
have been granted forgiveness later had their debt restored after failing to
submit paperwork during a three-year monitoring period.
The new action would eliminate the three-year review period and make more types
of disabilities eligible for cancellation. The Biden administration temporarily
lifted some of the program's rules during the pandemic, but the new changes
would be permanent.
All the proposed changes are the result of a federal rules process that has
been in the works for more than a year. It adds to the Biden administration’s
effort to expand targeted student debt relief through a patchwork of existing
programs. So far it has approved nearly $26 billion in debt forgiveness for
more than 1.3 million borrowers.
Biden has separately faced pressure to pursue mass debt cancellation, with some
Democrats urging him to erase $50,000 across the board. As a candidate Biden
supported $10,000 in forgiveness and in April he said he was “taking a hard
look” at the issue, promising a decision “in the next couple of weeks.” No
decision has been announced.
By
COLLIN BINKLEY, AP Education Writer.