MORE FLEXIBILITY EYED FOR STUDENT DEBT FORGIVENESS
New rules proposed by the Biden administration last week 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 smooth out 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 Obamaera 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 process groups of similar claims together.
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 proposed rules would make it clear that the department plans to recoup costs from colleges that commit fraud.
And for the first time, borrowers would know when to expect a decision: The policy would require the Education Department to approve or deny individual claims within three years.
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.
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. Each monthly payment must be made in full and within 15 days of its due date, otherwise it doesn’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. People 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.