Broad student debt relief unlikely
Committee meets to discuss Biden’s ‘Plan B’
President Joe Biden’s second attempt at far-reaching student loan forgiveness likely will reach fewer borrowers than some might hope.
The Supreme Court in June overturned Biden’s original plan for mass forgiveness, which would have relieved up to $20,000 for tens of millions of Americans. Even before then but especially ever since, the president has focused on canceling the student loan debt of specific populations covered by existing policy.
At the same time, the federal Education Department turned to a process known as negotiated rulemaking, or “neg reg,” to enable broader relief through changes to federal higher education law.
But that process, which leans on a committee of stakeholders to deliberate those rule changes, may not result in the kind of sweeping student loan debt forgiveness Biden’s first plan aimed for. The first neg reg meeting wrapped up Wednesday, and throughout it Education Department officials stressed its limitations, redirecting the conversation on specific borrowers. Threats of litigation are also top of mind.
Here are five takeaways from the committee’s first two days of talks.
Don’t bet on a big forgiveness plan. After the morning roll call, which revealed at least four absent members of a committee of fewer than 20 people, Education Department officials said they needed to clarify a few things before opening up the discussion. On Tuesday, some negotiators had alluded to their hopes for broad debt relief like the kind Biden proposed before the plan was struck down by the Supreme Court. Some spoke of their frustrations with programs such as Public Service Loan Forgiveness, with interest rates that make it difficult for borrowers to make a dent in their balances, and with poor marketing about relief options.
But on Wednesday, Education Department
Deputy Secretary Ben Miller reiterated that those ideas are beyond the scope of this series of neg reg meetings.
“Think of each question as a group of borrowers, where we might discharge some or all of their loan or loans,” Miller said. “I also want to try and clarify a bit on the lines between what are things we are looking to do here in this rule and what we’re not looking to do here with this rule.
“We got into a lot of details yesterday about things where the department does not issue regulations.”
And on Tuesday, Tamy Abernathy, a policy coordinator with the department, stressed that the mission of this committee isn’t to provide “broad-based debt cancellation, where we are going to wipe off debt in its entirety.”
Older Americans, Parent PLUS − ‘most vulnerable’ borrowers in the spotlight. The first question of the day focused on borrowers who took out loans before certain benefits were created. These borrowers tend to be older, often of retirement age, and have been in repayment for decades. These are among the nation’s most vulnerable borrowers, negotiators said, especially given people who’ve been in repayment the longest tend to be experiencing the most hardship.
Other groups that negotiators highlighted: borrowers of Parent PLUS or Federal Family Education Loan (FFEL) loans, which aren’t eligible for most income-driven repayment plans.
Debate over value of college – and how to measure that. The second question on Wednesday’s agenda: How should the Education Department handle the debts of borrowers whose degree programs, it later turns out, do not lead to salaries that can pay off the loans?
The Biden administration recently issued finalized rules known as gainful employment that increase accountability and transparency of programs with poor outcomes. These rules are designed to protect students moving forward. But what about former students, borrowers who – in some cases decades into their loans – have yet to secure the careers or incomes they envisioned they’d get by enrolling in those programs?
Negotiators largely centered on how to determine which programs are bad apples. Some stressed the department should look at colleges’ completion rates or the percentage of students unable to pay down their principal during a certain period of time.
What defines a ‘hardship’? The department reconsiders. Sherrie Gammage, one of the negotiators representing student loan borrowers who attended four-year college programs, is in her 60s and still paying off loans. Stage 4 non-alcoholic liver disease and chronic pancreatitis upended her life, she said Wednesday, and threw her into deferment, which is a type of postponed payment that, unlike forbearance, doesn’t accrue interest.
Her condition, a chronic illness, is one of many types of unforeseen challenges the department could consider in new guidelines about loan discharge eligibility. Incarceration or a lack of a permanent address were among other burdens negotiators brought up.
“It’s hard to hear what our borrowers are facing,” said Abernathy, the Education Department policy coordinator.
The federal government has higher standards for discharging student loans through bankruptcy than it does for other forms of debt. Scott Waterman, a negotiator and bankruptcy trustee, urged the department Wednesday to consider lowering those standards.
Questions linger about court challenges. There’s one big catch to this whole process, however: It hinges entirely on whether new regulations are fortified with the right legalese. Producing more regulations that don’t hold up against court challenges – which are likely – would further erode borrowers’ trust in the system, said Scott Buchanan, a negotiator representing services.
He said it would only heighten feelings from borrowers that the system is failing, especially on the heels of the Supreme Court’s blow to broader loan forgiveness.
The pressure is on the Biden administration to finalize a rule if and before Republicans win the White House in next year’s election. A final rule must be published by Nov. 1, 2024, for it to take effect in July the following year.
The next meeting is scheduled for Nov. 6-7, and the one after that for Dec. 11-12. Both of the sessions, like the one that kicked off Tuesday, will be virtual and include opportunities for the public to comment.