US moves toward narrower loan relief
Targets groups of students
WASHINGTON — The Biden administration is moving toward a narrower student loan relief plan that would target specific groups of borrowers — those with soaring interest, for example — rather than a sweeping plan like the one the Supreme Court rejected in June.
The Education Department on Monday released a draft of new federal rules paving the way for a second attempt at student loan relief. The proposal targets groups that are seen as especially vulnerable, focusing on those who owe so much, or make so little income, that they otherwise may never repay their loans.
Though full details are likely months away, the department says it wants to cancel some or all student debt for: borrowers whose balances exceed what they originally owed; those who have loans that entered repayment 25 or more years ago; those who used loans to attend career-training programs that led to “unreasonable” debt loads or insufficient earnings; those who are eligible for other loan forgiveness programs but did not apply.
A fifth group is also being discussed — “those who are experiencing financial hardship that the current student loan system does not currently adequately address.”
“President Biden and I are committed to helping borrowers who’ve been failed by our country’s broken and unaffordable student loan system,” Education Secretary Miguel Cardona said in a statement. “We are fighting to ensure that student debt does not stand in the way of opportunity or prevent borrowers from realizing the benefits of their higher education.”
President Biden’s initial plan was broader. It would have canceled up to $20,000 in federal student loans for those with annual incomes below $125,000 or couples below $250,000. But after that was rejected by the court’s conservative majority, he called on the Education Department to try again using a different legal basis.
The new proposal aims to tackle issues that are seen as some of the biggest culprits behind skyrocketing debt.
It would help counter interest that snowballs beyond borrowers' original balances. It would offer relief to borrowers who attended for-profit college programs with poor outcomes. It would also help older borrowers who took out loans decades ago and struggle to make payments.
The draft proposal appears to give the department authority to wipe away federal student loans entirely for borrowers in some categories.
For those who started repaying loans more than 25 years ago, the proposal says that “the secretary may waive the outstanding balance of a loan.” The same language is used for borrowers who are eligible for other cancellation programs but haven't applied.
For those with snowballing interest, the draft would allow the department to cancel “all or a portion of ” the amount beyond their original balance. In effect, it would allow the department to reset borrowers back to what they initially borrowed.
For those who attended lowvalue college programs, the draft says the secretary "may waive repayment." Borrowers would fall into that category if they attended a program that failed new standards in a separate federal rule known as gainful employment.
Even a more limited plan for relief is sure to draw fierce opposition from Republicans, who see cancellation as an unfair burden on taxpayers.
The proposal aims to settle the dispute by creating new federal rules detailing cases that merit cancellation. Before the rules can be enacted, they must be weighed by a committee of government outsiders in a process known as negotiated rulemaking. The new draft will be taken up when the committee meets next week.