Loan benefits

Biden administration begins overhaul of student loan forgiveness and income-tested repayment programs

The Biden administration is moving forward with a regulatory overhaul of major student loan forgiveness and repayment programs, including civil service loan forgiveness and income-tested repayment.

On Friday, the Education Department announced a schedule of public hearings that will begin in October for a negotiated rule-making process to “rewrite the rules” governing major federal student loan programs. According to a press release from the Ministry of Education, “Negotiated rule-making is a process whereby the ministry convenes representatives of interested groups to discuss proposed regulations over several sessions with the aim of reaching consensus. on the language of the proposed regulations ”.

Negotiated rule-making sessions will review the following federal student loan programs:

  • Public Service Loan Remission (PSLF), which can provide student loan forgiveness to eligible borrowers after 10 or more years of employment with nonprofit or public sector organizations.
  • Income-based repayment plans, which allow borrowers to repay their student loans using formulas applied to their income and family size. The programs include Revenu Contingent Repayment (ICR), Revenu Based Repayment (IBR), Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE).
  • Repayment Defense, which allows borrowers defrauded by their schools to request the cancellation of their federal student loan debt.
  • The Total and Permanent Disability Discharge (TPD), which cancels the federal student loan debt of borrowers who are unable to maintain substantial and gainful employment due to a health problem.
  • False certification and releases of closed schools, which provide for the cancellation of student loans to borrowers for certain academic misconduct and abrupt school closings.

The ministry also said other key topics will be assessed during the negotiated rule-making hearings, including the capitalization of interest on federal student loans (which can have devastating cumulative effects on loan balances), eligibility for the Pell grant and arbitration clauses in student loan and enrollment agreements.

“This regulatory committee will do the important work of improving borrowers’ access to the benefits that reduce the burden of federal student loans, including targeted discharges,” Education Secretary Miguel Cardona said in a statement. “We look forward to convening the committee and remain committed to the mission of better serving the students and borrowers of our country. “

The Ministry’s stated goal of rewriting the regulations governing these programs suggests that major changes may be in store. Advocates have long argued that many of these federal student loan programs are in need of a complete overhaul. For example, Public Service Loan Forgiveness suffers from a catastrophic 98% refusal rate. Thousands of borrowers who have applied to the borrower’s defense for repayment have had their requests stalled for years. And advocates recently accused the ministry of failing to process nearly half a million student loan borrowers who may be eligible for a TPD discharge, but may not realize it.

The ministry’s announcement follows its decision to extend the suspension of student loan payments until January 31, 2021. The moratorium on student loans was originally scheduled to expire on September 30 of this year. However, the four-month extension will not leave enough time to finalize new regulations. Developing negotiated rules is a process that typically takes at least one to two years.

The first negotiated rule-making session will begin on October 4 and run through October 8, with subsequent hearings in early November and early December. All sessions will be virtual and open to the public. More information is available here.

Further reading

5 takeaways from extending Biden’s student loan relief

Student Loan Cancellation Debate Continues Amid Service Disruption

Huge upheaval in student loan management: this important loan manager terminates his contract

$ 125 million in student debt relief announced for 50,000 students, thanks to Biden stimulus funds


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