The Education Department officially published proposed regulations last week for a new student loan forgiveness program tied to hardship. The rules outlines more than a dozen factors that could determine whether a borrower would qualify for debt relief.
“If finalized as the Department of Education proposes, these rules would authorize student debt relief to millions of borrowers struggling with high medical costs, childcare costs, and other financial hardships such as the impacts of a natural disaster,” said the department in a statement earlier in October.
The program, the final part of President Joe Biden’s “Plan B” for student loan forgiveness, is forging ahead for now, even as many other elements of the Biden administration’s student loan relief initiatives have stalled due to legal challenges. Observers widely expect the new hardship-based loan forgiveness plan to be challenged, as well, and its fate may ultimately depend on the outcome of this week’s presidential election.
Hardship Student Loan Forgiveness Plan Details
The so-called “Plan B” student loan forgiveness program is designed as a replacement for the one that the Supreme Court struck down last year. That plan, established under a different legal authority, would have wiped out up to $20,000 in federal student loan debt for qualifying borrowers. The Court’s conservative majority ruled that the program was not authorized by Congress under the HEROES Act.
The Biden administration’s second attempt involves a provision of the Higher Education Act that allows the Education Department to “compromise” or “waive” federal student debt balances in certain circumstances. The initial component of “Plan B” would have provided relief to four categories of borrowers, including those who have experienced runaway interest, and borrowers who first entered repayment on their student loans more than 20 years ago. But that program is currently blocked following a legal challenge.
The latest portion of “Plan B” would offer two student loan forgiveness pathways for borrowers experiencing hardship. Some people would qualify automatically if the Education Department determines that they are at a high risk of defaulting on their loans, based on information already available to department officials. Other borrowers would need to submit an application, subject to individualized review.
“If these rules are finalized as proposed, the Secretary of Education could waive up to the entire outstanding balance of a student loan when the Department determines a hardship is likely to impair the borrower’s ability to fully repay the loan or render the costs of continued collection of the loan unjustified,” said the department’s statement last month.
16 Hardship Factors For New Student Loan Forgiveness Plan
Under both pathways, the Education Department would consider at least 16 possible factors or indicators that suggest a borrower is experiencing some sort of hardship that would justify student loan forgiveness. Under the proposed regulations, these factors include the following:
- Household income;
- Assets;
- Type of student loans and total debt balances owed, including for non-federal student loans;
- Current repayment status and other repayment history information, such as a history of missed payments or $0 payments under income-driven repayment plans;
- Student loan total debt balances and required payments, relative to household income;
- Total balances of other debts and required payments, relative to household income;
- Receipt of a Pell Grant and other information from the Free Application for Federal Student Aid (FAFSA) form that suggests the borrower is low-income;
- Type and level of institution attended;
- Typical student outcomes associated with a program or programs attended (such as a program’s low graduation rate);
- Whether the borrower has completed any postsecondary certificate or degree program for which the borrower received federal financial aid;
- Age;
- Disability;
- Age of the borrower’s loan based upon first disbursement, or the disbursement of loans repaid by a consolidation loan;
- Receipt of means-tested public benefits such as temporary financial assistance, healthcare subsidies, or Medicaid;
- High-cost burdens for essential expenses like healthcare, caretaking, and housing;
- The extent to which hardship is likely to be temporary or persist going forward.
Importantly, the department emphasizes that this is a non-exhaustive list. Officials could consider “any other indicators of hardship identified by the Secretary.”
“We do not anticipate that the Secretary would need to evaluate every factor in proposed § 30.91(b) for a given borrower,” says department commentary included with the publication of the proposed regulations. “Rather, these factors identify different items that could be considered, either individually or in concert with other factors.”
“There are some factors that, might be sufficient with only limited additional evidence to determine a borrower is eligible for relief,” continues the commentary. “By contrast, there are other factors that are likely to serve as contributing factors, but that would likely require several more factors to sufficiently demonstrate that the borrower is eligible for relief.”
What Comes Next For Student Loan Forgiveness Based On Hardship
The publication of the proposed regulations in the Federal Register was an important next step for the eventual implementation of the new hardship-based student loan forgiveness plan. Now that the rules have been published, the public has an opportunity to submit formal comments for a period of 30 days. That comment period is set to end on December 2, 2024.
“The Department expects to finalize the regulations in 2025,” said the statement released last month. However, whether the program actually can go forward will likely come down to two factors: the outcome of this week’s presidential election, and whether an expected legal challenge results in the program getting blocked by a court.
Vice President Kamala Harris has spoken out in favor of the Biden administration’s efforts to assist student loan borrowers, including recent rule changes that have resulted in at least a million borrowers qualifying for relief through Public Service Loan Forgiveness. Meanwhile, former President Donald Trump and congressional Republicans have been highly critical of these efforts. Project 2025, a conservative policy proposal that Trump has tried to distance himself from, calls for the repeal of popular federal student loan forgiveness and relief programs, including PSLF.
Several of the Biden administration’s new regulatory updates are currently tied up in legal challenges. In addition to the first component of Plan B, the new SAVE plan has also been blocked by a nationwide injunction, leaving millions of borrowers in limbo.
Read the full article here
