The Biden administration has proposed a series of changes to federal student loan programs in an effort to expand access and ease the loan forgiveness process. (AP Photo/Carolyn Kaster, File)
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Federal student loan programs could be more easily accessible, more forgiving, and soon available to more people under new regulations proposed by the U.S. Department of Education.
The Biden Administration proposed rulesunveiled Wednesday, July 6, seek to expand and improve existing programs that have previously been criticized for limited accessibility and ease of use, the department said in a press release.
From new regulations are provisions to expand the defense of borrowers in cases where colleges are accused of lying or taking advantage of borrowers, easing and expanding the Public Service Loan Forgiveness Program, removing interest capitalization in some cases and to allow a broader set of disability statuses to be included in qualifying for discharges.
“If a borrower qualifies for student loan relief, they shouldn’t take mountains of paperwork or a law degree to get it,” US Education Secretary Miguel Cardona said in the statement. “These proposed regulations will protect borrowers and save them time, money and frustration, and hold their colleges accountable for wrongdoing.”
From 2021, the Federal Reserve announced that 30% of all adults say they have “incurred at least one debt for their education”. Among adults who took on student debt, 20% still had debt last year and 12% of those who had debt were behind on their payments.
The median amount of student debt among adults with overdue payments would be between $20,000 and $24,999.
Biden would have considered forgive part of federal student loanswith polls showing a majority of people in the United States support forgiving up to $10,000 in loan debt by each borrower.
But Jason Altmire, president and CEO of Career Education Colleges and Universities (CECU), a trade association representing for-profit colleges, criticized the proposed loan defense-until-repayment regulations as “a clear message and troubling that the Department intends to use the regulatory process to mass repay federal student loans while harming disadvantaged institutions and their students in the process.
“This is an unprecedented expansion of the Department’s authority that was never contemplated by Congress and will have significant negative economic consequences for institutions and taxpayers,” Altmire said.
If you have student loan debt, here’s what the new changes — which the department says will be finalized by November 1 — could mean for you.
Protection against predatory behavior by colleges
The new regulations would help borrowers receive debt forgiveness in cases where their college is accused of taking advantage of them or lying. These situations include “allowing group complaints, eliminating overly strict limits on when borrowers can file a complaint, expanding the type of misconduct that can lead to an approved complaint to include aggressive and deceptive recruiting practices, and s ensuring that borrowers receive timely decisions on their claims. “, reads the press release.
In addition, the Ministry proposes to prohibit colleges from having borrowers sign arbitration agreements and instead promise them to take their case to court.
These rules are intended to increase the transparency of arbitration proceedings, helping the department to better investigate possible college wrongdoing.
The ministry also offered automatic waivers for borrowers enrolled in a college that is closing as long as the borrower was enrolled within 180 days of the closing and had not completed their studies at the school.
“The Department has seen a significant number of college closures, and often these schools leave borrowers in debt but without a degree. Many of these borrowers do not repay their loans after the closing,” the statement said.
Some analysts reject the department’s efforts to defend borrowers. The provisions included could be weaponized against for-profit institutions and should instead aim for a better balance between protecting students and institutions, according to Nicholas Kent, director of policy at CECU.
“We don’t believe it’s based on the existing statue, and we believe it suffers from inadequate due process protection,” Kent told McClatchy News.
Public Service Workers and Debt Forgiveness
The existing Public Service Loan Forgiveness Program (PSLF) provides loan forgiveness to public service workers employed full-time by eligible federal, state, local, or tribal organizations and nonprofits.
Under the new regulations, obtaining forgiveness through the PSLF would be easier for borrowers, allowing more payments to qualify under the program, including lump sum payments and late payments. , as well as certain forbearances and deferrals, such as a deferral of cancer treatment.
The proposal also aims to expand access to the program to more workers and create a formal process for reconsidering denied claims.
“These tools have been part of the department’s tool belt for some time,” Kent said. “The department proposes to expand these tools to make the benefits that flow from the loan forgiveness provision much more generous to borrowers.”
Cap the amount of interest added to payments
The broadest rule proposed by the department suggests capping the capitalization of interest where it is not required by law.
Since July 1, interest rates on student loans have been more expensive, with rates increasing by 1.26 percentage points. According reports from Forbes. Existing federal student loans were not affected by the change as they operate at a fixed rate.
Given the increase in interest, the new provision could limit the amount of interest borrowers can accrue on their principal balance.
Under the proposed regulations, borrowers who are struggling to repay their loans could get a boost as the department exempts capitalization “when a borrower goes into repayment, comes out of forbearance, defaults on a student loan and quit most income-driven repayment plans,” the statement said.
Disabled Borrowers and Debt Forgiveness
The proposed settlement included a provision to expand the set of disability statuses recognized as eligible for pardon and to remove barriers that make the discharge process too long and complicated. This includes removing the three-year income test period for some borrowers and expanding the limited types of documents borrowers must submit to prove their eligibility for relief.
For borrowers with disabilities, this means more borrowers will have access to landfills. The process for receiving forgiveness will also be easier and more accessible.
When can you expect to see changes?
Over the next week, the ministry will release an official version of the proposals and begin accepting public comments for a 30-day period. After a review period, the department will respond to comments in the final decision which is expected by November 1.
After the finalized version is released, the Office of Management and Budget will review the rules and seek input from other federal agencies before the White House approves the rule.
If all goes as planned, the proposed rules will be implemented by July 1, 2023.
This story has been updated to reflect the context surrounding Jason Altmire’s comments on the proposed rules.
This story was originally published July 7, 2022 1:02 p.m.
