- The first round of negotiations for Biden's new student-debt relief plan concluded.
- The Education Department confirmed broad-based relief is not on the table.
The public got a glimpse into how President Joe Biden's Education Department is crafting its new plan for student-loan forgiveness — and it's looking like it won't be as expansive as some borrowers might want.
On October 10 and 11, a group of selected negotiators met with Education Department officials to discuss what student-loan forgiveness under the Higher Education Act should look like. During the sessions, the negotiators discussed which groups of borrowers should benefit from Biden's second attempt at debt relief, and while the process is ongoing and it will be months until the rule's language is released, the department negotiators made clear that the relief will not impact all federal borrowers.
"We are not looking at a broad-based debt cancellation where we are going to wipe off debt in its entirety," Tamy Abernathy, the department's negotiator, said during the Tuesday session. Abernathy said that instead the department would look at more specific waivers allowing at least some debt forgiveness for targeted groups.
Abernathy later noted that she's "not saying that we are not going to completely cancel borrowers' debts, and that we're only going to waive a portion of their debts. What I'm saying is that there are many moving pieces and parts of this and the categories for which we are presenting and we end up crafting those regulations could cancel some borrowers' debt completely, but it could not cancel all borrowers' debt completely."
Biden's first attempt at relief used the HEROES Act of 2003, which allows the education secretary to waive or modify student-loan balances in connection with a national emergency, such as the COVID-19 pandemic. The planned relief was up to $20,000 for Pell Grant recipients making under $125,000 a year, and up to $10,000 for other federal borrowers within the same income cap. It was not targeted to specific types of borrowers, as opposed to the ongoing discussions for relief under the Higher Education Act. That attempt, however, was struck down by the Supreme Court, which ruled the education secretary did not have the authority to enact broad relief using that law.
The Education Department put forth an issue paper outlining five groups of borrowers it wants to focus on for relief: those whose balances have grown due to unpaid interest, those who are eligible for relief under programs like income-driven repayment but did not apply, those who attended schools that left them with too much debt compared to earnings, those who entered repayment before new benefits became available, and those who are experiencing unique forms of financial hardship.
The department asked negotiators to focus on those categories, rather than all federal borrowers broadly. It also noted that issues like reforms to income-driven repayment plans and Public Service Loan Forgiveness are separate regulations and will not be a part of the discussions for the new student-debt relief rule.
What comes next
While the negotiations shed some light on what the final rule might look like, things could change over the course of the next few months. There will be two more rounds of negotiations in November and December, and following the adoption of proposed language, the Office of Management and Budget will review it, and then the public will have an opportunity to comment on it next year. Depending on those comments, the department could also choose to change the language at that point.
What's clear now is the Education Department is evaluating its compromise and waiver authority under the Higher Education Act after the Supreme Court struck down the broader relief under the HEROES Act.
During the sessions this week, negotiators brought up a range of topics for the department to consider, including expanding relief to borrowers who hold parent PLUS loans, automating applications for relief to prevent administrative hurdles, and discharging debt for borrowers who have missed paperwork or other errors that make it difficult for a borrower and servicer to determine their repayment progress.
The Education Department was unable to respond to all of the negotiators' points, and Abernathy said on Wednesday that the purpose of these initial sessions is for the department to collect information it can respond to in November and December.
"We're not purposely being vague or evasive," Abernathy said. "Many of the things that you're asking us are things we cannot respond to immediately. We need to go back, we need to look at the data, we need to be able to analyze what you're asking and discuss it as a group."
She added that "specifically about hardship, it's hard to hear what our borrowers are facing, and we are not insensitive to caring about all of the obstacles and where we can find ways to streamline and automate and provide the secretary the authority to make great decisions for these borrowers in these respective categories."