In a bold step aimed at reshaping the economic futures of millions, President Biden is scaling up the fight against the rising tide of student loan debt. He made a campaign promise, and his intention is to keep it. However, he is now working through the process called negotiated rulemaking to get there.
There are several measures the Biden administration is trying to implement quickly. Time is not on the current administration’s side, as we are in an election year. If approved, the relief plans would bring the total number of borrowers eligible for student loan debt relief up to 30 million, which includes 4 million borrowers already approved for forgiveness.
Included within the Biden Student Relief Plans
There are several proposals being considered for Biden student relief plans. While we don’t have all the details, the plans aim to help millions of borrowers. The plans offer an opportunity to authorize waivers to:
- Cancelling up to $20,000 of accrued or capitalized interest on loans since entering repayment. There are no income qualifiers, meaning all borrowers could potentially be eligible for this.
- Borrowers enrolled in the SAVE plan could be eligible for more interest cancellation based on income. For individuals making up to $120,000 per year, and married borrowers making up to $240,000 per year, the proposed plan would eliminate all accrued interest.
- Automatically cancelling debt for borrowers who would otherwise be eligible for loan forgiveness under income-driven repayment plans, including SAVE, PSLF, closed school discharges, or other forgiveness programs, but have not enrolled. This removes the need to apply and adds simplicity to the complicated paths to student loan forgiveness.
- Eliminating student debt for borrowers who entered repayment a long time ago. Borrowers with undergraduate debt could see their balances forgiven after 20 years of repayment. Borrowers with graduate school debt could see their balances forgiven after 25 years of payments. There will be no requirement to have been or be enrolled in an income-driven repayment plan.
- Cancel student debt for borrowers who previously enrolled in low-financial-value programs. These are programs or schools that have either lost their eligibility to participated in federal student aid or were denied recertification of their eligibility for federal student aid. These programs or schools would have failed to provide sufficient financial value, as indicated by high student loan default rates or unaffordable debt burdens relative to the borrower’s income.
- Cancel student loans for borrowers facing financial hardship that may prevent them from repaying their loans now or in the future. This provision seems to be a case-by-case review where a borrower could apply about the hardships they are facing. For example, the inability to repay their student loans due to the costs of childcare or medical expenses.
The Process to Approve: Negotiated Rulemaking
Student loan debt has ballooned over the past few decades, and the current administration recognizes the urgency of addressing this issue head-on. Just the potential to forgive interest for all borrowers, could have a significant income for borrowers. While the Biden administration has announced their plans, and the U.S. Department of Education has provided details about the cancellation provisions, there’s still a decent number of approvals required in the process of negotiated rulemaking.
The negotiated rulemaking process, also known as neg reg, can take time. Typically, the neg reg process is optional, unless there is a law requiring the process. In the case of the U.S. Department of Education, it is required by law to use negotiated rulemaking if regulations are being created that will alter or change financial aid programs. Because President Biden is working with the U.S. Department of Education to change and implement forgiveness through regulation, it is required.
At this point in time, the U.S. Department of Education has named 14 negotiators to the neg reg discussing the new changes for federal student loan forgiveness. They met for several sessions and submitted a proposal to the U.S. Department of Education. Once proposed regulations are released, which we can expect to see in the coming months, there will be time to allow for public comment. After public comment is received, a response will be provided, and final rules are published. Depending on the regulation, it’s unclear when the implementation date will be. Generally, the neg reg process follows what’s known as the Master Calendar. According to the Master Calendar, any final rules published by November 1, will be implemented by the following July 1. For example, if final rules are published on Oct. 24, 2024, the implementation will likely be July 1, 2025. However, there could be a push to implement the rules before that, it will all depend on the final rules.
With a new set of proposals under consideration, Biden’s administration's ambition is to significantly alleviate the burden faced by over 30 million Americans. This is a resolute move, especially after the Supreme Court struck down the initial student debt relief program, signifying the administration's unwavering commitment in ensuring higher education remains a vessel of opportunity rather than a vessel of financial strain.
Opposition and Support
It’s not a secret that Biden’s forgiveness plans have faced a decent amount of opposition. His initial plan he tried to authorize under the HEROES Act was struck down in the U.S. Supreme Court. Despite his inability to use the HEROES act, he has been steadfast to help ease the burden of student loan debt for borrowers.
The opposition has argued that student loan debt cancellation is benefiting wealthy student loan borrowers—a group that is educated and has a higher earning potential when compared to students who don’t attend college. There is also concern that relieving debt won’t do anything to stimulate the economy, so the impacts won’t be felt.
Supporters of forgiveness have been noted to believe that borrowers who attended college are unable to realize their higher earnings due to the mass amount of debt needed to attend college. Riddled with issues, like, confusing or expensive student loan repayment programs, challenges in discharging the debt through bankruptcy, has created other problems for borrowers. For example, until the creation of the SAVE plan, many income-driven repayment borrowers who had been making years of on-time regular payments saw their balances grow with “runaway interest” charges. Due to the rules of the income-drive repayment plans, except for the SAVE plan, a borrower’s monthly payment could be lower than their monthly accruing interest. These initiatives presented by the Biden administration have been created to fix some of the problems that have existed in the federal student loan programs.
In support, the Biden administration’s U.S. Under Secretary of Education, James Kvaal, states, “These historic steps reflect President Biden’s determination that we cannot allow student debt to leave students worse off than before they went to college. The President directed us to complete these programs as quickly as possible, and we are going to do just that.”
The Path Forward
These proposals are compelling for many student loan borrowers. It would be hard to find anyone who would be unhappy with debt forgiveness. However, the biggest threat to these plans is time. The time to get through neg reg, and the time left in the current Biden administration. However, the timing is likely not an accident. Pushing through with these initiatives before November could mean more votes for President Biden in the upcoming election.
The Biden administration has already forgiven a large amount of federal student loan debt, and the new proposals will just increase those totals. The root cause of high debt can be attributed to many issues, which many feel are not being addressed. The combination of high college costs, ability to borrow with no or negative credit history, and confusing repayment programs, has created a student loan crisis. It’s almost like plugging a hole when you know the pressure will just make a new one later—the problem may be fixed for a short period of time, but you should prepare for the problem to arise again.
The Higher Education Act of 1965, as amended, is still waiting for reauthorization. Reauthorization of the act could result in much needed fixes in some of the root causes. But for now, it seems like the Biden administration is doing their best to fix the result of the root problems.