The Biden administration is poised to revise regulations that will expand eligibility for a series of loan forgiveness programs designed to protect defrauded borrowers and forgive loans of certain public employees.
The Department of Education unveiled the new regulatory proposal on Wednesday, overhauling the department’s approach to loan forgiveness under the so-called borrower defense program and the Public Service Loan Forgiveness program.
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The proposal now enters a 30-day period of public comment. In a press release, the department said it expects to finalize the rule this fall and begin enforcement in July 2023.
“We are committed to fixing a broken system. If a borrower qualifies for student loan relief, it shouldn’t take mountains of paperwork or a law degree to obtain it,” Education Secretary Miguel Cardona said in the department’s release. “Student loan benefits also should not be so hard to get that borrowers never actually benefit from them. The Biden-Harris Administration is determined to build a more accessible, affordable, and accountable student loan system. These proposed regulations will protect borrowers and save them time, money, and frustration, and will hold their colleges responsible for wrongdoing.”
The proposed regulations would standardize the process for applying for loan forgiveness under the borrower defense program while also expanding eligible claims under the program.
The borrower defense program allows student loan borrowers who attended colleges that “misled” students or “engaged in other misconduct in violation of certain state laws” to have their loans forgiven.
Under the proposed regulations, students would be eligible for loan relief if they attended a college that engaged in “substantial misrepresentations, substantial omissions of fact, breaches of contract, aggressive and deceptive recruitment, state or federal judgments or final Department of Education actions that could give rise to a borrower defense claim.”
“Aggressive and deceptive recruitment” is the most significant addition to the program.
Under the Trump administration and former Education Secretary Betsy DeVos, eligibility for the borrower defense program was highly restricted, and loan forgiveness was difficult to obtain.
In contrast, since taking over the executive branch in January 2021, the Biden administration has taken several steps to discharge loans under the borrower defense program and expand eligibility for other student loan forgiveness programs.
Last month, the Department of Education announced it was discharging the loans of all borrowers who attended the defunct Corinthian Colleges. The 560,000 borrowers held a collective $5.8 billion in debt prior to the department’s decision to forgive the loans.
In April, the department announced new criteria for borrowers applying for forgiveness under the Public Service Loan Forgiveness program and the Income Driven Repayment program that expanded eligibility to 3.6 million borrowers. Those programs allow borrowers who have made a certain number of payments to have their remaining balance discharged.
The proposed regulations would allow late and lump sum payments, as well as certain deferments and forbearances, to count toward forgiveness eligibility. The department also plans to implement a system for borrowers previously denied forgiveness under the program to apply for reconsideration.
“Today’s proposals build upon the work the Biden-Harris Administration has already done to improve the student loan program, make college more affordable, and deliver tens of billions of dollars in relief to over one million student loan borrowers across the country,” the department said in its press release.
Payments and interest accumulation for federally held student loans have been frozen since the onset of the COVID-19 pandemic in March 2020. The Biden administration has extended the pause several times, most recently in April, when it prolonged the resumption of payments to the end of August.
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The White House has publicly flirted with the idea of forgiving a significant portion of federally held student loans ahead of the midterm elections, an action long called for by activists and members of the president’s own party, including Senate Majority Leader Chuck Schumer (D-NY) and Sen. Elizabeth Warren (D-MA). Legal experts, including a former Obama administration official, have said the president likely lacks the authority to discharge federally held loans unilaterally.
