Joe Biden Taking Another Whack At Student Debt Relief
Joe Biden Taking Another Whack At Student Debt Relief
If high interest eated your student loan balance, you're probably in luck!
In June, the Supreme Court struck down Joe Biden’s executive order that would have provided $10,000 in debt forgiveness to most people with federal student loans (or up to $20,000 for borrowers who received Pell grants). The Court decided that nah, a global pandemic and economic chaos wasn’t enough of an “emergency” for loans to be forgiven under the law Biden invoked, the 2003 HEROES Act, proclaiming that any broad student loan forgiveness would have to be specifically passed by Congress.
Biden pledged that he wasn’t whipped yet, and directed the Education Department to take another swing at loan forgiveness, this time under the authority of a different law, the Higher Education Act (HEA). That process has been moving along — slowly, because the Ed Department wants to make sure whatever rules it proposes this second time will have a higher chance of holding up to the Six Mad Gods on the Court. This week the administration released a draft of proposed rules for a new debt relief program, which will now be the subject of further meetings this month before being formally proposed sometime in early 2024, after which there’ll be the mandatory public comment period and all that.
What this all adds up to is that the new debt relief plan is focused more narrowly on particular groups of borrowers, which should still reduce student debt for millions of Americans. A more general relief plan that applies to everyone with student debt may or may not come later. After the Supreme Court knocked down the rationale for broader debt relief, a piece-by-piece relief plan that prioritizes low-income borrowers and those who are the deepest in debt may be the best available options (that, and repairing the goddamned Court, we grumbled, recognizing that too is a long-term project).
Forbes student debt boffin Adam Minsky notes that the HEA includes a
“compromise and settlement” authority, which advocates have long argued is a broad legal basis for the administration to cancel student debt on a mass scale. Critics, however, argue that this is too broad of a reading of this provision, which historically has been used in case-by-case settlements of defaulted federal student loans, or to resolve litigation against the Education Department.
The proposed regs, then, seem to be aimed at a sweet spot between “reduce debt for everyone (and have the Supremes toss it again)” and “reduce debt for one borrower at a time.”
The current tranche of proposed rules would provide different sorts of help for borrowers in four categories:
1. Borrowers Whose Balances Are Greater Than Their Original Debt
Folks whose student debt has ballooned with interest to an amount larger than the balance when they entered repayment could see up to $10,000 knocked off the total they owe. (More details on this bit at Forbes.)
That interest balloon problem is also addressed by the Ed Department’s new SAVE repayment plan, which prevents interest from accruing beyond a borrower’s income-based minimum monthly payments.
2. Borrowers Who Started Repaying Long Ago In A Galaxy Far, Far Away
This proposal would provide a one-time discharge of the full remaining loan balance for folks who started repaying undergraduate loans 20 years ago, or graduate loans 25 years ago.
3. Borrowers Who Qualify For Existing Forgiveness But Didn’t Apply
That one’s pretty straightforward: It would make sure that people whose loans qualify for forgiveness under programs like Public Service Loan Forgiveness or income-driven repayment, but who never formally applied, get their loans written off anyway.
4. Borrowers Whose Schools Were Shit
OK, we’re paraphrasing there. No, students who attended the clearly inferior in-state sports rival of your alma mater wouldn’t be getting their loans forgiven, despite their poor taste in athletic mascots. (Sun Devils?! As IF!)
Rather, this would forgive loan balances for people who owe money to schools that the Ed Department has blocked from getting federal aid because they did a shitty job of preparing people for future earnings, leaving students with an assload of debt they can never pay off because their “education” was shit. There’s a whole bunch of rules around such determinations, but that’s the gist of the proposal here. Haha, “gist” sounds like “jizz,” but it isn’t even dirty!
Beyond these categories, the Ed Department committee is also working on coming up with additional debt relief for people who are experiencing “financial hardship” but don’t yet qualify for any existing loan relief programs. The text of that proposal hasn’t been worked out yet, but the committee will take it up in the same December 11 meeting meeting this month that will hash out a final draft of the rules for the four categories above.
Also, keep in mind that Biden’s Education Department has done incredible work sorting out and eliminating debt for millions of borrowers whose student debt problems fell through the cracks under previous presidents. As the press release notes, that includes:
• Nearly $42 billion for almost 855,000 borrowers who are eligible for forgiveness through IDR by fixing historical inaccuracies in the count of payments that qualify toward forgiveness. [Hey! That’s ME! And it’s Yr Editrix’s ShyPixel, too! – Dok]
• Almost $51 billion for 715,000 public servants through Public Service Loan Forgiveness (PSLF) programs, including the limited PSLF waiver and Temporary Expanded PSLF (TEPSLF).
• $11.7 billion for almost 513,000 borrowers with a total and permanent disability.
• $22.5 billion for more than 1.3 million borrowers who were cheated by their schools, saw their institutions precipitously close, or are covered by related court settlements.
Yes, this is all frustratingly bureaucratic and legalistic, but it’s also the kind of shit that’s necessary to follow federal rule-making laws, at least until Donald Trump seizes power and arbitrary shitty governing becomes the new normal.
PREVIOUSLY!
[CNBC / Forbes / Education Department press release / Draft Rules for Student Debt Relief]
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The 20+ year old one is going to apply to me. Still got about $4000 hanging around from 1998-2002. By then, PSLF will also discharge the grad loans. At this point, I'm making minimum payments and calling it good.
I really hope they get something done soon. My husband and I got legally married last December because I started a job with really great medical insurance and he was uninsured. When I was let go last Friday, one of my main concerns was that now that we're married our combined income is just barely too high for me to qualify for any kind of repayment plans. Also, I'm losing my really good insurance and we just barely don't qualify for me to get affordable insurance. The hits just keep coming!
In good (relatively) news, I had a very productive meeting with my psych doctor yesterday and we made a med plan to make sure that I won't have to stop taking my depression and anxiety meds when my insurance runs out. She was really great and price checking different ways of writing the prescription to see what will have the cheapest out of pocket cost through my pharmacy, so that was a huge relief for me through all of this. I also live in Washington State and had been receiving WA paid medical leave and found out that I will be able to continue receiving that even though I've lost my job so I'll be able to take time for my mental health over the holiday season and then go onto unemployment and figure out what's next. So at least that's one system doing what it's intended to do.