Proposed rules could make it easier to forgive student debt

The Biden administration proposed Wednesday new rules that would make it easier to forgive federal student debt through existing programs.

06 July 2022 Wednesday 16:27
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Proposed rules could make it easier to forgive student debt

The Biden administration proposed Wednesday new rules that would make it easier to forgive federal student debt through existing programs.

This action will overhaul relief programs, which have been criticised for their lengthy processing times and burdensome paperwork. This action builds on the administration’s efforts to increase targeted debt cancellation for some borrowers, while President Joe Biden contemplates wider student debt forgiveness.

Miguel Cardona, Education Secretary, stated that "We are committed in fixing a broken system." "If a borrower is eligible for student loan relief, it shouldn’t take mountains or a law degree in order to get it."

This proposal would reformulate the debt forgiveness process for students who have been deceived by their colleges, as well as other programs for disabled borrowers and those in public service careers.

Although it is unlikely that it will allow debt forgiveness for large swathes of borrowers it is intended to make it easier to those who are already eligible. The Education Department intends to complete the rules by July 1, 2023.

The borrower defense program is one of the most important changes. This allows students to have their loans erased if they are lied to or otherwise committed fraud.

Since the Obama-era crackdown against for-profit colleges, the program has seen an explosion in claims. However, there has been a backlog of over 200,000 applications due to political and legal disputes. Some borrowers have waited for years for a decision.

Instead of requiring that each claim be reviewed individually by the government -- a rule established by Trump's administration -- the new proposal would allow for the Education Department to review, decide on groups of similar claims.

A department could approve all claims made by the school chain and approve them in one case if students are deceived about their future job prospects. This option is available when there is evidence of widespread fraud at a school.

Biden's administration is seeking to make more colleges financially responsible for student loans that are canceled. In the past, taxpayers were responsible for loan cancellations. However, the new rules will make it clear that the department intends to recover costs from colleges that engage in fraud.

The plan was condemned by the for-profit college sector, which was subject to intense scrutiny from Obama's administration. However, President Donald Trump later became a friend.

Jason Altmire, the president and CEO of Career Education Colleges and Universities said that the policy would represent an "unprecedented extension" of the authority of the Education Department.

Altmire stated that "Today's proposal rule sends out a clear message that the Department intends use the rulemaking process for federal student loans discharge en masse while hurting institutions and students."

The Public Service Loan Forgiveness Program, which Congress created to encourage government and non-profit workers, is also being overhauled. However, it has been criticised for its rigid requirements.

Current rules allow eligible workers to get their federal student debt forgiven if they make 120 monthly payments. These payments must be paid in full within 15 days of the due date or they will not count towards the 120 monthly payments.

The new act would eliminate the 15-day rule and allow payments to be counted even if they're made in multiple installments or late. The new action would also allow borrowers to pay up to one year in advance, instead of monthly payments.

Borrowers in certain circumstances could be eligible for loan forgiveness, even if they do not pay the monthly payments. For example, borrowers who have their loans paused to pay for medical treatment, military service, or to join Peace Corps would still be liable for monthly payments.

Although the changes will increase flexibility, they are not as drastic as the temporary overhaul that the Biden administration implemented last year to combat the pandemic.

This short-term solution allows borrowers to have past payments counted towards loan forgiveness, even if they went toward loans not eligible under the program. The Education Department advised borrowers to take advantage of this change before it expires on Oct. 31.

A separate program to assist borrowers with disabilities would be given more flexibility.

This program allows people with permanent disabilities and inability to earn significant income to get their federal student loans forgiven. Many people who were granted forgiveness have had their debts restored after they failed to file paperwork within a three year monitoring period.

This new action would end the three-year review period, and allow more disabilities to be cancelled. Although some rules were temporarily removed by the Biden administration during the pandemics, the new changes will be permanent.

The federal rules process has been underway for over a year and all the proposed changes result from that process. This adds to the Biden administration’s efforts to expand student debt relief via a variety of programs. It has so far approved debt forgiveness of nearly $26 billion for more than 1.3million borrowers.

Biden has been subject to pressure from Democrats to cancel mass debt. Some Democrats even urged him to eliminate $50,000 all over the board. Biden, as a candidate, supported $10,000 in forgiveness. In April, he stated that he was taking a hard look at the issue and promising to make a decision in the "next couple of weeks." There has not been a decision.



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