Topline
The Biden administration on Wednesday unveiled new proposals to improve and expand student loan relief programs by attempting to make it easier for borrowers who were defrauded by for-profit schools, those who are permanently disabled and public servants to benefit from loan forgiveness, building on previous efforts to tackle what it calls a “broken” system.
Student loan borrowers gather near The White House to tell President Biden to cancel student debt.
Key Facts
The White House wants to get rid of limits on when some borrowers can file loan cancellation claims, and allow them to file group claims, if their school closes or if they were taken advantage of by a for-profit school.
The proposals, laid out by the Department of Education, included a rule that would block schools from making borrowers sign agreements to resolve disputes through arbitration instead of class-action lawsuits.
If adopted, the new regulations would “protect borrowers and save them time, money, and frustration,” while also holding “colleges responsible for wrongdoing,” the Department of Education said in a statement.
The White House also wants to make it easier for borrowers working in public service—who are eligible for debt forgiveness after at least 10 years of loan payments—to access loan relief, allowing more payments to qualify for the federal program, including partial, lump sum and late payments, as well as creating a process to reconsider borrowers whose applications were denied.
Another new rule aims to ensure more borrowers who are permanently disabled and unable to work receive student loan relief by expanding eligibility criteria to include more types of disability recognized by the Social Security Administration and allowing borrowers to submit a broader range of documents to show proof of their disability.
Student loan relief should not be “so hard to get that borrowers never actually benefit” from it, Education Secretary Miguel Cardona said in a statement, adding the White House was determined to create a more “accessible, affordable and accountable student loan system.”
Key Background
The new regulations are a part of broader efforts by the administration to make improvements to the student loan system. They come after the White House announced last month it would forgive $6 billion in student loans for some 200,000 borrowers who sued the government in 2019 over claims they were defrauded by their colleges—nearly all of which were for-profit schools—as a part of a settlement agreement. The updated rules also come as the Biden administration is under mounting pressure to take a much bigger step to address student debt relief by forgiving a much larger amount of loans for all federal borrowers. Biden told reporters two weeks ago he was close to reaching a decision on federal loan forgiveness, and reportedly may cancel $10,000 for all borrowers who earn less than $150,000 a year.
Further Reading
Biden administration plans to make sweeping changes to ‘broken’ student loan system (CNBC)
Biden Administration Proposes Easing Student Loan Forgiveness Process for Defrauded Students (Wall Street Journal)
Source: https://www.forbes.com/sites/madelinehalpert/2022/07/06/biden-proposes-upgrades-and-expansions-to-student-loan-programs-heres-who-might-benefit/