Within the last week, the Biden administration has taken several significant actions on student loan relief that may have far-reaching impacts for borrowers:
Taken together, these actions provide important clues about where the administration may be heading in terms of providing relief to student loan borrowers. But questions, and some uncertainty, remain. Here are some key takeaways for borrowers.
The Biden Administration Appears To Be Listening to Student Loan Borrowers — At Least, To Some Extent
The administration’s recent actions suggest that officials are listening to student loan borrowers. Advocates and lawmakers were sounding the alarm on the potential chaos that would ensue this fall if borrowers were forced to resume repayment this October, particularly in the midst of significant changes to student loan servicing. The administration did not make a decision quickly, but ultimately acted to extend the student loan payment pause into 2022. The Biden administration has also brought on a significant number of high-profile borrower advocates, including Richard Cordray (who previously ran the Consumer Financial Protection Bureau), and attorneys aligned with the movement to cancel student debt.
The Biden administration has also invited pro-borrower advocates to participate in upcoming negotiated rulemaking sessions, which may result in significant changes to key federal student loan programs like Public Service Loan Forgiveness and income-based repayment. The Department called for nominations to the rulemaking committee that would include students, student loan borrowers, individuals with disabilities, state regulators, and legal assistance providers. “The Department is especially interested in nominations from individuals or organizations that represent the perspective of historically underserved and/or low-income communities,” wrote the Department in a press release.
Student Loan Servicers Are On Notice
Consumer advocates, state attorneys general, and consumer rights enforcement agencies have long accused student loan servicing companies of mismanaging the federal student loan system, with little accountability from the federal government. The federal Consumer Financial Protection Bureau (CFPB) issued a report earlier this year concluding that widespread problems with student loan servicing continue. The agency “found a number of ways that student loan servicers gave incorrect information to borrowers, resulting in missteps that could cost consumers thousands of dollars,” said the CFPB.
The appointment of Richard Cordray, who used to run the CFPB, to lead the Department of Education’s Federal Student Aid division was seen by many advocates as an early sign that the administration would start to reign in the conduct of student loan servicers. Those hopes were likely bolstered this week by the Department’s announcement that it would be rescinding policy guidance issued under the Trump administration that was designed to interfere with the ability of states and individuals to apply state consumer protection laws to the conduct of federal student loan servicers. A crackdown on poor student loan servicing practices could be looming, which may be a factor in the recent decisions by some student loan servicers to withdraw from federal student loan servicing entirely.
Big Changes May Be Coming To Student Loan Forgiveness and Repayment Programs — But Not Quickly
The Department of Education’s recent announcement of a public hearing schedule to overhaul key federal student loan programs was significant in a number of ways. First, the sheer number of topics under review is in many ways unprecedented — everything from interest capitalization to income-driven repayment plans to Public Service Loan Forgiveness to school-based student loan discharges will be evaluated. In addition, the Department declared that it intends to “rewrite” the regulations governing these programs, suggesting that they are not simply looking for minor tweaks; these programs could be substantially altered and improved at a fundamental level (as long as they remain consistent with their enabling legislation). The Department’s press release indicated that it will be proceeding with the goal of expanding access to student loan forgiveness and discharge programs.
But while these changes could be major, they will not happen quickly. The negotiated rulemaking process is long and tedious, requiring multiple rounds of hearings to solicit public input and stakeholder feedback. The Department also affirmed that it wants to reach “consensus” from all stakeholders — a goal that may prove elusive (and, at a minimum, time consuming). It can sometimes take years before new, rewritten regulations are finalized and enacted.
What About Student Loan Cancellation?
Broad cancellation of student loan debt continues to be a major topic of discussion, and student loan activists, advocates, and allies in Congress are pushing the Biden administration to act using executive authority. At this point, given that Congress has not advanced a credible bill to cancel student loan debt that would pass both the House and the Senate, the Biden administration must decide if it will act unilaterally.
In April, the Biden administration launched a legal review of potential authorities that could be the basis for broad student debt cancellation using executive action. The administration confirmed as recently as last month that the review is ongoing, but provided no further updates. Advocates for student loan borrowers are hoping the administration will use the additional four months of the student loan moratorium to finalize its review and implement some sort of student loan cancellation (Biden has in the past said he would support $10,000 in student loan cancellation, but advocates have been pushing him to go higher). But so far, administration officials have not indicated what they might do.
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