The Department of Education released its draft regulatory text and issue paper ahead of the next Student Loan Debt Relief negotiated rulemaking session, which begins on November 6.

The key takeaway from the first session of negotiations was that the Department is no longer seeking the same broad-based debt relief that the Supreme Court struck down earlier this year. To strengthen the legal argument around the Department’s ability to forgive large amounts of loan debt, the agency is narrowing the list of borrowers who may potentially qualify for forgiveness to four groups. Those groups include borrowers who:

• Currently have outstanding federal student loan balances that exceed what they originally owed;
• Have loans that first entered repayment 25 or more years ago;
• Took out loans to attend career-training programs that created unreasonable debt loads or provided insufficient earnings for graduates, as well as borrowers who attended institutions with unacceptably high student loan default rates; and
• The Secretary of Education determines are eligible for forgiveness under repayment plans (e.g., income-driven repayment), targeted relief programs (e.g., Public Service Loan Forgiveness), or closed school loan discharges but whom have not applied for such relief.

There is a potential fifth group of borrowers – those who are experiencing financial hardship that the current student loan system does not adequately address – but the Department is seeking additional information from negotiators on how best to identify and address those who fall into this category. The issue paper includes the Department’s questions and will be a key agenda item for negotiators on the second day of the session.

It remains to be seen how many student loan borrowers would qualify under the new eligibility requirements the Department is contemplating, as well as how much relief they would provide borrowers. Estimates for the original debt relief plan were that approximately 40 million borrowers would qualify for the proposed $10,000 to $20,000 relief, but that plan was struck down, in large part, due to its economic significance. The Department must walk the tightrope of making its relief plan broad enough to meet the President’s objectives but narrow enough to pass the inevitable legal challenge.

For more information about next week’s negotiation, please visit the Department’s negotiated rulemaking page.