Education Department and Negotiators Meet Again on Debt Relief

Seeking to provide an alternative path to student loan debt relief, the Department of Education held the second of three negotiated rulemaking sessions earlier this week. Among the key areas negotiators were focused on was the draft regulatory text the Department proposed after the first session, which provided more details about how and to whom the agency is planning to provide relief.

To begin the session, negotiators discussed forgiving accrued interest for borrowers who have a loan balance that exceeds their original principal balance. The Department explained that its goal is to provide similar benefits to the new income-driven repayment plan (IDR), Saving on a Valuable Education (SAVE), for borrowers who entered repayment prior to its existence. The negotiators, in general, supported this idea, but pushed the Department to go further by reviewing past payments made solely to interest and apply them to the principal instead. The Department responded by stating that this would be difficult because it does not track payment amounts or whether payments are toward interest or principal.

Negotiators also discussed borrowers who took out loans more than 25 years ago. The Department proposed in their draft regulations to conduct a one-time forgiveness for those borrowers, but the negotiators urged the Department to consider this an ongoing policy. There was widespread support for having the Department forgive loans after 20 years for those with only undergraduate debt and 10 years for low original balances, which would mirror what the SAVE IDR plan offers. It was also suggested that the Department consider including time spent in default toward this relief process and others, such as IDR.

The Department also proposed using gainful employment (GE) and cohort default rates (CDR) to determine whether a student is eligible for relief. While this proposal was supported by negotiators, they cautioned that new GE rules requiring students to acknowledge that a program has failed GE should not be disqualifying.

Negotiators also suggested that the Department should include for debt relief borrowers with missing loan records, those with loans under the Family Federal Education Loan (FFEL) program, and Parent PLUS borrowers. Negotiators also stressed that the Department should strongly consider every possible way to automate the application and approval processes to ease the burden on borrowers and the agency.

The final component of the negotiations was centered around borrowers experiencing hardship. The issue paper provided before the session included eight questions for the negotiators to discuss, most of which were aimed at clarifying exactly what type of hardships the Department should use to qualify borrowers. The suggestions ranged from being eligible for Supplemental Nutrition Assistance Program (SNAP) benefits, receiving a Pell Grant, being in default, and using some principles of hardship from bankruptcy standards.

There was also concern voiced by the alternate negotiator for state attorneys general that the first rulemaking session had not properly considered how the Department could insulate this attempt at debt relief from any legal challenges that await. He cited concerns the Supreme Court laid out in striking down the first attempt, such as whether it is fair to taxpayers who did not attend college or have already paid back their loans. The Department responded by saying that it is working to ensure those voices are at the table for the upcoming session.

The committee will reconvene on December 11 and 12 for its third and final session. Before then, the Department will review the negotiators’ revisions to its first draft and provide updated language, which will then be the topic of discussion for the last session. Any updates regarding the topics of discussion for the committee, or future proposals from the Department, can be found on the Department’s negotiated rulemaking webpage.

For more information, please contact:
Justin Monk