Biden’s New Student Loan Forgiveness Plan Starts To Take Shape

The Education Department is moving forward with a process to create a new student loan forgiveness plan, as directed by President Biden.

Biden’s new plan is intended to serve as a replacement for the program that was rejected by the Supreme Court last summer. In the wake of that decision, Biden announced that the Education Department would begin creating a backup student loan forgiveness plan. The establishment of the new plan is a multi-step process. The Biden administration entered a critical new stage of that process this week.

New Student Loan Forgiveness Plan In The Works

Biden’s initial student loan forgiveness plan would have provided $400 billion in student debt relief, allowing millions of borrowers to receive $10,000 or more in student loan cancellation. But after the Supreme Court blocked that program in June, Biden announced that the administration would try a different route.

The replacement student loan forgiveness program currently under development will be created under the Higher Education Act. The HEA is a different statute from the one that was the basis for Biden’s initial debt relief plan; that was the HEROES Act 2003. Despite broad statutory language that the Biden administration argued had authorized sweeping debt relief, the Supreme Court ruled that mass student loan forgiveness exceeded Congress’s intent when it passed the HEROES Act over twenty years ago.

Administration officials believe that a new student loan forgiveness under the HEA may be more likely to withstand legal scrutiny. However, to establish a new HEA program, the Education Department must go through a cumbersome regulatory process called negotiated rulemaking. This involves the creation of a committee of key stakeholders who then hold a series of public hearings, factor in public input, and craft new regulations governing the program, ideally by consensus.

Biden Administration Initiates Public Hearings For New Student Loan Forgiveness Plan

This week, the Education Department began a critical step in establishing the new student loan forgiveness program by kicking off the first in a series of public negotiated rulemaking hearings.

“Earlier this summer, the Supreme Court struck down the Biden-Harris Administration’s plan to provide up to $20,000 in student debt relief to borrowers recovering from the pandemic,” said Under Secretary of Education James Kvaal in opening remarks on Tuesday. “We disagree with that decision, but we are moving forward. We immediately began this new regulatory process to bring student loan relief to as many borrowers as possible as quickly as possible. Already, we’ve considered more than 26,000 public comments, and now, with your help, our efforts to fix the broken student loan system take another step forward.”

Kvaal noted that the HEA “gives the Secretary of Education the authority to ‘enforce, pay, compromise, waive, or release any right, title, claim, lien, or demand,’ including Federal student loans. Our current regulations lack specificity on how that authority is applied. We are particularly focused on the waiver authority.”

An issue paper that the Education Department released last week identified five potential categories of borrowers who could qualify for student loan forgiveness under the new program. These include borrowers who have experienced significant balance growth due to interest accrual and fees; borrowers who have been unable to apply for existing student loan forgiveness programs; borrowers with extreme financial hardships; and those who took out student loans many years ago, or who did not receive sufficient value from the educational program they attended.

During this week’s public hearings, the negotiated rulemaking committee will discuss the HEA authority, the categories of borrowers who could qualify for student loan forgiveness under the new program, and how to specifically define the scope of relief and the process for applying.

Student Loan Forgiveness Plan: What To Expect

This week is just the first set of public hearings as the negotiated rulemaking process moves forward. The Education Department will hold additional hearings in November and in December. These hearings will be open to the public.

Then, the Biden administration will release draft regulations governing the new student loan forgiveness plan. This should happen sometime in 2024, at which point a new public comment period will open up. The regulations could be finalized later that same year.