Details of massive student loan forgiveness just released for Biden’s new plan

The Biden administration announced important new details this week about its new student loan forgiveness plan.

The program is aimed at providing student loan relief to borrowers following a Supreme Court ruling last summer that struck down Biden’s first student loan forgiveness initiative. The new plan is being developed under a different legal authority and will target borrowers based on their specific circumstances.

Ministry of Education announced draft regulation It includes eligibility criteria and proposed student loan forgiveness amounts ahead of a third round of negotiated rulemaking hearings scheduled for next week. These hearings will be one of the final steps before rules governing the program are finalized next year.

Here is the latest one.

Biden announces new student loan forgiveness plan through separate legal authority

The Biden administration’s latest student loan forgiveness plan will be enacted through a federal law called the Higher Education Act. The HEA’s legal text includes so-called “compromise and settlement” powers, which supporters have long argued are a broad legal basis for the administration to cancel student loans on a large scale. But critics argue that this is too broad an interpretation of the provision, which has historically been used for case-by-case settlements of federal student loan defaults and to resolve lawsuits against the Department of Education. It has been.

Nevertheless, administration officials are hopeful that a new loan forgiveness plan through HEA has a better chance of withstanding legal challenges than Biden’s first student debt relief plan. ing. The plan, which would cancel $10,000 or $20,000 of federal student loan debt for more than 30 million borrowers, was enacted under the HEROES Act of 2003, but separate legislation , giving the Department of Education broad authority to waive federal student loan rules. National emergency. The Supreme Court’s conservative majority narrowly interpreted the language of the HEROES Act, arguing that for the administration to proceed unilaterally, Congress needed to explicitly authorize blanket student loan forgiveness in the text of the law.

The new HEA plan proposed by the Biden administration would be more tightly tailored. Student loan forgiveness focuses on five broad categories of borrowers. Ahead of next week’s negotiated hearing on the rulemaking, the Department of Education has released draft rules regarding student loan forgiveness eligibility and potential forgiveness amounts.

Up to $10,000 of student loan forgiveness

Under the proposed regulations, borrowers could receive up to $10,000 in student loan forgiveness if their current balance is greater than the amount originally borrowed. This can be due to years of interest accrual, interest capitalization, negative amortization associated with forbearance or income-driven repayment plans, or excessive fees and collection costs associated with loan defaults. there is.

The draft regulation proposes: [of Education] may forgive the lesser of $10,000 or the amount by which the borrower’s cumulative loan balance exceeds: (1) Original principal balance of loans originated before January 1, 2005. (2) Loan balance as of the last day of the grace period for loans executed after January 1, 2005. or (3) the sum of the original principal balances of all loans repaid by Federal Consolidation Loans or Direct Consolidation Loans.

Up to $20,000 of student loan forgiveness

The draft regulations suggest that student loan forgiveness amounts for borrowers whose current balance exceeds their original balance could be even higher under certain circumstances.

If a borrower is enrolled in SAVE, a new income-driven repayment plan recently announced by the Biden administration, they may be eligible for up to $20,000 in student loan forgiveness. “The Secretary may forgive the lesser of $20,000 or the amount by which the cumulative unpaid balance on a borrower’s loans exceeds: (1) for loans disbursed before January 1, 2005; is the original principal balance of the loan; (2) the loan balance as of the last day of the grace period for loans disbursed on or after January 1, 2005; or (3) the loan balance as of the last day of the grace period for loans made on or after January 1, 2005. ”, the total principal balance of all loans repaid by Federal Consolidation Loans or Direct Consolidation Loans. To qualify, borrowers must also earn less than $125,000 a year if they are single, or $250,000 if they are married and file taxes jointly with their spouse.

Borrowers may be eligible for up to $20,000 in student loan forgiveness if their current balance exceeds their original balance, especially if their income is particularly low. “A borrower must comply with this section if (1) the borrower is enrolled in an IDR plan…and (2) there is documentation of the borrower’s adjusted gross income or other income acceptable to the financial institution. Eligible for the exemption described in paragraph (a), the Secretary has certified that the borrower’s annual income is less than or equal to 225 percent of the applicable Federal Poverty Guidelines.”

Fully waived student loans

The draft regulations identify a number of specific circumstances in which you may qualify for full student loan forgiveness and forgiveness of your entire federal student loan balance. These include:

• Borrowers with only undergraduate federal student loans who first started repaying their loans 20 years ago.
• Other federal student loan borrowers whose loans first went into repayment 25 years ago.
• People who are eligible for student loan forgiveness under other available programs but have not yet applied.
• Former students of universities and other institutions who have engaged in some form of identifiable misconduct. According to the regulations, this includes schools that are no longer eligible for federal financial aid, schools that do not meet “student performance-based accountability standards established under the HEA or its implementing regulations,” or schools that “have “Schools that failed to provide sufficient value for money.” This includes situations in which an institution or program has engaged in material misrepresentation, material omission, misconduct that affects a student’s eligibility, or other similar activity. ”

Here’s what’s next in Biden’s new student loan forgiveness plan

The draft rule will be discussed in the next round of rulemaking negotiations, where a committee of stakeholders will convene to discuss the rules governing the new student loan forgiveness program. The committee has held two meetings so far, in October and November.

The committee will also continue to discuss the extent to which personal and financial hardship can be grounds for student loan forgiveness under the new plan. “The Department of Education continues to consider relief options for borrowers facing financial hardships that cannot be addressed by current loan systems and will devote time to this topic in future bargaining sessions,” the Department of Education said in a statement. mentioned in. statement on tuesday.

The stakeholder committee will seek to reach consensus on the draft regulations during next week’s public hearings on December 11th and 12th. “Consensus means there is no opposing opinion on a given idea,” the ministry said. “Following this meeting, the Department will work on a draft rule that will be released for public comment next year. The Department intends to use any agreed-upon regulatory text in the draft rule.” Rulemaking Conference Process Regulatory provisions may change. For documents where agreement cannot be reached, the department will have more leeway to develop regulations based on the committee’s discussions.

The new student loan forgiveness plan may not be implemented and available until 2025. But the Biden administration could use HEA authority to implement the program sooner, possibly as early as 2024.

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