Biden’s education department proposes to streamline student loan process
The U.S. Department of Education on Wednesday proposed new regulations intended to help student borrowers whose colleges misled or closed them, who are permanently disabled, or who work in the public service, including unpaid college instructors. holders. The settlement would also reduce, where possible, student loan costs for some borrowers by ending interest capitalization, in which accrued interest is added to the principal balance of the loan.
The Department of Education said it has approved the discharge of about $26 billion in federal student loan debt for more than 1.3 million borrowers since President Biden took office, through programs targeting specific categories of borrowers. Last month, for example, the department announced the cancellation of $5.8 billion in student loan debt held by 560,000 borrowers who attended Corinthian Colleges, a for-profit chain that closed in 2015. This cancellation represented the largest one-time student loan. dump in the history of the department.
But borrowers are still waiting to see if the president will follow through on his campaign promise to forgive up to $10,000 in debt for all student borrowers. Student loan repayments have been suspended since the start of the pandemic, but are expected to resume on September 1, shortly before the midterm elections. A total of 40 million borrowers hold nearly $1.6 trillion in student loan debt.
A department spokesperson said Wednesday that its review of large-scale debt cancellation was “in progress.” Additionally, the department continues to assess the impacts of the Covid-19 pandemic and the economy on student borrowers and has not yet made a decision on whether to further extend the payment pause.
The Department of Education will receive public comments on the proposed settlement for 30 days and plans to release the final rules this fall. If passed, the new rules are expected to come into force by July 1, 2023.
“We are committed to fixing a broken system,” US Secretary of Education Miguel A. Cardona said in a press release. “If a borrower qualifies for student loan relief, they shouldn’t need mountains of paperwork or a law degree to get it.”
The proposed settlement would make it easier for students whose colleges have lied to or taken advantage of to get their loans forgiven. The changes would allow groups of borrowers, rather than individuals, to apply for relief and create a single, streamlined process for pending and future applications, instead of the patchwork of regulations that currently exist, which are based on when the loans were disbursed. The department is also proposing a broader and clearer standard for the types of college misconduct that would qualify a borrower for releases. Under the proposed regulations, colleges would be responsible for the cost of such rejections. If passed, the new regulations would also allow some borrowers whose colleges have closed to receive automatic discharges.
The ministry is also proposing to allow more borrowers to qualify for forgiveness through the Cancellation of civil service loans program, making more types of payments eligible for the discount and letting certain types of deferments and forbearances count towards the program. The ministry has also proposed changes that would allow non-permanent instructors who work at least 30 hours a week to qualify for the program.
More borrowers with permanent disabilities would be eligible for releases under the proposed settlement, which would recognize a broader set of disabilities, simplify the documentation required to demonstrate eligibility and eliminate a three-year income test period. years for some borrowers who receive discharges.