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Biden Administration Seeks to Ease Path to Loan Forgiveness for Defrauded Students By Adrienne Lu July 6, 2022 Mágoz for The Chronicle

The U.S. Education Department on Wednesday proposed new regulations intended to help student-loan borrowers whose colleges misled them or closed, who are permanently disabled, or who work in public service, including nontenured college instructors. The regulations would also, when possible, lower student-loan costs for some borrowers by ending interest capitalization, in which accrued interest is added to the principal balance of the loan.

The Education Department says it has approved the discharge 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

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The U.S. Education Department on Wednesday proposed new regulations intended to help student-loan borrowers whose colleges misled them or closed, who are permanently disabled, or who work in public service, including nontenured college instructors. The regulations would also, when possible, lower student-loan costs for some borrowers by ending interest capitalization, in which accrued interest is added to the principal balance of the loan.

The Education Department says 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 debts held by 560,000 borrowers who attended Corinthian Colleges, a for-profit chain that closed in 2015. That cancellation amounted to the largest one-time student-loan discharge in the department’s history.

But borrowers are still waiting to see if the president will follow through on a campaign promise to cancel up to $10,000 in debt for all student borrowers. Student-loan payments have been paused since the start of the pandemic but are set to resume on September 1, shortly before the midterm elections. All together, 40 million borrowers hold close to $1.6 trillion in student-loan debt.

A spokesman for the department said on Wednesday that its review of broad-based debt cancellation is “ongoing.” In addition, the department is continuing to assess the impacts of the Covid-19 pandemic, and the economy, on student borrowers and has not yet made a decision about whether to further extend the payment pause.

The Education Department will receive public comments on the proposed regulations for 30 days and plans to publish final rules this fall. If enacted, the new rules are set to take effect by July 1, 2023.

“We are committed to fixing a broken system,” said U.S. Secretary of Education Miguel A. Cardona in a news release. “If a borrower qualifies for student-loan relief, it shouldn’t take mountains of paperwork or a law degree to obtain it.”

The proposed regulations would make it easier for students whose colleges lied to or took advantage of them to have their loans discharged. The changes would allow for groups of borrowers, rather than only individuals, to seek relief and would create a single, streamlined process for pending and future claims, instead of the patchwork of regulations that exist now, which are based on when loans were disbursed. The department is also proposing a broader and clearer standard for the types of misconduct by colleges that would make a borrower eligible for discharges. Under the proposed regulations, colleges would be responsible for the cost of such discharges. If adopted, the new regulations would also allow certain borrowers whose colleges have closed to receive automatic discharges.

The department is also proposing to allow more borrowers to qualify for forgiveness through the Public Service Loan Forgiveness program, by making more types of payments eligible for forgiveness and by letting certain kinds of deferments and forbearances count toward the program. The department has also proposed changes that would allow non-tenure-track instructors who work at least 30 hours a week to qualify for the program.

More borrowers with permanent disabilities would qualify for discharges under the proposed regulations, which would recognize a broader set of disabilities, ease the documentation required to demonstrate eligibility, and eliminate a three-year income-monitoring period for some borrowers who receive discharges.

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We welcome your thoughts and questions about this article. Please email the editors or submit a letter for publication. Graduate EducationAdult StudentsStudent SuccessFinance & Operations Adrienne Lu Adrienne Lu writes about politics in higher education and students — with a focus on underrepresented students. She can be reached at [email protected] or on Twitter @adriennelu.