President Biden’s latest initiative for student loan cancellation advances as a proposed regulation
President Joe Biden’s latest plan for student loan cancellation is moving forward as a proposed regulation. This presents a new opportunity for him to fulfill a campaign promise and rally young voters before the November election.
The Education Department submitted paperwork on Tuesday for a new regulation that aims to implement the loan cancellation plan announced by Biden last week. However, it still needs to go through a 30-day public comment period and additional review before it can be finalized.
Compared to the plan that was invalidated by the U.S. Supreme Court last year, this new plan is more focused. It has a different legal basis and intends to cancel or reduce loans for over 25 million Americans.
Conservative opponents argue that this plan unfairly burdens taxpayers who did not attend college, and they have threatened to contest it in court.
During a recent trip to Wisconsin, the Democratic president emphasized the plan, calling it “life-changing” relief. He outlined five categories of individuals who would be eligible for assistance.
The paperwork filed by the Education Department covers four of these categories. A separate proposal addressing relief for individuals facing various forms of hardship will be submitted later.
The broadest category of forgiveness aims to help borrowers who owe more than their initial loan amount due to excessive interest. Under this category, up to $20,000 in interest would be eliminated for individuals in this situation. Additionally, borrowers with annual incomes below $120,000 who are enrolled in income-driven repayment plans would have all of their interest erased, without any maximum limit. This would be done automatically.
Another category would cancel loans for individuals who have been making undergraduate student loan payments for at least 20 years, and those who have been making graduate loan payments for at least 25 years.
Loans would be automatically canceled for those who attended colleges or programs that are considered to have low financial value. For instance, borrowers would be eligible for cancellation if they attended a program that resulted in graduates earning no more than individuals with a high school diploma, or if the program left graduates with a significant amount of debt compared to their incomes.
Borrowers who qualify for other federal forgiveness programs but have not yet applied would also have their loans erased. Federal education officials would use existing data to identify these individuals and offer them relief. This is intended to help those who are unaware of other programs or have been discouraged by complex application processes.The proposal went through multiple hearings as part of a federal rules process that involves input from external experts. Students, college officials, state officials, borrower advocates, and loan servicers all contributed to the development of the plan. Advocates pushed for the addition of a fifth category of forgiveness for individuals facing various hardships that make it difficult for them to repay their loans. The Education Department is still working out the specifics of this rule and will present a separate proposal in the coming months.
According to the department, the hardship proposal will provide loan cancellation for borrowers at high risk of defaulting and those facing other challenges such as significant medical expenses or caregiving responsibilities. This proposal is in line with the recommendations made by external experts during the rulemaking process. Finalizing a proposed rule usually takes several months, followed by additional time before it becomes effective. However, the Biden administration plans to implement certain aspects of the new proposal as early as this fall, using the education secretary’s authority to enact rules in specific situations.
Republicans strongly oppose widespread student loan cancellation, arguing that it is an unfair bailout for college graduates. Senator Bill Cassidy of Louisiana, the ranking member of the Senate Health, Education, Labor, and Pensions Committee, voiced concerns about the lack of relief for non-college attendees who also face financial burdens. He also highlighted the challenges faced by individuals who have already paid off their student loans but still struggle to afford their mortgage payments. Cassidy believes that the Biden administration is transferring the burden of someone else’s student debt onto these Americans.
To prevent a repayment plan that offers a fast track to loan forgiveness, two coalitions of Republican states have filed lawsuits against the Biden administration. The White House is confident that the new plan is legally sound, citing the authority given to the education secretary by the Higher Education Act to waive student loans under specific circumstances.
News Source:TheAssociatedPress