After Biden Cancels $1 Billion In Student Loans, 3 Potential Next Steps For Student Loan Forgiveness

Ruben Onsu

WASHINGTON, DC – MARCH 18: U.S. President Joe Biden speaks in the East Room of the White House on … [+] March 18, 2021 in Washington, DC. President Biden announced that his administration will meet his goal of administering 100 million COVID-19 vaccine doses in 100 days tomorrow, 58 days […]

Last week, the Biden administration announced a reinterpretation of a federal student loan cancellation program that will result in $1 billion in student loan forgiveness.

The student debt relief will be provided under the Borrower Defense to Repayment program — a student loan forgiveness program that was set up with new procedures and regulations by the Obama administration in 2016. The Borrower Defense program was designed to forgive federal student debt for students who were misled, defrauded, or otherwise harmed by their colleges and universities (often for-profit institutions).

Under former Education Secretary Betsy DeVos, the U.S. Department of Education established stricter rules governing the program, and also enacted a policy of providing partial student loan forgiveness for approved Borrower Defense applications in an attempt to limit relief. So while the Department could find that student loan borrowers were misled by their school, it could nevertheless provide little or no student loan forgiveness.

Education Secretary Miguel Cardona, who was recently confirmed to replace DeVos, reversed DeVos’s partial relief policy. As a result, thousands of student loan borrowers whose Borrower Defense applications were already approved will now be able to receive complete student loan cancellation in the coming weeks. The collective total amount of student loan forgiveness is expected to be around $1 billion.

Student loan borrower advocacy organizations and progressive lawmakers praised the Biden administration. But many groups also maintained that the administration needs to go further to address skyrocketing student loan debt. The White House has signaled that it continues to explore additional avenues for providing student loan borrowers with further relief. Here’s what could come next.

Additional Student Loan Forgiveness Through the Borrower Defense Program

While student loan borrower activists and advocates applauded Secretary Cardona for expanding Borrower Defense relief, student loan debt will be cancelled only for about 72,000 borrowers. Over 200,000 student loan borrowers have applied for student loan forgiveness under the Borrower Defense program, and the fate of the remaining 130,000 applications remains uncertain.

Student loan borrowers’ hopes that federal courts would intervene and overturn DeVos’ strict new Borrower Defense rules were dashed last week when a federal court hearing a Borrower Defense regulatory challenge mostly upheld the new rules. Thus, at least for the immediate future, the stricter Borrower Defense regulations — which increase the burden of proof required for student loan borrowers to have their claims approved, require that borrowers show they were harmed financially, and narrow the definition of school-related misrepresentations — remain in effect.

To reverse these stricter regulations, the Biden administration could potentially roll them back and establish more borrower-friendly rules in their place. However, establishing new regulations is a long process. Former Secretary DeVos did not finalize the current regulations until 2020, nearly at the end of President Trump’s term, even though the process was started in 2017. The Biden administration has not made any firm commitments yet about trying to rewrite the regulations again.

Alternatively, Congress could pass new legislation reversing the regulations currently in place and replacing them with new rules that are more favorable to borrowers. This would be a much faster route to reforming the Borrower Defense program. Such legislation passed Congress with bipartisan majorities in 2020, but it was vetoed by President Trump. It is unclear if lawmakers will try again this session.

Meanwhile, ongoing class action lawsuits and other litigation regarding the Borrower Defense program continue to play out in federal courts. So far, the Biden administration has not meaningfully changed course regarding the Department of Education’s disposition in these suits.

Reforming Income-Driven Repayment and Public Service Loan Forgiveness

Additional student loan relief does not necessarily have to be limited to the Borrower Defense program. On the campaign trail, Biden repeatedly touted his intention to reform and improve income-driven repayment and the Public Service Loan Forgiveness (PSLF) program.

Biden proposed establishing a new income-driven repayment plan that would allow student loan borrowers to pay only 5% of their discretionary income towards their student loans. If enacted, this plan could reduce the monthly payments of millions of student loan borrowers by 50% or more, while allowing borrowers to get any remaining student loan balance forgiven after 20 years. Currently, that student loan forgiveness could be taxable to the borrower, although Biden recently signed stimulus legislation that temporarily exempts student loan forgiveness from taxation.

Biden also has advocated for improving Public Service Loan Forgiveness by expanding eligibility to non-Direct federal loans and non-income-driven repayment plans, while also providing for gradual, incremental student loan forgiveness over the course of the 10-year public service employment period, rather than the all-or-nothing student loan forgiveness currently in place at the end of the program.

So far, the Biden administration has not started any process to enact these reforms through the regulatory process, which means the most likely avenue for changes to these programs would be via Congressional legislation. Democratic lawmakers introduced several bills last session designed to address problems with these programs, but the bills got nowhere in the Republican-controlled Senate. With Democrats now in control of both chambers, reforms to Public Service Loan Forgiveness and income-driven repayment have a higher chance of passing.

Widespread Student Loan Forgiveness

Meanwhile, student loan borrower activists, advocacy groups, and progressive lawmakers in Congress have been pushing President Biden for months to cancel student debt through executive action. Biden supports broad student loan forgiveness, but he has repeatedly indicated his preference that Congress enact student debt cancellation through legislation, rather than acting unilaterally via an executive order.

While many student loan legal experts have argued that Biden has authority to enact widespread student loan forgiveness through executive action, Department of Education attorneys under former Secretary DeVos reached the opposite conclusion, and Biden has expressed deep uncertainty about that path.

The President has repeatedly stated that he would support $10,000 in broad student loan forgiveness for borrowers, while student loan borrower advocacy groups have been pushing him to cancel $50,000 or more. Biden says he opposes the $50,000 figure.

Whether broad student loan forgiveness is initiated by President Biden through executive action, or by Congress via legislation, the White House and Democratic congressional leaders have all suggested that there would likely be limitations on student loan forgiveness based on a variety of potential factors, such as the type or balance of the loans, the borrower’s income, or the level of education the borrower obtained.

Many activists are still pushing for complete, universal student loan forgiveness, and are holding a week of action this week designed to maintain the pressure campaign.

Further Reading

72,000 Borrowers Will Get $1 Billion In Student Loan Forgiveness – Do You Qualify?

Is $10,000 In Student Loan Forgiveness Next, After Biden Administration Cancels $1 Billion?

Miguel Cardona Confirmed As Education Secretary

Borrowers Face Huge Delays Applying For Student Loan Forgiveness Program

Congress Passes Biden’s Stimulus Bill: 6 Takeaways For Student Loan Borrowers

Stimulus Bill Has This Hidden Student Loan Tax Benefit

Congress Makes Big Change To Income-Based Repayment: What Student Loan Borrowers Should Know

Senate Passes Stimulus Bill With Student Loan Tax Relief — Will It “Pave The Way” To Cancel Student Debt?

Here’s Everyone Who Wants Biden To Cancel Student Loan Debt (It’s A Big List)

Whether Biden Cancels Student Debt Will Depend On These 3 Things

Could These Student Loan Borrowers Be Excluded From Biden’s Forgiveness?

Can Biden Cancel Private Student Loans? 3 Options

Next Post

'His new business': Trump seeks personal political brand as he grips Republican base | Donald Trump

Days after being acquitted in his second impeachment trial last month, Donald Trump issued a statement lashing out against one of the very Republican senators who made that acquittal possible. “The Republican party can never again be respected or strong with political ‘leaders’ like Senator Mitch McConnell at its helm,” […]