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Biden under pressure to prolong talks on mass student loan relief as progress stalls
Groups advocating for relief from student loan debt are urging the government to take faster action in finding a solution to help those struggling with unmanageable debt. In a letter sent on Thursday, these advocates made their demands known. This comes after President Joe Biden’s plan for widespread student loan forgiveness was struck down by the Supreme Court last year. Following that decision, the administration quickly shifted to an alternative strategy to secure relief for borrowers.
This alternative strategy, known as “Plan B,” involved a process called “negotiated rulemaking” or “neg reg” for short. This process involved several months of discussions among a committee of stakeholders to propose changes to federal higher education law that could provide relief to a broad range of borrowers.
The final neg reg session took place in December, but many of the participants, including borrowers and advocates, were unsatisfied with the outcome. Now, a coalition of 67 organizations representing students, including people of color, veterans, and individuals with disabilities, is calling for a fourth session to reach an agreement on a rule that would forgive the debt of borrowers facing financial hardship.
According to the letter issued on Thursday, “We cannot allow bureaucratic processes and timelines to serve as a barrier to desperately needed relief for the American people. The Department cannot wait until it is too late; it must act now and establish a fourth rulemaking session to ensure the promise of student debt cancellation happens swiftly as we embark upon a new year.”
The current status of student loan debt relief:
After much anticipation and a payment pause during the pandemic, President Biden unveiled his plan for mass student loan forgiveness in 2022. This plan aimed to provide relief to over 40 million borrowers, with amounts ranging from $10,000 to $20,000. The specific amount depended on whether the borrowers were low-income students who received Pell grants for college. Over 26 million borrowers applied or were automatically determined to be eligible, and more than 12 million had already been approved before legal challenges halted the effort.
However, this initiative was ultimately struck down by the Supreme Court. The Department of Education then turned to the neg reg process as a backup plan. This involved leveraging the Higher Education Act of 1965 to make adjustments to the law and enable relief in a more incremental manner.
The neg reg sessions began in July and focused on deliberating rule changes and potential relief options for different categories of borrowers. These categories included borrowers whose loan balances had significantly increased, borrowers who were eligible for relief but hadn’t applied, and borrowers who had been repaying their loans for many years.
In December, the Department released draft rules based on the preceding neg reg sessions. These rules included relief for borrowers whose interest had caused their loan balances to balloon, borrowers who hadn’t signed up for forgiveness but were eligible, and borrowers who had been in repayment for decades. However, the proposed rules had numerous caveats, leading to dissatisfaction among the negotiators. “This isn’t broad enough,” said Sherrie Gammage, a committee member representing borrowers from four-year colleges, during the December neg reg session.
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The content of the letter:
A letter addressed to Education Secretary Miguel Cardona was signed by 67 organizations, including Young Invincibles, the National Consumer Law Center, the NAACP, and the National Education Association. This letter urged the department to schedule a fourth neg reg session to develop a comprehensive rule that would ensure relief for borrowers facing financial hardship. Research has shown that many student loan borrowers experience economic hardship, which is further exacerbated by their loans and limits their ability to invest in their families, save for retirement, and purchase homes.
The letter stated, “In response to the Department’s questions, negotiators worked tirelessly and in good faith to provide the Department with comprehensive proposals.” However, the authors expressed disappointment with the government’s failure to finalize a proposal for borrowers experiencing hardship. They emphasized that not providing relief would leave millions of borrowers, including recent graduates, low-income borrowers, borrowers of color, and borrowers with disabilities, without the necessary assistance. The letter concludes, “This cannot be an option.”
Biden’s next steps regarding student loan forgiveness:
A spokesperson for the Department of Education declined to comment on the record but indicated that officials had received the letter and would review its contents. The department is committed to providing relief to as many student loan borrowers as possible in a timely manner, including through regulatory changes.
Considering the dissatisfaction with the proposed rules and the upcoming presidential election, additional neg reg sessions could be a possibility. Generally, regulations need to be finalized by November in order to take effect the following summer. Beyond the regulatory process, the Biden administration has been working on providing relief to other borrowers who have already been deemed eligible for forgiveness due to separate legal or administrative developments. For example, fixes to calculations on income-driven repayment plans led to automatic relief for 804,000 borrowers. Additionally, relief has been secured for borrowers who attended colleges that misled or defrauded students through borrower defense to repayment.
804,000 borrowers get relief: Student loan debt forgiveness becomes a reality for those who’d paid for decades
However, these efforts have faced legal challenges at every turn. Critics argue that student loan forgiveness is a handout and that borrowers should take responsibility for their decision to take on debt for education. Elaine Parker, president of Job Creators Network Foundation, stated that “student loan borrowers are throwing a temper tantrum about having to repay their loans after a three-and-a-half-year payment holiday.” Parker criticized President Biden for giving borrowers false hope and warned that expecting debt cancellation could lead to financial ruin.
Parker suggested focusing on reducing the cost of attendance at colleges instead of pressuring the government for forgiveness. While average tuition rates have increased over the past few decades, recent increases have not outpaced inflation. It’s worth noting that more federal student loan borrowers fall into the 25-34 age group, but borrowers in their mid-30s and 40s have the largest share of outstanding student loan debt. Additionally, approximately one out of every four federal dollars lent for undergraduate education goes to parents.
According to a report published by the left-leaning think tank New America, about one in six federal student loan borrowers are in default on their loans. Many of these borrowers have been in default for at least seven years.