What do Biden’s three recent student loan actions mean for borrowers
Over the past week, the Biden administration has taken several important steps regarding student loan relief that can have far-reaching impacts for borrowers:
Taken together, these actions provide important clues as to where the administration can go in terms of helping student loan borrowers. But questions and some uncertainty remain. Here are some key points for borrowers to remember.
The Biden administration appears to be listening to student loan borrowers – at least, to some extent
Recent administration actions suggest officials are listening to student loan borrowers. Advocates and lawmakers were sounding the alarm bells about the potential chaos that would ensue this fall if borrowers were forced to resume repayments in October, especially amid major changes in student loan servicing. The administration did not make a decision quickly, but ultimately acted to extend the student loan payment hiatus until 2022. The Biden administration also appealed to a significant number of prominent borrower advocates, including Richard Cordray (who previously headed the Consumer Financial Protection Bureau) and lawyers aligned with the student debt cancellation movement.
The Biden administration has also invited borrower advocates to participate in upcoming negotiated rule-making sessions, which could lead to significant changes in key federal student loan programs, such as public service loan forgiveness. and repayment based on income. The ministry has sought nominations to the regulatory committee that would include students, student loan borrowers, people with disabilities, state regulators and legal aid providers. “The Department is particularly interested in nominations from individuals or organizations who represent the perspective of historically underserved and / or low-income communities,” the Department wrote in a press release.
Student loan officers warned
Consumer advocates, state attorneys general and consumer law enforcement agencies have long accused student loan service companies of mismanaging the federal student loan system, with little accountability for the part of the federal government. The Federal Bureau for Financial Consumer Protection (CFPB) released a report earlier this year concluding that widespread problems with servicing student loans persist. The agency “found a number of ways in which student loan officers were giving borrowers incorrect information, leading to missteps that could cost consumers thousands of dollars,” CFPB said.
The appointment of Richard Cordray, who headed the CFPB, as head of the federal student aid division of the Department of Education was seen by many advocates as a warning sign that the administration would begin to rule over conduct. student loan officers. Those hopes were likely bolstered this week by the ministry’s announcement that it would repeal policy guidelines issued under the Trump administration that were intended to interfere with the ability of states and individuals to enforce state consumer protection laws to the conduct of federal student loan officers. A crackdown on bad student loan management practices could be looming, which could be a factor in recent decisions by some student loan managers to withdraw from the federal student loan service altogether.
Big changes could happen to student loan forgiveness and repayment programs, but not quickly
The recent announcement by the Department of Education of a schedule of public hearings to review key federal student loan programs has been significant in several ways. First, the number of subjects under study is in many ways unprecedented – everything from interest capitalization to income-driven repayment plans, to civil service loan forgiveness to releases. student loans in school settings, will be assessed. Additionally, the ministry said it intended to “rewrite” the regulations governing these programs, suggesting that they don’t just seek minor adjustments; these programs could be significantly changed and improved at a fundamental level (as long as they remain in compliance with their enabling legislation). The Ministry’s press release said it was moving forward to expand access to student loan waiver and release programs.
But while these changes can be major, they won’t happen quickly. The negotiated rule-making process is long and tedious, requiring multiple rounds of hearings to solicit public comments and stakeholder comments. The Ministry has also said it wants to achieve “consensus” from all stakeholders – a goal that can be elusive (and, at a minimum, time consuming). It can sometimes take years for new rewritten regulations to be finalized and enacted.
What about the cancellation of the student loan?
Large-scale student loan debt cancellation continues to be a major topic of discussion, and student loan activists, advocates and allies in Congress are pushing the Biden administration to act using executive power. At this point, given that Congress has not put forward a credible bill to write off student loan debt that would pass through both the House and the Senate, the Biden administration must decide whether it will act unilaterally.
In April, the Biden administration launched a legal review of potential authorizations that could serve as the basis for broad student debt cancellation with executive action. The administration confirmed last month that the review was ongoing, but provided no further updates. Advocates for student loan borrowers hope the administration will use the additional four months of the student loan moratorium to finalize its review and implement some kind of student loan cancellation (Biden has in the past said he would support $ 10,000 in student loan cancellation, but advocates pushed him to go higher). But so far administration officials have not indicated what they might do.
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