Still Waiting on Student Debt Cancellation

For those with six figures of student debt, your ears probably perk up every time you hear the phrases “student loan forgiveness” or “student debt cancellation”; ours do, too! Ever since the student loan payment moratorium took effect under the CARES Act in 2020, there’s been abundant speculation as to whether forgiveness would follow.

President Biden campaigned on student loan payment reform and is making good on those promises, but he also floated forgiving $10,000 for every single borrower, which has remained stalled for over a year. Although the media continues to speculate, and Senators Schumer and Warren remain vocal advocates, it seems less and less likely as time passes that the President will make a unilateral action to forgive student loans.

Another Path Forward for Student Loan Forgiveness?

As legal experts, media outlets, and the Twittersphere have debated whether the President has the power to cancel student debt, the Department of Education has continued behind the scenes to widen access to programs like Public Service Loan Forgiveness through regulatory changes. Now, advocates are bringing forward a new strategy that could be used to broadly expand student loan forgiveness without the need for congressional approval, and that could withstand partisan scrutiny.

Student loan expert Mark Kantrowitz explains that existing “regulatory authority is so broad that the U.S. Department of Education could use the rulemaking process to issue…a new student loan forgiveness program.” The concept involves the original income-driven repayment plan, which was called Income-Contingent Repayment (ICR). Today, that plan is little utilized because of its long repayment terms (25 years) and high demands on income (20% of discretionary income). The language of the regulatory code “provides the U.S. Department of Education with broad regulatory authority to modify the details of the program.”

That broad authority could be used to modify the terms of repayment, just as it has already done to widen access to Public Service Loan Forgiveness. Under these rules, the Dept. of Education previously created the PAYE and REPAYE plans, and Kantrowitz argues that the same tactic could be used to create yet another repayment plan. “These regulations included a smaller definition of discretionary income, a smaller percentage of discretionary income, a shorter repayment terms and various requirements for forgiveness of the remaining loan balance. These changes involve all of the dimensions required to implement a new student loan forgiveness program.”

Whether or not this idea comes to fruition, it will take time for any further significant student loan reform. In the meantime, your best bet is to take advantage of existing programs such as the Limited Waiver Opportunity for PSLF. If you have any questions about it, we’re always here to help you with your specific needs!