Reforms to Student Loan Policy Via Existing Laws

Since the Supreme Court blocked President Biden’s broad student loan cancellation last summer, the Department of Education has been working through a slow-and-steady process called Negotiated Rulemaking. By using “Neg Reg,” officials can make modifications to existing policy under authority granted by the Higher Education Act of 1965. Negotiators come to a consensus, then publish their proposals for public comment before implementation. With this process, the Dept. of Ed. has been able to expand eligibility and implementation of student loan forgiveness without raising questions of legal authority.

Progress Already Made through Negotiated Rulemaking

Biden’s Dept. of Ed. has been busy over the last few years, making remarkable progress towards simplifying and streamlining student loans through negotiated rulemaking. Some of the successful and lauded efforts toward student loan forgiveness, repayment plans, and more came out of this procedure. Both the Limited Waiver Opportunity and IDR Account Adjustment, which have alleviated millions of borrowers’ student debts, owe their origins to Neg Reg. At the end of last year, negotiators decided to extend their efforts as they grappled with persisting questions like: “how to define hardship for borrowers?” With their final meeting of this session completed, their most recent recommendations may be the last Neg Regs we see of this presidential term. 

Negotiated Rulemaking and Student Loan Forgiveness

This most recent round of negotiated rulemaking focused on questions of hardship and suitable circumstances in which to forgive a borrower’s student loans. It states: 

The Secretary may waive up to the outstanding balance of a Loan[…]when the Secretary determines that a borrower has experienced or is experiencing hardship related to such a loan such that the hardship is likely to impair the borrower’s ability to fully repay the Federal government or the costs of enforcing the full amount of the debt are not justified by the expected benefits of continued collection of the entire debt.

The published document outlines two areas where forgiveness should receive particular focus: 1) borrowers at risk of default, and 2) borrowers experiencing “hardship.” This latter term has been an obstacle for negotiators, and—rightly—receives the most consideration in the document. The proposed regulations outline a host of factors that contribute to “hardship,” such as total household income, total balance of student loans, total balance of other debts (e.g. car payments, a mortgage, etc.), type of institution the borrower attended and outcomes experienced by similar graduates, disability, high-cost essential expenses like housing or healthcare, and more. 

Legal experts are divided on whether the breadth and vagueness of this definition of hardship will make these regulations stronger or weaker in court, but we can at least see what negotiators were wrestling with as they crafted this proposal. “Hardship” is a subjective term and, naturally, is hard to pin down. 

If you have questions about how these proposed regulations may affect you and your path to student loan freedom, give your student loan professional a call. We’ll continue to wade through the legalese and keep you up-to-date on all updates and reforms to student loans!