June 17, 2024

New Biden Student Debt Relief Could Take Over a Year to Complete

  • Biden is negotiating rules to implement his new student debt relief plan.
  • It recently took his Department of Education 15 months to go through that process.
  • The process requires the administration to negotiate and seek public feedback.

Loan forgiveness for student borrowers may not arrive anytime soon.

After the Supreme Court struck down President Joe Biden’s first attempt to cancel student debt using the HEROES Act of 2003, the Department of Education announced it would try again — this time using the Higher Education Act of 1965.

The HEROES Act allowed the administration to move quickly with the relief, as the law said the secretary of education could waive or modify student loans in connection with a national emergency. While the high court ruled that Biden overstepped his authority by using that law for broad student debt relief, it did not rule out the Higher Education Act as another way to get debt relief for borrowers.

The law says the Department of Education can enforce, pay, compromise, waive or release “any right, title, claim, lien or claim” related to federal student debt. But that law requires Biden to go through the rulemaking process. Before the Department implements a policy, it must place its proposal on the Federal Register to allow the public to comment on it. That initial proposal is called a Notice of Proposed Rulemaking. Once the Department publishes its proposal, it holds a public hearing and then undergoes a series of negotiations with stakeholders and experts until all parties reach a consensus on the regulation.

That process has historically taken a long time, which means the new attempt at broad student-debt relief may not come for some time.

There is no set timeline for the department to complete this process, and it has varied in the past. But under the Biden administration, the rulemaking process is the fastest for a series of higher education reforms started in August 2021and the official rule was published at the beginning of Novemberabout 15 months in total.

Of course, the timeline for this new plan for student debt relief could be faster, and Department of Education officials have said they will work as quickly as they can on the process of getting relief for borrowers. The timeline also does not account for any litigation that may arise.

“We want to help borrowers let down by the basic federal student loan market — that investments in yourself and your education will help you lead a better life,” Deputy Education Secretary James Kvaal said during a public hearing Tuesday. “For those who have seen their debt get out of hand, even as they make the payments we ask of them, we will help as many borrowers as possible, and we will work as quickly as possible under the law.”

What comes next

The department held the public hearing on Biden’s new debt relief plan on Tuesday, where department officials heard from borrowers, advocates and experts on how they thought the proposal should be shaped.

He is now in the process of selecting negotiators. Negotiators are nominated by the public and selected by the Department, which will seek nominations through the Federal Register. According to the website, negotiators could include “students, legal aid organizations representing students, institutions of higher education, state student grant agencies, guaranty agencies, lenders, secondary markets, loan servicers, guaranty agency servicers, collection agencies, state agencies, and accrediting agencies.”

Once negotiating committees are established, they will meet for three sessions at monthly intervals, and each session usually lasts three days, but the number of sessions may vary depending on how the negotiations play out. In order for negotiators to reach consensus on the debt relief proposal, all members of the committee must agree to the final rule. When that happens, the department will republish the text of the rule in the Federal Register for public comment, and will consider the comments before publishing the final rule.

During the negotiation of the rules, the Department intends to return to facilitating the repayment of borrowers starting in October, and the interest will start accruing again in September. There will be a 12-month “on-ramp” period when borrowers who miss payments will not be reported to credit agencies, along with a new income-based repayment plan to lower borrowers’ monthly payments.

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