Biden 'sEducation Department released proposals to improve student-loan forgiveness programs.- If approved, the changes will go into effect no later than July 1, 2023.
The student-loan industry is on track for major reforms.
On Wednesday, President Joe Biden's Education Department $4 a list of proposed improvements to four major student-loan forgiveness programs. From easing access to relief for public servants and those defrauded by for-profit schools to tackling surging interest on
"We are committed to fixing a broken system. If a borrower qualifies for student loan relief, it shouldn't take mountains of paperwork or a law degree to obtain it," Education Secretary
The list of proposals is part of the department's rulemaking process, and the next step for these rules is a 30 day public comment period, in which anyone can submit feedback on the proposals. The department will then plan to finalize rules by November 1 and implement them no later than July 1, 2023. If you are enrolled, or planning to apply, for a loan forgiveness program, here's what these new rules could mean for you.
Borrower defense to repayment
Borrower defense to repayment is a student-loan forgiveness process for borrowers who believe they were defrauded by a for-profit school, allowing them to submit a borrower defense claim for relief. Here are the key changes the department plans to make to this program:
- A single streamlined process for relief that will apply to all claims made as of July 1, 2023
- A broader standard of school misconduct that can fall into these categories: substantial misrepresentations, omissions of fact, contract breaches, and aggressive and misleading recruitment tactics
- Reconsideration of claims for borrowers who were not approved for full debt relief
- A clear timeline for individual and group borrower defense claims
- An expectation that the department will hold colleges accountable for costs of approved claims
Public Service Loan Forgiveness
The Public Service Loan Forgiveness (PSLF) program is designed to forgive
- Give borrowers more flexibility by allowing lump-sum and partial payments to count toward forgiveness
- Make the full-time employment requirement simpler by defining it as 30 hours of work a week and clarify how to calculate hours for non-tenured teachers
- Allow certain types of deferments and forbearances to count toward forgiveness progress, including cancer treatment deferment, Peace Corps service deferment, military service deferments, and National Guard Duty forbearance
- Reconsider applications that were denied
- Open public comment on other types of employment that currently don't qualify for PSLF.
Total and permanent disability discharges
Borrowers who are determined to be totally and permanently disabled by a physician, the Social Security Administration, or the Department of Veterans Affairs can qualify for student-debt relief. Here's how the department proposes easing that process:
- Expand the types of disabilities recognized for discharges
- Eliminate the three-year monitoring period that tracks a borrower's income after they receive debt relief, which has been a major paperwork hurdle for many qualifying borrowers
- Expand the types of accepted documentation to qualify for the program
Closed school discharges
In the past, schools have shut down in the middle of a borrower's education, leaving them with student debt but no degree. To ensure those borrowers aren't buried with debt, the department proposed the following changes:
- Provide automatic debt relief to borrowers who were still enrolled 180 days before a school's closure within one year
- Clarify that students can get debt relief as long as they didn't graduate or attend a teach-out program, which allows students to finish their studies at a different school