*ED Review (2/16/24)
STUDENT LOAN RELIEF
Meanwhile, the Administration released proposed regulatory text focused on providing debt relief for borrowers facing hardship on their student loans. In the wake of the U.S. Supreme Court’s decision on the Administration’s original student debt relief plan, President Biden announced a new path to provide debt relief for as many borrowers as possible under the Department’s existing rulemaking authorities. The text will be discussed as part of a negotiated rulemaking session on February 22 and 23 (press release).
The proposal outlines a set of factors that could be used to identify hardship, such as a borrower’s total student loan balance and required payments relative to household income and whether a borrower has high-cost burdens for essential expenses like health care and child care. The text specifies that the Secretary of Education may consider these and other factors to determine whether borrowers are experiencing the type of hardship that would qualify for debt relief.
As one exercise of the Secretary’s authority, the proposal would allow for automatic relief for borrowers who are highly likely to be in default in two years. These borrowers would be identified via a methodology developed by the Secretary using available information. Beyond such relief, the text allows the Secretary to provide further relief to borrowers experiencing hardship through an application or automatic process.
*ED Review (11/25/22)
This week, the Department announced an extension of the pause on student loan repayment, interest, and collections. This extension will help alleviate uncertainty for borrowers as the Administration requests the U.S. Supreme Court review lower court orders preventing the Department from providing debt relief for tens of millions of Americans. Payments would resume 60 days after the agency is permitted to implement the program or the litigation is resolved, giving the court an opportunity to resolve the case during its current term. If the program has not been implemented and the litigation has not been resolved by June 30, 2023, payments would resume 60 days after that. More information may be found at StudentAid.gov (see also President Biden’s video update).
Earlier, the White House and Secretary Cardona forcefully responded to a U.S. District Court judge’s ruling blocking the Administration’s student debt relief plan.
“We strongly disagree with the District Court’s ruling on our student debt relief program, and the Department of Justice has filed an appeal,” White House Press Secretary Karine Jean-Pierre said in a statement. “The President and this Administration are determined to help working and middle-class Americans get back on their feet, while our opponents…sued to block millions of Americans from getting much-needed relief. For the 26 million borrowers who have already given the Department of Education the necessary information to be considered for debt relief -- 16 million of whom have already been approved for relief -- the Department will hold onto their information so it can quickly process their relief once we prevail in court. We will never stop fighting for hard-working Americans most in need….”
“We believe strongly that the [Administration’s] student debt relief plan is lawful and necessary to give borrowers and families breathing room as they recover from the pandemic and to ensure they succeed when repayment restarts,” Secretary Cardona added in his statement. “We are disappointed in the decision of the Texas court to block loan relief moving forward. Amidst efforts to block our debt relief program, we are not standing down. The Department of Justice has appealed today’s decision on our behalf….”
Per court orders, the Department pulled offline and is no longer accepting applications for discharges.
Separately, the Secretary issued a statement regarding a federal court’s approval of a settlement in Sweet v. Cardona, which will provide billions of dollars of relief to over 200,000 borrowers, and the Department of Justice announced a new process for handling cases in which individuals seek to discharge federal student loans in bankruptcy.