Tag Archives: student debt

Biden Administration Introduces New Regulations to Reduce Cost of Federal Student Loan Payments

The Biden Administration’s proposed regulations for a Revised Pay As You Earn (REPAYE) plan would create the most affordable income-driven repayment (IDR) plan that has ever been made available to student loan borrowers, simplify the program, and eliminate common pitfalls that have historically delayed borrowers’ progress toward forgiveness and provide student debt relief to some 40 million borrowers © Karen Rubin/news-photos-features.com

Despite ongoing opposition by Republicans, President Joe Biden continues to introduce programs to relieve the burden of student loans. This is a fact sheet from the Department of Education describing a Revised Pay As You Earn (REPAYE) plan to provide student debt relief for 40 million borrowers:

Today, the U.S. Department of Education (Department) proposed regulations to reduce the cost of federal student loan payments, especially for low and middle-income borrowers. The regulations fulfill the commitment President Biden laid out in August when he announced his Administration’s plan to provide student debt relief for approximately 40 million borrowers and make the student loan system more manageable for student borrowers. The proposed regulations would create the most affordable income-driven repayment (IDR) plan that has ever been made available to student loan borrowers, simplify the program, and eliminate common pitfalls that have historically delayed borrowers’ progress toward forgiveness.  

“Today the Biden-Harris administration is proposing historic changes that would make student loan repayment more affordable and manageable than ever before,” said U.S. Secretary of Education Miguel Cardona. “We cannot return to the same broken system we had before the pandemic, when a million borrowers defaulted on their loans a year and snowballing interest left millions owing more than they initially borrowed. These proposed regulations will cut monthly payments for undergraduate borrowers in half and create faster pathways to forgiveness, so borrowers can better manage repayment, avoid delinquency and default, and focus on building brighter futures for themselves and their families.” 

The proposed regulations would amend the terms of the Revised Pay As You Earn (REPAYE) plan to offer $0 monthly payments for any individual borrower who makes less than roughly $30,600 annually and any borrower in a family of four who makes less than about $62,400. The regulations would also cut in half monthly payments on undergraduate loans for borrowers who do not otherwise have a $0 payment in this plan. The proposed regulations would also ensure that borrowers stop seeing their balances grow due to the accumulation of unpaid interest after making their monthly payments.  

While these regulations would provide critical relief to student borrowers, the Biden-Harris Administration is also committed to ensuring postsecondary institutions and programs are held accountable if they leave borrowers with unaffordable debts. The Department is currently working on a proposed gainful employment regulation that would cut off federal financial aid to career training programs that fail to provide sufficient financial value and require warnings for borrowers who attend any program that leaves graduates with excessive debts. The same regulatory package will also include proposals to strengthen the conditions that can be placed on institutions that fail to meet the requirements of the Higher Education Act or exhibit signs of risk.  

The Department is also taking steps today to carry out President Biden’s announcement from August that the Department would publish a list of the programs at all types of colleges and universities that provide the least financial value to students. To advance this effort, the Department is publishing a request for information to seek formal public feedback on the best way to identify the programs that provide the least financial value for students. This public comment process will ensure the Department is carefully considering a range of perspectives and considerations as it constructs the list. Once the list is published, institutions with programs on this list will be asked to submit improvement plans to the Department to improve their financial value.  

Estimated effects of the proposed IDR Plan 

The proposed regulatory changes would substantially reduce monthly debt burdens and lifetime payments, especially for low and middle-income borrowers, community college students, and borrowers who work in public service. Overall, the Department estimates that the plan would have the following effects compared to the existing REPAYE plan: 

  • Future cohorts of borrowers would see their total payments per dollar borrowed decrease by 40%. Borrowers with the lowest projected lifetime earnings would see payments that are 83% less, while those in the top would only see a 5% reduction. 
  • A typical graduate of a four-year public university would save nearly $2,000 a year relative to the current REPAYE plan. 
  • A first-year teacher with a bachelor’s degree would save more than $17,000 in total payments while pursuing Public Service Loan Forgiveness—a two-thirds reduction in what they would pay in total under REPAYE.  
  • 85% of community college borrowers would be debt-free within 10 years
  • On average, Black, Hispanic, American Indian and Alaska Native borrowers would see their lifetime payments per dollar borrowed cut in half. 

Building on an Unparalleled Record of Debt Relief 

The draft regulations build upon the work the Biden-Harris Administration has already done to improve the student loan program, make colleges more affordable, approve $48 billion in targeted relief to nearly 2 million student loan borrowers, and fight to provide up to $20,000 in one-time debt relief to over 40 million eligible borrowers, including 26 million who have already applied. These regulations also propose to build on the Administration’s commitment to ensuring IDR plans deliver relief to eligible borrowers. This includes ongoing steps to provide accurate counts of progress toward forgiveness for borrowers through a one-time account adjustment

The proposed regulations and request for information will be published in the Federal Register tomorrow. The public may comment on both documents through the Regulations.gov website for 30 days. The Department expects to finalize the rules later this year and aims to start implementing some provisions later this year, subject to any changes made based on public comments. 

View an unofficial copy of proposed IDR regulation here and a fact sheet with further information here. View an unofficial copy of the RFI here, and a fact sheet with further information here.

Fighting for Debt Relief at the Supreme Court

Since President Biden first announced his intention to cancel up to $20,000 in student loan debt for the vast majority of borrowers, opponents of student debt relief have filed legal challenges seeking to halt this effort. In December, the Supreme Court agreed to hear two of these challenges– Nebraska v. Biden (recaptioned Biden v. Nebraska at the Supreme Court), brought by Republican officials in Nebraska, Missouri, Kansas, South Carolina, Arkansas, and Iowa, and Brown v. Biden (recaptioned Biden v. Brown at the Supreme Court), a challenge brought by student loan borrowers in Texas and funded by a right-wing dark-money group. 

Today, an historic coalition of cities, states, experts, and advocates filed more than a dozen amicus curiae briefs with the U.S. Supreme Court in support of the Biden Administration’s student debt relief program. 

This week’s briefs support the Justice Department’s effort to defend this policy before the nation’s highest court. To date, more than 26 million Americans have applied for student debt relief and more than 40 million Americans are expected to benefit when this program is fully implemented.

Leaders and public officials join law scholars, economists, sociologists, higher education and public policy experts from across the political and ideological spectrum in briefing the high court. The briefs represent the breadth of communities that stand to benefit from student debt relief, including working people, borrowers of color, veterans, older people, people of faith, along with cities and states across the country. Together, these briefs showcase the broad support, strong legal foundation, and urgent economic necessity underpinning President Biden’s effort to cancel student debt for 40 million Americans.

Amici Curiae Quote Sheet is available here: https://protectborrowers.org/wp-content/uploads/2023/01/Student-Debt-Relief-Amici-Curiae-Quote-Sheet.pdf

Amici Curiae Summaries and Highlights are available here: https://protectborrowers.org/wp-content/uploads/2023/01/Student-Debt-Relief-Amici-Curiae-Summaries-and-Highlights.pdf

The amicus curiae briefs filed in support of the U.S. Department of Justice in Biden v. Nebraska and Biden v. Brown include:

White House Announces New Actions to Help More Americans Manage Student Debt

The Obama Administration is implementing programs to ease the student debt crisis © 2016 Karen Rubin/news-photos-features.com
The Obama Administration is implementing programs to ease the student debt crisis © 2016 Karen Rubin/news-photos-features.com

The issue of student debt has been a key one on the Democratic side of the presidential campaign (not the Republicans who like to accentuate the stress without actually doing anything about it), but the Obama Administration has been taking what actions it can – in face of Republican obstruction in Congress to accomplish anything that would improve the lives of working Americans- to help Americans manage their student debt. The White House issued a Fact Sheet detailing these actions.

Higher education is one of the most important investment individuals can make for themselves and for our country. Today, 11 of the 15 fastest-growing occupations require a postsecondary education. That’s why the President has made historic investments to help millions of Americans afford college by doubling investments in grant and scholarship aid through Pell grants and tax credits, keeping interest rates low on federal student loans, and creating better options to help borrowers manage debt after college like the Pay as You Earn (PAYE) plan.

As detailed in a new post on student debt trends and state-by-state data being released by the Council of Economic Advisers, these efforts are paying off. More students are graduating college than ever before. More than four of five Direct Loan recipients with loans in repayment are current on their loans. Delinquencies, defaults, and hardship deferments are all trending downward, with nearly three million borrowers successfully accessing a pathway out of default through loan rehabilitation since 2010. And more students are taking action on their student debt when they need support, with nearly five million Direct Loan borrowers taking advantage of repayment options like the President’s PAYE plan, which caps monthly student loan payments at 10 percent of income, up from 700,000 enrolled in 2011.

Many students access student loans to help finance their education; typically, that investment pays off, with bachelor’s degree recipients earning $1 million more in their lifetime and associate’s degree recipients earning $360,000 more, compared to their high school counterparts. But for some, burdensome student loan debt can present a challenge as they seek to start a career, raise a family, purchase a home, start a business, or save for retirement.

Guaranteeing strong consumer protections and building a system of high-quality customer service are important components of a federal student loan system that expands college opportunity and provides reassurance to American families that pursuing a college degree and responsibly borrowing to pay for college will not threaten their future financial security.

The White House has just announced new actions while highlighting the progress already made to help ensure the more than 40 million Americans with student loan debt understand their repayment options and access high-quality customer service, strong consumer protections, and targeted support to repay their student debt successfully.

New Actions on Student Debt 

Over the past few years, the Administration has stepped up efforts to ensure that flexible repayment options are available to support Americans with federal student debt. Today’s actions build on that progress and provide a roadmap to guide and support borrowers as they seek to manage and repay their debt successfully:

  • New Goal to Enroll 2 million More Borrowers in Plans like Pay As You Earn (PAYE).The President’s PAYE and related income-driven repayment plans are available to help borrowers who may be struggling to manage their debt effectively. Yet, too many borrowers still do not know about this important option. Leveraging key improvements in loan servicing and customer service, better tools and resources, targeted outreach to borrowers, and partnerships with key external organizations under the Student Debt Challenge, the Administration is announcing a new goal to enroll two million more borrowers in plans like PAYE by this time next year. 
  • Launch of StudentLoans.gov/Repay. To help borrowers easily navigate the complexity of student loan repayment options, the U.S. Digital Service and the Department of Education’s Office of Federal Student Aid have launchedStudentLoans.gov/Repay to help drive students to their best repayment option in five steps or less. Built mobile-first, and using human-centered design,StudentLoans.gov/Repay was designed to make repayment information as easy to understand as possible. 
  • Strengthening Consumer Protections through New Standards for Student Loan Servicing. The Department of Education and Department of the Treasury – after consulting with the Consumer Financial Protection Bureau (CFPB) and their work with Illinois Attorney General Lisa Madigan and other state attorneys’ general – have developed clear student loan borrower rights and protections in three key areas: (1) providing accurate and actionable information about account features, borrower protections, and loan terms; (2) establishing a clear set of expectations for minimum requirements for communication and services provided by student loan servicers, including adequate and timely customer service; and (3) holding servicers accountable for fixing errors, being responsive to borrowers, and resolving problems by ensuring that borrowers, federal and state agencies and regulators, and law enforcement officials have access to appropriate channels of recourse when violations of federal or state consumer financial laws occur. The Department of Education will ensure all borrowers with federal Direct Loans can rely on high-quality service in line with these standards and protections. The Department of Education will implement this effort as part of its new vision for servicing student loans.    
  • Better Information to Help Borrowers Take Action on their Debt: CFPB Prototype Student Loan Payback Playbook. The CFPB is seeking comment on a new set of student loan servicing disclosures—a student loan Payback Playbook – that provides borrowers personalized information to better understand their repayment options and find a monthly payment they can afford. To help borrowers choose the best repayment plan with the most up-to-date information based on their circumstances, borrowers would see a plain language Playbook on their monthly bill, in regular email communications from their student loan servicer, or when they log into their student loan account. The Department of Education, working with the CFPB, will be finalizing and implementing these disclosures for federal loans borrowers. 
  • Ensuring Effective Student Loan Counseling. The Department of Education will work to improve the timing and content of current loan counseling efforts, including statutorily required entrance and exit counseling, to help students make better borrowing decisions, increase college completion, promote successful loan repayment, and reduce delinquencies and defaults. Specifically, the Department will upgrade and redesign its Entrance and Exit Counseling tools on StudentLoans.gov – which serves 6.5 million students a year – based on user analytics and direct input from more than 500 borrowers, financial aid administrators, policymakers, and higher education organizations. The Department is also developing a loan counseling experiment to rigorously evaluate the effectiveness of different counseling tools and the impact of offering borrowers more frequent information and guidance beyond the statutorily required one-time entrance and one-time exit counseling.
  • Leveraging Research to Drive Better Student Outcomes. The Department of Education will pilot Advancing Insights through Data (AID), a research partnership program that will offer other federal agencies and affiliated researchers data access to conduct research that can inform and advance policies and practices that support students’ postsecondary success and strengthen repayment outcomes for borrowers. Starting with Federal Reserve Board researchers this fall, the program will allow experts to apply to securely access and match administrative student aid data files with other survey and administrative data, while ensuring safeguards are in place to protect the privacy of students and families. AID builds on the Administration’s recent efforts to leverage government data in ways that can improve service delivery, promote transparency, and strengthen accountability, particularly through the College Scorecard, which includes the most comprehensive, reliable data ever published on students’ post-college earnings and repayment outcomes. The Department is also exploring future opportunities for new research partnerships.
  • Modernizing Credit Reporting for Student Loans To Ensure Fair Treatment Of BorrowersThe Department of Education and the Department of the Treasury, in consultation with the CFPB, are working collaboratively with the credit reporting industry to develop guidance for servicers, lenders, and others who furnish data to the credit bureaus to determine how best to report student loan data so that it is fair, consistent, and accurately reflects repayment activity. This effort is another critical part of the Department’s new vision for servicing student loans.
  • Over 40 new student debt challenge takers.Earlier this month, the White House issued a call to action for colleges, universities, non-profits, businesses, state and local governments, and other employers to help more borrowers better understand their options, and to take action to enroll those borrowers in PAYE and related plans so they can manage their monthly payments and avoid delinquency and default. There is a growing list of commitments from organizations working to inform their employees and members about PAYE and related plans, train human resources (HR) staff on the importance of helping borrowers understand their student loan repayment options and the steps individuals must take to enroll, and use digital platforms to highlight PAYE and related plans. In the few short weeks since the Debt Challenge was launched, there have been over 40 commitment makers, and the Administration is encouraging more colleges, businesses, non-profits to take action. As of April 26, the list of commitments includes:

o   ACCESS College Foundation

o   AFSCME

o   Achieving the Dream

o   American Student Assistance

o   American Sustainable Business Council

o   California State University, Long Beach

o   California Association of Nonprofits

o   The Century Foundation

o   College Advising Corps

o   College Forward

o   College Greenlight

o   Dyersburg State Community College

o   Florida International University

o   Friendship Public Charter School

o   Indiana University

o   Iowa State University

o   Jobs for the Future

o   Lake Area Technical Institute

o   Lone Star College

o   Marcus Foster Education Institute

o   Marks and Associates

o   Montana State University Bozeman

o   Morgan State University

o   National Housing Resource Center

o   Natixis Global Asset Management

o   New Haven Promise

o   Operation HOPE, Inc.

o   Parkway School District

o   Pharr-San Juan-Alamo Independent School District

o   Rutgers University – Newark

o   Tennessee Technological University

o   University of Pittsburgh

o   University of Memphis

o   University of South Carolina School of Medicine Greenville

o   The Institute for College Access and Success

o   The State University of New York

o   University of Michigan – Ann Arbor

o   University of Northern Iowa

o   United Tribes Technical College

o   Valencia College

o   Young Invincibles