What Biden’s Three Recent Actions On Student Loans Mean For Borrowers

What Biden’s Three Recent Actions On Student Loans Mean For Borrowers

Within the final week, the Biden administration has taken a number of important actions on student loan aid which will have far-reaching impacts for debtors:

Taken collectively, these actions present necessary clues about the place the administration could also be heading when it comes to offering aid to student loan debtors. But questions, and a few uncertainty, stay. Here are some key takeaways for debtors.

The Biden Administration Appears To Be Listening to Student Loan Borrowers — At Least, To Some Extent

The administration’s latest actions recommend that officers are listening to student loan debtors. Advocates and lawmakers have been sounding the alarm on the potential chaos that will ensue this fall if debtors have been pressured to renew compensation this October, significantly within the midst of serious modifications to student loan servicing. The administration didn’t decide rapidly, however finally acted to increase the student loan fee pause into 2022. The Biden administration has additionally introduced on a major variety of high-profile borrower advocates, together with Richard Cordray (who beforehand ran the Consumer Financial Protection Bureau), and attorneys aligned with the motion to cancel student debt.

The Biden administration has additionally invited pro-borrower advocates to take part in upcoming negotiated rulemaking classes, which can end in important modifications to key federal student loan applications like Public Service Loan Forgiveness and income-based compensation. The Department known as for nominations to the rulemaking committee that would come with students, student loan debtors, people with disabilities, state regulators, and authorized help suppliers. “The Department is especially interested in nominations from individuals or organizations that represent the perspective of historically underserved and/or low-income communities,” wrote the Department in a press launch.

Student Loan Servicers Are On Notice

Consumer advocates, state attorneys normal, and shopper rights enforcement companies have lengthy accused student loan servicing firms of mismanaging the federal student loan system, with little accountability from the federal authorities. The federal Consumer Financial Protection Bureau (CFPB) issued a report earlier this yr concluding that widespread issues with student loan servicing proceed. The company “found a number of ways that student loan servicers gave incorrect information to borrowers, resulting in missteps that could cost consumers thousands of dollars,” mentioned the CFPB.

The appointment of Richard Cordray, who used to run the CFPB, to steer the Department of Education’s Federal Student Aid division was seen by many advocates as an early signal that the administration would begin to reign within the conduct of student loan servicers. Those hopes have been doubtless bolstered this week by the Department’s announcement that it will be rescinding coverage steerage issued beneath the Trump administration that was designed to intrude with the flexibility of states and people to use state shopper safety legal guidelines to the conduct of federal student loan servicers. A crackdown on poor student loan servicing practices might be looming, which can be an element within the latest choices by some student loan servicers to withdraw from federal student loan servicing completely.

Big Changes May Be Coming To Student Loan Forgiveness and Repayment Programs — But Not Quickly

The Department of Education’s latest announcement of a public listening to schedule to overtake key federal student loan applications was important in a variety of methods. First, the sheer variety of matters beneath overview is in some ways unprecedented — every little thing from curiosity capitalization to income-driven compensation plans to Public Service Loan Forgiveness to school-based student loan discharges shall be evaluated. In addition, the Department declared that it intends to “rewrite” the laws governing these applications, suggesting that they don’t seem to be merely searching for minor tweaks; these applications might be considerably altered and improved at a elementary degree (so long as they continue to be in step with their enabling laws). The Department’s press launch indicated that will probably be continuing with the objective of increasing entry to student loan forgiveness and discharge applications.

But whereas these modifications might be main, they won’t occur rapidly. The negotiated rulemaking course of is lengthy and tedious, requiring a number of rounds of hearings to solicit public enter and stakeholder suggestions. The Department additionally affirmed that it needs to achieve “consensus” from all stakeholders — a objective which will show elusive (and, at a minimal, time consuming). It can generally take years earlier than new, rewritten laws are finalized and enacted.

What About Student Loan Cancellation?

Broad cancellation of student loan debt continues to be a significant subject of dialogue, and student loan activists, advocates, and allies in Congress are pushing the Biden administration to behave utilizing govt authority. At this level, on condition that Congress has not superior a reputable invoice to cancel student loan debt that will go each the House and the Senate, the Biden administration should resolve if it’ll act unilaterally.

In April, the Biden administration launched a authorized overview of potential authorities that might be the premise for broad student debt cancellation utilizing govt motion. The administration confirmed as just lately as final month that the overview is ongoing, however offered no additional updates. Advocates for student loan debtors are hoping the administration will use the extra 4 months of the student loan moratorium to finalize its overview and implement some type of student loan cancellation (Biden has up to now mentioned he would assist $10,000 in student loan cancellation, however advocates have been pushing him to go greater). But thus far, administration officers haven’t indicated what they may do.

Further Reading

Biden Administration Starts Overhaul Of Student Loan Forgiveness, Income Based Repayment Programs

Student Loan Cancellation Debate Continues Amidst Servicer Disruption

Huge Student Loan Servicing Shakeup: This Major Loan Servicer Is Ending Its Contract

Did The Biden Administration Just Send A Big Signal On Student Loan Cancellation?

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