Understanding the Student Loan Debt Policy Landscape
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Understanding the Student Loan Debt Policy Landscape

Brownstein Client Alert, Oct. 11, 2023

Overview and Current Landscape

As part of its pledge to improve student loan programs and advance diversity and opportunity in higher education, the Biden administration has forgiven a total of $127 billion in student debt for 3.6 million borrowers, introduced a new loan repayment plan, started the negotiated rulemaking process to establish new regulations around gainful employment and value transparency, and released guidance regarding diversity in higher education.

The Biden administration has faced several setbacks in pursuing its higher education agenda. In June, the Supreme Court struck down Biden’s large-scale student loan forgiveness plan impacting about 43 million borrowers, as well as the decades-old practice of using affirmative action in college and university admissions.

On Sept. 1, interest on student loan repayments began accruing after a more than three-year pause, and repayments resumed on Oct. 1. Student loan debt totaled more than $1.77 trillion as of March. Borrowers should be notified of their monthly amount due 30 days before the due date, and bills should have started appearing between mid-September and early October, at least 21 days before they are due. Millions of borrowers will have a different loan servicer than they did when payments were paused in March 2020. Additionally, the administration assured borrowers that if they select autopay for their monthly repayments, they will save 0.25% on interest rates. For the next year, through Sept. 30, 2024, borrowers will also be shielded from normal consequences of missed payments, including going into default. Default can negatively affect credit scores and result in the withholding of federal tax refunds or a portion of the borrower’s paycheck. Once in default, the borrower loses eligibility for additional federal student aid and can no longer receive deferment or forbearance. Although shielded from these consequences in the first year, borrowers will continue to see interest accrue while payments are not made.

Given congressional gridlock and unfavorable court rulings, the Biden administration has pledged to use executive action to continue to advance its higher education priorities in these areas.

This alert discusses:

  • the actions the administration has taken to date to address federal student loan programs;
  • congressional efforts to date to address student debt; and
  • a look ahead at actions the administration may take in this space.


Actions to Date by the Biden Administration to Fix Federal Student Loan Programs:

On Oct. 4, President Biden provided an update on the administration’s efforts to fix the federal student loan program and forgive student debt through workaround mechanisms, given the Supreme Court’s earlier ruling. The president reiterated his promise to repair the current system and highlighted the administration’s ongoing efforts to relieve debt and make higher education more affordable.


Debt Forgiveness

  • On Oct. 4, the Biden administration announced $9 billion in debt relief. The $9 billion is comprised of $5.2 billion for 53,000 borrowers under the Public Service Loan Forgiveness (PSLF) program; nearly $2.8 billion in new debt relief for almost 51,000 borrowers through fixes to income-driven repayment (IDR) plans; and $1.2 billion for almost 22,000 borrowers who have a total or permanent disability and have been identified and approved for discharge through a data match with the Social Security Administration.
  • On July 14, the Biden administration announced it would forgive $39 billion in student debt through updating a technical requirement under IDR plans. Borrowers are eligible if they have accumulated the equivalent of either 20 or 25 years of qualifying monthly payments, depending on their loan type or IDR plan. There are 804,000 eligible borrowers, who have a total of $39 billion in federal student loan debt. This effort is a result of the Biden administration’s implementation of the payment count adjustments announced in April 2022, which addressed historical inaccuracies in the count of payments that qualify toward forgiveness under IDR plans. A lawsuit from the Cato Institute and Mackinac Center for Public Policy challenged the forgiveness plan and argued that the federal government lacked the authority to forgive the debt. On Aug. 14, Judge Thomas L. Ludington dismissed the case stating the groups did not show they would be harmed by the plan and rejected the plaintiffs’ request that the forgiveness be temporarily blocked. Soon after the judge’s order was posted, the Biden administration began to discharge loans, and hundreds of thousands of borrowers began to receive notification emails. Around 614,000 people are expected to have their entire student loan debt forgiven. In announcing the move, Education Secretary Miguel Cardona said the Biden administration is “standing up for borrowers who did everything right but whose progress towards forgiveness went uncounted due to past administrative failures.” Rep. Virginia Foxx (R-VA), chair of the Education and the Workforce Committee, responded calling the relief “an abuse of taxpayer money” and a blatant “political attempt to circumvent the Supreme Court.”


Student Repayment Plan

  • On July 31, the Biden administration opened a new student loan repayment plan, the Saving on a Valuable Education (SAVE) plan. SAVE is an IDR program that will raise the threshold for borrowers who qualify for as little as zero-dollar-a-month payment plans where the Department will not charge any monthly interest not covered by a borrower’s payments. This replaces the Revised Pay As You Earn (REPAYE) plan, and borrowers enrolled in REPAYE will be automatically reenrolled in SAVE. Current IDRs allow interest to snowball on a borrower’s debt, which prompted the Biden administration to develop SAVE as an alternative to current options.


Increasing Diversity and Opportunity; Improving Transparency; and Protecting Against Discrimination

  • On Sept. 28, the Biden administration released a report, “Strategies for Increasing Diversity and Opportunity in Higher Education.” This report is meant to help colleges and universities understand and respond to the U.S. Supreme Court’s decision in Students for Fair Admissions, Inc. v. PresidentandFellows of Harvard College and Students for Fair Admissions, Inc. v. University of North Carolina et al. The report calls for increased focus on socioeconomic and racial diversity on college campuses and outlines strategies and practices in the areas of outreach, admissions, financial aid and college completion. The strategies include: investment in targeted recruitment, outreach and pathway programs; increased consideration in admissions to the adversity students have faced, including financial means and discrimination; increased affordability through need-based aid and simplified student aid applications; and the fostering of welcoming and supportive environments with support programs to increase completion and retention rates. The report builds on a Dear Colleague Letter and a Questions and Answers resource posted by the departments of Education and Justice on Aug. 14.
  • On Sept. 27, the Biden administration released final regulations to establish safeguards against unaffordable debt and insufficient earnings for postsecondary students. The rule is comprised of a revitalized Gainful Employment (GE) rule and a new Financial Value Transparency (FVT) framework. The GE rule will allow the Department to assess if programs offered by private for-profit institutions and certificate programs meet statutory requirements to prepare students for GE in a recognized occupation. This will be assessed using the share of annual earnings the typical graduate devotes to paying their debt, also known as the debt-to-earnings ratio. The debt-to-earnings ratio must be less than or equal to 8%, or less than or equal to 20% of the graduate’s discretionary earnings, which is defined as their annual earnings minus 150% of the federal poverty guidelines. The GE rule will also require an “earnings premium,” which mandates higher earnings for at least half of graduates in comparison to a typical high school graduate in their state’s labor force who never enrolled in postsecondary education. The FVT framework will provide current and prospective students and families with cost estimates of out-of-pocket expenses for postsecondary programs, potential debt and predicted earnings post-graduation. The final regulation will be published on Oct. 10, 2023. It was issued with the consideration of more than 7,500 public comments and will go into effect on July 1, 2024.
  • On July 25, the Department began a civil rights investigation into whether Harvard University discriminates in the admissions process by giving preferential treatment to children of donors and alumni. The Lawyers for Civil Rights filed the lawsuit on behalf of three minority advocacy groups and alleged the students who receive preferential treatment are “overwhelmingly White” and make up as much as “15% of Harvard’s admitted students.” The plaintiffs called on the Department to investigate the impact of Harvard’s use of donor and legacy preferences. This lawsuit was filed shortly after the Supreme Court’s June decision to reject the use of affirmative action at colleges and universities around the nation.


Past Congressional Efforts:

The House and Senate have been working on legislative solutions to address student debt and the overall cost of higher education. Numerous bills have been introduced by both Democrats and Republicans. Below is an overview of several key proposals.

On Sept. 5, Bill Cassidy (R-LA), ranking member of the Senate Health, Education, Labor and Pensions (HELP) Committee, and Sens. John Thune (R-SD), John Cornyn (R-TX) and 14 other Senate Republicans introduced a Congressional Review Act (CRA) Resolution (S.J.Res.43) to overturn President Biden’s new IDR program, SAVE. Ranking Member Cassidy stated SAVE would “incentivize borrowers who can afford repayment to have their student debt reduced at the expense of Americans who did not go to college or worked to pay.” He also asserted that the majority of bachelor’s degree borrowers would not have to pay back the principal on their loans, which could cost taxpayers as much as $559 billion, based on a University of Pennsylvania Budget Model. The Senate CRA currently has 34 co-sponsors, all Republican. In the House, Rep. Lisa McClain (R-MI) introduced a companion resolution (H.J.Res.88), which currently has 51 Republican co-sponsors.

On July 27, Rep. Joe Courtney (D-CT) and Sen. Peter Welch (D-VT) introduced the Student Loan Interest Elimination Act (H.R. 4986 & S.2557). The bill would amend the Higher Education Act (HEA) to eliminate interest on student loans, establish the Education Affordability Trust Fund and increase annual and aggregate loan limits. The bill would establish a trust fund through which interest payments would pay for the student loan program’s administrative expenses, and it would develop a sliding scale based on financial need to determine interest rates. As a result, some borrowers could still receive a 0% interest rate, and no student would have an interest rate higher than 4%. The bill has 23 Democratic co-sponsors in the House and none in the Senate. A fact sheet on the bill can be found here and a section-by-section summary can be found here.

On July 27, in the Senate Fiscal Year 2024 Labor, Health and Human Services (HHS), Education, and Related Agencies appropriations bill, appropriators proposed an increase of the maximum Pell Grant award from $7,395 to $7,645. In the House, Republican appropriators proposed deep cuts to the Department and defunded Federal Work-Study and other education programs, though it maintained the maximum Pell Grant at $7,395. The Senate appropriations bill, which passed out of full committee, allocates about $12 billion more to the Department than does the House bill, which has not yet passed out of full committee. Following passage of the Continuing Resolution (CR) on Sept. 30 to extend government funding through Nov. 17, both chambers are expected to continue appropriations work in an effort to pass all spending bills before the next funding deadline. However, due to the recent removal of Rep. Kevin McCarthy (R-CA) as speaker of the House, appropriations bill negotiations have taken a backseat to the speaker replacement process.

On June 14, Senate HELP Ranking Member Cassidy and Sens. Chuck Grassley (R-IA), John Cornyn (R-TX), Tommy Tuberville (R-AL) and Tim Scott (R-SC) introduced the Lowering Education Costs and Debt Act (S.1972), a package of five bills aimed at addressing the rising costs of higher education and the increasing amount of debt taken on by students. The bills in this package include the College Transparency Act (CTA), the Understanding the True Cost of College Act, the Informed Student Borrowing Act, the Streamlining Accountability and Value in Education (SAVE) for Students Act, and the Graduate Opportunity and Affordable Loans (GOAL) Act. The package would reform the college data reporting system, require higher education institutions to use a uniform financial aid letter, require borrowers to annually receive loan counseling, condense repayment options from nine to two, and end Graduate PLUS loans. The package has received no additional co-sponsors to date.


Looking Forward:

Following the Supreme Court decision striking down Biden’s loan forgiveness plan, the Department announced the beginning of a rulemaking process to establish a new student loan forgiveness plan. The administration indicated the new plan will be enacted through title IV of HEA, which allows the Department to “compromise, waive or release” its claims against borrowers. This authority under HEA has been utilized in numerous circumstances under multiple administrations, but not to the scale of Biden’s initial forgiveness plan. The HEA requires the Department to go through the negotiated rulemaking process in order to establish new regulations governing HEA programs.

The nine-step rulemaking process began in July with the announcement of the creation of a negotiated rulemaking committee, the Student Loan Relief Committee, to prepare proposed regulations for Federal Student Aid programs. The Department held a public comment period and a public hearing on July 18. Following the hearing, the Department solicited nominations for individuals to serve on the advisory committee, receiving about 200 nominations. On Sept. 29, the 14 committee members were announced, representing student borrowers from numerous types of programs, current students, U.S. military service members or veterans, civil rights organizations, legal assistance organizations, state officials, state attorneys general, public institutions, private nonprofit institutions, proprietary institutions, Historically Black Colleges and Universities and other minority-serving institutions, as well as Federal Family Education Loan (FFEL) lenders, servicers or guaranty agencies. The committee will meet for three sessions on the following dates: Oct. 10–11; Nov. 6–7; and Dec. 11–12. Session times will be from 10 a.m. to 12 p.m. and 1 to 4 p.m. with a public comment period from 3:30 to 4 p.m., except on the final day of the final session. Sessions will be conducted virtually and are available to the public to view. Individuals must register for each session.

The committee is set to give feedback on numerous topics, which were determined based on public comments and concerns voiced during the public hearing. Topics include: assistance for borrowers who would be eligible for forgiveness under a repayment plan but did not apply; borrowers who attended programs that did not provide a financial value sufficient for repayment; and borrowers who have higher balances than what they original borrowed. The issue paper with questions for consideration and registration for Session 1 has been released. Materials and registration for the November and December sessions will be released closer to the meeting dates.

Although the Biden administration has taken numerous efforts to make progress on the above priorities, it has yet to make material progress on the following stated priorities:

  • Allowing employees of all types of child care providers to participate in the PSLF program, not solely those employed by a nonprofit or federally run child program.
  • Providing two years of community college or other high-quality training program without debt for any individual looking to improve their skills to keep up with the changing nature of work.
  • Creating a new grant program to assist community colleges in improving student success.
  • Making a $50 billion investment in workforce training, including community college business partnerships and apprenticeships.
  • Making public colleges and universities tuition-free for all families with incomes below $125,000.
  • Targeting additional financial support to low-income and middle-income individuals by doubling the maximum value of Pell grants, significantly increasing the number of middle-income Americans who can participate in the program.
  • Creating seamless pathways between high school, job training, community college and four-year programs to help students get their degrees and credentials faster.

Several of these priorities were originally included in Build Back Better, Democratic reconciliation legislation. However, they were ultimately eliminated in the final bill—the Inflation Reduction Act. Most of the priorities listed above cannot pass without congressional action and will only potentially be addressed if Democrats win the presidency and control both chambers of Congress in the upcoming 2024 elections.


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