The Biden administration is relaxing the rules for student debt forgiveness

WASHINGTON (AP) – The Biden administration is moving forward with an overhaul of several student debt forgiveness programs, with the goal of making it easier for borrowers to get relief if they are cheated by their colleges or if put in a decade of work as public servants. .

The Department of Education on Monday finalized a package of rules it proposed earlier this year. The new rules took effect in July and are separate from President Joe Biden’s sweeping student debt forgiveness plan, which has been upheld in court amid a legal challenge from Republican-led states.

The Secretary of Education, Miguel Cardona, called it a “monumental step” that will make it faster and simpler to get debt relief. “The Biden administration is fixing a broken system and putting loans first,” Cardona told reporters Monday.

Chief among the changes is a renewal of a program known as loan defense, which offers debt forgiveness to students whose colleges make false advertising claims or otherwise commit fraud. The program aims to help victims of predatory for-profit colleges, but has been bogged down by complex rules and political battles, resulting in a growing backlog of applications.

The new policy clarifies that the Department of Education can review claims from individual borrowers or can grant forgiveness to large groups of students from the same college, if he was found to have committed fraud. The department may pursue such “group discharge” claims on its own or in response to requests from states or nonprofit legal groups.

EXPLANATOR: Everything you need to know when applying for student loan forgiveness

It’s a reversal of Trump-era policies that eliminated group exemptions and made it harder for individuals to qualify for relief. The new rule cements the department’s ability to clear the debt for thousands of loans in a single action, as the Biden administration has already done for those who attended ITT Tech, Corinthian Colleges and other for-profit college chains.

In a major change, the federal government will also be able to force colleges to cover the cost when their students are granted loan cancellation due to fraud. These costs have typically been passed on to taxpayers, prompting complaints from conservative critics who say the program cancels debt too freely at the public’s expense.

“We’re putting students ahead of special interests,” Cardona said, adding that his agency will go after “shady schools” that leave students with heavy debt and “useless” college degrees.

The rules have been embraced by student advocates but pushed back by an industry group representing for-profit colleges. The group said the rules would deprive schools of due process protections, and questioned how closely the department reviewed the more than 5,000 public comments that responded to its initial proposal.

“The department cut corners in a ram race through a punitive loan defense rule with serious legal and regulatory flaws that could undermine America’s education system,” said Jason Altmire, a former Democratic congressman and president and CEO of Career Education Colleges and Universities. .

The overhaul also brings big changes to the Public Service Loan Forgiveness program, which was created by Congress as an incentive for government workers and nonprofits, but has not fulfilled its promise because of notoriously complex rules.

Under existing rules, teachers, nurses and other public workers can discharge the remainder of their federal student debt after making 120 monthly payments. All payments must be made in full and within 15 days of their due date, otherwise they are not counted towards the 120 monthly payments.

The new rule removes the 15-day rule, allowing payments to count even if they are made late or in several installments. It also allows borrowers to make a year’s worth of payments in advance in a single lump sum, instead of making monthly payments.

Borrowers in certain situations will also be able to make progress towards debt forgiveness even if they do not make payments. Those who receive their student loans on break for cancer treatment, military service or Peace Corps, for example, will be treated as if they were still making monthly payments during that time.

More flexibility will also be added to a separate program that offers debt cancellation to those with disabilities.

This program cancels federal student debt for people who are permanently disabled and unable to generate significant income. But many were granted relief after having their debt reestablished because they failed to submit documents during a three-year monitoring period.

The new rule will eliminate the monitoring period and make more types of disabilities eligible for cancellation.

Loosening the rules around existing debt forgiveness programs has been a priority for the Biden administration, which has already granted $38 billion in debt cancellation for defrauded students, public students and others. That doesn’t include Biden’s broad repeal plan, which is estimated to cost about $400 billion.

A federal appeals court temporarily blocked Biden’s plan, creating uncertainty for millions of borrowers who said they would have up to $20,000 canceled. The Department of Education said it is still processing applications even when it is prevented from clearing the debt. Cardona on Monday said his agency is moving “full steam ahead” with the plan.