US Department of Education in Washington, DC
Caroline Breiman | CQ-Roll Call, Inc. | Getty Images
The Biden administration announced Wednesday that it is moving to make sweeping changes to the federal student loan system, including making it easier for public employees to obtain debt forgiveness and setting new limits on interest accumulation.
“We are committed to reforming a broken system,” US Education Secretary Miguel Cardona said in a statement.
The main elements of the proposal include:
- Protection of fraudulent borrowers: Under the proposed regulations, students who attended for-profit schools that lied to or took advantage of them could be considered as a debt relief group, meaning that individuals would not bear the burden of making their case alone. Fraudulent borrowers will also be given more freedom when they can file a loan cancellation claim, and the definition of misconduct by schools will be expanded to include aggressive and deceptive hiring practices. Many colleges can also be prohibited from requiring borrowers to sign mandatory pre-dispute arbitration agreements or class-action waivers.
- Overhaul of the Public Service Loan Forgiveness Program: The program allows debt cancellation after 10 years for those who work for a specific government or nonprofit. Borrowers who have been in certain types of patience or postponement can count those months into their relief schedule. Currently, these periods are not eligible. Late payments will not be excluded from the total eligible payments to borrowers.
- Changes in how interest is accrued: The practice of federal student loan interest capitalization, in which accrued interest is added to the principal balance, will also be rescinded in cases where borrowing becomes unaffordable or defaults on its loan.
The public has 30 days to comment on the proposed regulations from the Ministry of Education, and the final rules will take effect no later than July 1, 2023.
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Federal Student Loan Forgiveness Still Reluctant
Although advocates have long called for these changes, the Biden administration has been under increasing pressure to respond in a deeper way to the student loan crisis by waiving a large sum or all of the debt.
The nation’s $1.7 trillion outstanding student loan balance outweighs credit card or car debt, and more than 10 million borrowers were behind on their payments before the pandemic.
During the campaign, Biden said he supported the liquidation of $10,000 from borrowers’ accounts. Doing so will cost about 321 billion dollars Full loan forgiveness is granted to about a third of student loan borrowers.
As the White House deliberates on how to proceed with the loan forgiveness, the amount it should cancel remains one of the biggest sticking points.
The NAACP has been outspoken about how $10,000 won’t go far enough for black student loan borrowers. Wisdom Cole, the association’s national director for youth and colleges, recently He said On Twitter, turning down just $10,000 would be a “slap in the face.”
The Senate’s top Democrat, Chuck Schumer of New York — along with Senator Elizabeth Warren, a Massachusetts Democrat, and other Democrats — is pushing the president to repeal at least $50,000 for everyone.
However, no amount of tolerance will make all borrowers happy. More than 3 million student loan borrowers owe more than $100,000.
At the same time, many Americans are irritated by the idea of forgiveness of any student debt, including those who have never borrowed for their education or gone to college. some republicans They said they would try to block the president’s attempt to cancel the debt.
With the November midterm elections approaching, these are all key considerations for Biden.
