Biden administration relaxes student debt forgiveness rules

WASHINGTON (AP) — The Biden administration is moving forward with an overhaul of several student debt forgiveness programs designed to make it easier for borrowers to get help if they cheated on colleges or if they spent ten years as government employees.

The Ministry of Education finalized the package of rules on Monday proposed earlier this year. The new rules take effect in July and differ from President Joe Biden’s sweep student debt forgiveness planwhich was detained in court amid a court summons from Republican-led states.

Education Minister Miguel Cardona called it a “monumental step” that will make getting debt relief faster and easier. “The Biden administration is fixing a broken system and putting borrowers first,” Cardona told reporters Monday.

Chief among the changes is the overhaul of a program known as borrower protection, 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 it has been mired in complex regulations and political battles, leading to a growing number of applications.

The new policy clarifies that the Department of Education can review claims from individual borrowers or can forgive a large number of students at the same college if they are found to have committed fraud. The Department may file such “class dismissal” suits on its own or in response to requests from states or nonprofit legal groups.

This is a reversal of Trump-era policies that eliminated group discharges and made it more difficult for individuals to qualify for benefits. The new rule cements the department’s ability to wipe out the debt of thousands of borrowers in a single action, as the Biden administration already did for those who attended ITT Tech, Corinthian Colleges and other commercial college chains.

In an important shift, the federal government will also be able to force colleges to cover the costs if their students have their loans canceled due to fraud. Those costs are usually passed on to taxpayers, prompting complaints from conservative critics who say the program cancels the debt too freely at the public’s expense.

“We put students before special interests,” Cardona said, adding that his agency will seek out “shady schools” that leave students with heavy debt and “useless” college degrees.

The rules were passed by student advocates but scuttled by an industry group representing for-profit colleges. The group said the rules would deprive schools of adequate legal protections, and it questioned how carefully the department considered more than 5,000 public comments in response to its original proposal.

“The department cut corners in its rush to push through a borrower protection rule with serious legislative 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 makes major changes to the Public Service Loan Forgiveness Program, which was created by Congress as a stimulus for government and nonprofit workers but has failed to deliver on its promise due to notoriously complex rules.

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

The new rule erases the 15-day rule, allowing payments to be taken into account even if they are made late or in multiple installments. It also allows borrowers to make payments up to a year in advance in one lump sum instead of making monthly payments.

In certain situations, borrowers will also be able to make progress toward debt forgiveness even if they default. Those whose student loans have been put on hold for cancer treatment, military service, or the 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 people with disabilities.

This program cancels federal student debt for people who are permanently disabled and unable to earn a significant income. But many were granted such relief later when their debt was reinstated because they failed to produce the documents during the three-year monitoring period.

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

Loosening the rules on existing debt forgiveness programs has been a priority for the Biden administration, which has already authorized the cancellation of $38 billion in debt owed to defrauded students, in-state students and others. That doesn’t include Biden’s sweeping repeal plan, which is in place estimated at around $400 billion.

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

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The Associated Press Education Team receives support from the Carnegie Corporation of New York. AP is solely responsible for all content.