Biden To Initiate Additional Student Loan Relief This Week — But Borrowers Demand Full Cancellation - Forbes

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The Biden administration this week is taking steps to provide additional student loan relief that could impact hundreds of thousands of borrowers. But student loan borrowers and advocates say it’s not enough.

Today, the U.S. Department of Administration announced that it would be easing burdensome bureaucratic requirements for student loan borrowers who have had their student loans forgiven due to a medical disability. The Total and Permanent Disability (TPD) Discharge program allows student loan borrowers who are unable to maintain substantial, gainful employment due to a medical impairment to get their student loans forgiven.

However, to keep their student loans in a discharged status, most TPD borrowers must submit ongoing annual paperwork for three years following their discharge to certify their status and employment earnings (if any). Failure to respond to the Department of Education’s inquiries can result in the discharged loans being reinstated. The vast majority of student loan disability discharges that were reversed was due to a disabled borrower’s failure to respond and submit the required paperwork.

The Biden administration announced today that the Department of Education would be waiving the paperwork requirements during the so-called post-discharge monitoring period for the TPD Discharge program for the duration of the ongoing COVID-19 pandemic. The change will be retroactive to March of 2020, when the pandemic emergency was first declared. Student loan borrowers who have had their disability discharges reversed (and their student loans reinstated) due to failure to send in the required paperwork during their post-discharge monitoring period will be eligible to have their loans re-discharged. A total of approximately 230,000 student loan borrowers will be impacted, including 41,000 borrowers who had their discharges reversed.

Advocates for student loan borrowers criticized the White House for not taking bolder steps to improve the disability discharge program, such as by automating relief for disabled borrowers, rather than forcing these borrowers to jump through bureaucratic hoops. “Even the Trump Administration automated debt relief for veterans determined to be totally and permanently disabled,” said Alex Elson, an attorney and co-founder of the student loan advocacy group, Student Defense. “There is absolutely no reason the Biden Administration should be refusing to do the same thing. The Department should waive negotiated rulemaking and issue a new regulation that automates discharges for these borrowers."

The Biden administration is also reportedly planning to announce additional student loan relief this week: an expansion of emergency student loan protections to potentially cover additional student loans. Currently, collections on defaulted federal student loans has been suspended under the CARES Act, which President Biden extended to September 30, 2021. However, only government-held federal student loans are subject to the collections suspension. Collections activities may continue against student loan borrowers who have defaulted federal student loans that are not held by the government, such as Family Federal Education Loan (FFEL) program loans held by guaranty agencies, and federal Perkins loans held by schools. An expansion of the collections moratorium to these other types of federal loans could benefit borrowers who are experiencing wage garnishment and other collections activity, but relief may be limited only to borrowers in default. The White House has not yet released any formal details.

This week’s steps are the latest in a string of moves by the new administration to address student loan debt. On his first day in office, President Biden signed an executive order extending the moratorium on most federal student loan payments and interest to September 30, 2021. Subsequently, Biden signed into law his sweeping new stimulus package, the “American Rescue Plan,” which will exempt student loan cancellation and forgiveness from taxation under federal law through the end of 2025. Progressive lawmakers hailed this provision as “paving the way” for Biden to cancel student debt.

Last week, Secretary Cardona announced a policy change to the Borrower Defense to Repayment program that will result in student loan cancellation for 72,000 student loan borrowers; the total amount of student loan forgiveness is expected to be around $1 billion. Also last week, Cardona also issued new guidance allowing colleges to use stimulus funds to cancel institutional student debts in certain situations.

These changes have been relatively fast, but also incremental, providing only temporary relief in some cases or, if it is more permanent, relief that only helps tiny subsets of over 40 million student loan borrowers. Advocates for student loan borrowers have offered measured praise for the administration’s efforts, but continue to push Biden to go much further to provide lasting relief to millions of student loan borrowers.

“Abandoning partial relief is a strong start for a narrow subset of borrowers,” said Toby Merrill, Director of the Project on Predatory Student Lending in a statement following the administration’s changes to the Borrower Defense program. “But what we need from the Education Department is an overhaul of the current borrower defense process.... The Biden-Harris administration must now address these failings or else perpetuate a system that is stacked against the very students they are supposed to protect.”

Advocates for borrowers have been arguing for months that the best path forward to address the student debt crisis is not incremental reform, but widespread student loan forgiveness. “Today’s announcement demonstrates the failure of the Department of Education programs designed to provide relief to vulnerable borrowers and the need for widespread student debt cancellation,” said Persis Yu of the National Consumer Law Center in a statement.

Student loan borrower activists, advocacy groups, and progressive lawmakers in Congress have been pushing President Biden for months to cancel student debt through executive action. Biden supports broad student loan forgiveness, but he has repeatedly indicated his preference that Congress enact student debt cancellation through legislation, rather than acting unilaterally via an executive order.

While many student loan legal experts have argued that Biden has authority to enact widespread student loan forgiveness through executive action, Department of Education attorneys under former Secretary DeVos reached the opposite conclusion, and Biden has expressed deep uncertainty about that path. He has directed attorneys at the U.S. Department of Justice to review the legality of executive action.

The President has repeatedly stated that he would support $10,000 in broad student loan forgiveness for borrowers, while student loan borrower advocacy groups have been pushing him to cancel $50,000 or more. Biden says he opposes the $50,000 figure.