Updates on Federal Student Loan Repayment and Negotiated Rulemaking for Broad-Based Student Debt Relief

The landscape of federal student loans continues to evolve as borrower payments resume. Mere days after repayment started on October 1, the Biden Administration announced the approval of an additional $9 billion in student loan debt cancellation. The latest round of forgiveness supplements the administration’s ongoing efforts to address the issue of student loan debt that impacts an estimated 40 million Americans.

So, which borrowers benefit and what about broad-based student loan relief? As updates unfold, VantageScore seeks to keep consumers informed on student loan forgiveness news and provide clarity to help them navigate the intricacies of repayment. Below, we dissect the key details of the newly approved $9 billion in debt cancellation, provide an update on what is happening with broad student loan forgiveness, and explore alternative options for student debt relief.

Breaking Down the $9 Billion in New Student Debt Cancellation

The Biden Administration’s latest announcement will provide student debt cancellation through fixes the U.S. Department of Education (ED) has made to income-driven repayment plans (IDR) and Public Service Loan Forgiveness (PSLF). Additionally, debt relief will be granted to borrowers with total and permanent disabilities. Here’s a breakdown of the key points:

Scope: A total of $9 billion in new student loan debt is set to be canceled, targeting specific groups of borrowers who have been disproportionately affected by the student debt crisis.

Beneficiaries: 125,000 borrowers will qualify for forgiveness under this announcement and include qualified public servants, those enrolled in IDRs for two or more decades, and permanently disabled borrowers.

Implementation: The Department of Education, in collaboration with loan servicers, will identify and notify eligible borrowers. According to the Department, notices have already been sent out to the borrowers enrolled in IDRs who are receiving forgiveness. Notices for the other 75,000 borrowers should be mailed within the next 30 days.

Who Qualifies for the $9 Billion in New Student Loan Forgiveness?

• Approximately 53,000 borrowers enrolled in Public Service Loan Forgiveness programs. These are borrowers who have been working in federal, state, or local government or for an eligible nonprofit for 10 or more years, with forgiveness available after making 120 qualifying monthly payments.
• Approximately 51,000 borrowers enrolled in income-driven repayment plans who have been in repayment for 20 years and reached the threshold of payments for forgiveness, but never received their entitled relief.
• Approximately 22,0000 borrowers who have a total or permanent disability. Those eligible have been identified and approved for discharge through the Social Security Administration.

How Will I Know if My Student Loan Will Be Forgiven? Can I Apply?

Eligible borrowers will be receiving notices from their loan servicer. As those receiving student debt relief under the October 2023 $9 billion cancellation announcement have either met payment thresholds or qualify for relief under other criteria, borrowers cannot apply to become eligible. There is no application, but you can contact your loan servicer to see if you qualify or will be receiving a notice.

What is Happening with Broad-Based Student Loan Forgiveness?

In June 2023, the Supreme Court struck down the Biden-Harris Student Debt Relief Plan, ruling the Department of Education didn’t have authority to forgive student loans under the HEROES Act. Following this ruling, the Department of Education initiated the required “negotiated rulemaking” process to pursue broad-based loan forgiveness under the Higher Education Act of 1965.

The administration is currently looking at how it can help borrowers whose balances are greater than what they originally owed; borrowers who are eligible for relief under specific programs but didn’t apply; those under financial hardship; and those who went through programs that didn’t give financial value.

What is Negotiated Rulemaking?

Negotiated rulemaking is a process required under the Higher Education Act in which the Department of Education works with stakeholder representatives to develop regulations that are well-informed by the interests all stakeholders.

In the context of student loan forgiveness, the Biden administration is using negotiated rulemaking to increase the effectiveness of the Public Service Loan Forgiveness (PSLF) program and Income-Driven Repayment (IDR) plans. The goal of these changes is to make it easier for borrowers to qualify for loan forgiveness and to shorten the repayment period for borrowers.

“It’s a big, intense process because there are so many people involved and the regulations are invariably quite complicated. In this case, the new regulations will need to account for current programs, limits to the Department’s authority, the risk of future litigation aiming to invalidate the rules, and the interests of many different groups at the negotiating table.”

Dan Currell, former a Senior Advisor at the Department of Education

The negotiated rulemaking process can be time consuming, but the Department of Education has said that it plans to release final regulations in early 2024. The Department of Education website provides additional information on the negotiated rulemaking process.

Find additional information on student loans and repayment in this extensive FAQs-style blog post developed by Dan Currell in partnership VantageScore: 39 Answers to Student Loan Questions

The Student Loan Relief Committee and Next Steps

In September 2023 the Department of Education announced the individuals who will serve on the Student Loan Relief Committee, which will engage with the Department in the negotiated rulemaking process. The Department also released an issue paper to guide the first negotiating session. The policy considerations will be discussed at the first Student Loan Relief Committee meeting on October 10 -11, 2023. Subsequent meetings are scheduled for November and December of 2023.

The Department of Education website has designated a page where student loan borrowers can find information and updates regarding the process: Negotiated Rulemaking for Higher Education 2023-2024.

Other Paths to Student Loan Forgiveness and Debt Relief

As the negotiated-rulemaking process continues to unfold, there are additional avenues that student loan borrowers can explore to receive loan forgiveness or debt relief. These include:

SAVE Plan: In August 2022, the Biden Administration announced the launch of the Saving on a Valuable Education Plan (SAVE), a new new income-driven repayment plan (IDR), replacing the REPAYE or Revised Pay as You Earn Plan. The SAVE plan aims to offer borrowers more affordable monthly payments that are calculated based on the income and family size of an eligible borrower, rather than their loan balance. The remaining balance will be forgiven after a certain number of years.

Learn More: What is the SAVE Plan for Student Loans

Teacher Loan Forgiveness: Teachers who work full-time in low-income schools for five years may be eligible for up to $17,500 in student loan forgiveness.

Borrower Defense to Repayment – Borrowers who went to a for-profit college and were misled or defrauded by that college may be eligible for debt relief.

Amidst ongoing updates and developments in the world of federal student loans and repayment, it is important that borrowers be proactive and stay informed. VantageScore aims to empower borrowers with resources to support their repayment journey and help secure financial wellness going forward.

Stay informed: VantageScore Student Loan Repayment Resources, FAQs & News

Additional Resources:
Managing Student Loans for Better Credit Health
7 Tips to Help Borrowers Prepare as Student Loan Payments Restart

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