Plan B for Student Loan Relief: Advocates Call on Biden to Expand Forgiveness Program

A coalition of advocacy organizations is calling on the Biden administration to expand a new student loan forgiveness program currently under development to include robust coverage for borrowers facing economic hardship.

The new plan has been referred to as a “Plan B” after the Supreme Court struck down President Biden’s initial student loan forgiveness program last summer. That program would have provided up to $20,000 in debt relief for more than 30 million borrowers if they earned income within fairly generous parameters. After the Supreme Court blocked the plan, the administration started developing a new pathway to relief. But borrower advocates have expressed concerns that the new plan may not go far enough.

Here's the latest.  

Student loan forgiveness under the Higher Education Act

Biden’s initial student loan forgiveness plan was enacted through the HEROES Act. This 2003 statute provides authority to the Education Department to “waive” or “modify” provisions of federal law relating to financial aid and student debt repayment programs in response to a national emergency, such as a pandemic. 

Legal challenges brought by conservative groups made their way to the Supreme Court, which ultimately ruled that mass student debt relief was not expressly authorized by Congress when it passed the statute and, thus, was not allowed under the HEROES Act.

So, the Biden administration is trying a different legal path to student loan forgiveness — this time, through the Higher Education Act (HEA). The HEA has separate legal authority, giving the Education Department power to “compromise” or “waive” federal student debt in certain circumstances. 

Typically, this authority has only been exercised in fairly limited situations, such as resolving litigation against the department or settling defaulted federal student loans on a case-by-case basis within limited guidelines. 

HEA negotiated rulemaking

To establish parameters for broader student loan forgiveness authority under the HEA’s “compromise and settlement” provision, the department has embarked on a process called negotiated rulemaking. This involves convening a committee of key stakeholders to review and discuss proposed regulations drafted by the Education Department:

• If the committee reaches consensus on regulatory language, that language can become part of the program's final rules. 
• If the committee does not reach consensus, the Education Department can implement regulations more freely, while taking into account the comments of the committee members.

The department held three negotiated rulemaking sessions last fall on the proposed HEA loan forgiveness program, during which the rulemaking committee discussed draft regulations governing the new HEA plan. 

The department suggested focusing on four groups of borrowers who could qualify for student loan forgiveness. These groups would include:

• Those who have outstanding balances that exceed their original disbursed amounts.
• Those who have been in repayment for 20 or 25 years or longer.
• Those who qualify for existing student loan forgiveness programs but haven’t yet applied.
• Former students who attended institutions that engaged in fraud or other misconduct, or did not provide sufficient value. 

The Education Department also proposed a possible fifth category for student loan forgiveness: those experiencing economic hardship. 

But officials never released draft regulations defining what constituted economic hardship. While different ideas were proposed (such as receipt of public benefits, advanced age, or documented medical issues), there was no dedicated rulemaking session to review hardship eligibility. This prevented the rulemaking committee from even having the possibility of reaching consensus on hardship-based student loan forgiveness.

Advocacy groups call on Biden administration to consider hardship-based student loan forgiveness

In a letter this week addressed to U.S. Secretary of Education Miguel Cardona, a coalition of 67 organizations advocating for student loan borrowers called on the administration to hold another negotiated rulemaking session on economic hardship and make the new HEA student loan forgiveness program as expansive as possible. 

“Despite negotiators working in good faith to provide proposals to [the Education Department] and outside student loan experts appearing before the committee to share a groundbreaking analysis of how this can be done, [the department] failed to present a proposal in time before the conclusion of the third session,” said the coalition in a statement on Thursday. 

“As required under the Higher Education Act, proposals must be presented before the negotiated rulemaking committee in order for them to be considered in the final Notice for Proposed Rulemaking.”

“Failing to finalize a proposal to provide relief for borrowers experiencing hardship would result in millions of borrowers—including most recent graduates, many low-income borrowers, borrowers of color, and borrowers with disabilities—being left out of the necessary debt relief,” wrote the coalition in its letter. 

“This cannot be an option… The Department must establish a fourth negotiated rulemaking session and present its proposal to the Committee so President Biden can keep his promise.”

“Borrowers have been continuously let down by the failed attempts to cancel student debt, leaving them frustrated and disheartened.”

Kristin McGuire, Executive Director of Young Invincibles

“Borrowers have been continuously let down by the failed attempts to cancel student debt, leaving them frustrated and disheartened,” said Kristin McGuire, Executive Director of Young Invincibles, one of the organizations that signed onto the letter. 

“While the Department of Education has made significant strides to redress the harm done by a broken student loan system, establishing a negotiated rulemaking process was meant to finally deliver the widespread debt relief that President Biden has promised. It is imperative that the Department of Education immediately establish a fourth session for the Student Loan Debt Relief negotiated rulemaking to finish the job. We must continue this process until the hardships created by student debt are addressed, and this relief is delivered.”

The department did not issue a formal response to the coalition’s letter.

Next steps for HEA student loan forgiveness

The window for another rulemaking session on hardship-based student loan forgiveness will start to close in the coming months. The Education Department is expected to release final regulations on the program by May 2024.

After that, the program may not be available until the summer of 2025 — which, notably, is after the presidential elections. However, it is possible that the Biden administration could exercise the HEA’s early implementation authority and make the program available for borrowers sooner than that, possibly as early as fall 2024.

Regardless of when the new student loan forgiveness program is finalized and made available for borrowers, there is widespread agreement that it will inevitably be challenged in court. That means the Supreme Court may again have the final say on whether borrowers can receive significant student loan forgiveness. 

If you're struggling with your student loans, book a consultation with Student Loan Planner to get tailored profession-specific student loan advice.