Biden's Education Department reveals the 4 groups of student-loan borrowers it's prioritizing for its second attempt at debt relief

  • The Education Department released the draft text of its second attempt at student-debt relief.

  • It identified four groups of borrowers it will prioritize for the new plan.

  • They include borrowers whose outstanding balances exceed what they originally borrowed.

President Joe Biden's Education Department just released the latest details on its second attempt at student-loan forgiveness.

On Monday, the department released the draft text of its proposal to cancel student debt for federal borrowers using the Higher Education Act of 1965. At the end of June, the Supreme Court struck down Biden's first plan for broad debt relief using the HEROES Act of 2003, which allowed the education secretary to waive or modify student-loan balances in connection with a national emergency, like COVID-19.

The high court ruled Biden did not have the authority to cancel student debt broadly using that law. The Higher Education Act, on the other hand, does not require the reliance of a national emergency — but it does require the administration go through negotiated rulemaking, which involves a series of negotiation sessions with higher education stakeholders and borrowers to craft a final regulation for the new debt relief plan.

Monday's announcement was the latest step in that process.

"These draft proposals would build on the historic $127 billion in loan forgiveness the Biden-Harris administration has already approved for nearly 3.6 million borrowers," Education Secretary Miguel Cardona said in a statement. "We are fighting to ensure that student debt does not stand in the way of opportunity or prevent borrowers from realizing the benefits of their higher education."

The draft regulatory text identified four groups of borrowers the department is seeking to prioritize for debt relief:

  1. Those who have outstanding balances that exceed what they originally borrowed

  2. Those who have loans that entered repayment 25 or more years ago

  3. Those who took out loans to attend programs that left them with too much debt compared to post-grad earnings, along with those who went to schools with "unacceptably high" default rates

  4. And those who are eligible for forgiveness under repayment plans like income-driven repayment and Public Service Loan Forgiveness but have not yet applied for relief.

"We agree that there are struggling borrowers who are not yet reached by existing loan forgiveness programs and repayment options," Under Secretary of Education James Kvaal told reporters on a press call. "Additional discussion and evidence is needed to define those groups and any possible policy solutions with more precision."

A senior department official also told reporters that the amount of student debt canceled could vary by each group.

These groups have not changed from the initial issue paper the department released last month that outlined the groups of borrowers it wanted negotiators to focus on. However, at this time it excludes a fifth category: those who are experiencing financial hardship "in ways that the current student loan system does not adequately address."

The department said on Monday that it wants negotiators to discuss how to address that fifth category to include in another regulatory proposal or future policymaking. It released an issue paper on that topic, as well, with questions including which types of borrowers receive hardship and whether the standards to improve the bankruptcy process could also be applied to debt relief.

The next negotiation sessions will take place on November 6 and 7, with one hour of public comment at the end of each of those days. The negotiators will discuss the proposed text and the department will continue to refine it prior to the last negotiation sessions on December 11 and 12.

During the sessions in October, the department's negotiator Tamy Abernathy made clear this new relief will not reach every student-loan borrower. "We are not looking at a broad-based debt cancellation where we are going to wipe off debt in its entirety," she said.

She also said that unless the education secretary decides to implement the relief early, it would not go into effect until July 1, 2025, meaning it could get tangled up in the presidential election.

"If this cancellation was going to be pushed into 2025, I know that there are a lot of people who are very upset that they didn't get the Biden forgiveness and it's turned them off to voting, which I'm terrified of," Ashley Pizzuti, one of the negotiators representing student-loan borrowers, said during the October session.

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