LegiStorm

Summary:

Outstanding Higher Education Act (HEA) Title IV federal student loan debt exceeds $1.6 trillion and is owed by about 45 million borrowers. In August 2022, the Biden Administration announced it would invoke the Higher Education Relief Opportunities for Students Act of 2003 (HEROES Act) to cancel, on a one-time basis, up to $20,000 in qualifying federal student loan debt for borrowers with adjusted gross incomes below specified thresholds. The Department of Education (ED) did not cancel any federal student loan debt under the HEROES Act policy, though, due to litigation challenging the Secretary of Education’s (the Secretary’s) authority to carry it out. The U.S. Supreme Court ultimately struck down the policy in Nebraska v. Biden. Hours after the Supreme Court’s decision in Nebraska, the Biden Administration announced it would begin a negotiated rulemaking process (as required under the HEA) to consider extending student loan debt relief further than what is currently available. Rather than rely on the HEROES Act, the new effort would rest on a different asserted statutory authority: HEA Section 432(a)(6). That section authorizes the Secretary to “enforce, pay, compromise, waive, or release any right, title, claim, lien, or demand, however acquired” under the Federal Family Education Loan program. On April 17, 2024, ED published the first of two planned Notices of Proposed Rulemaking (NPRMs) deriving from the negotiated rulemaking process “to address the burden of Federal student loan debt.” (ED stated that it would publish the second proposed rule from the negotiated rulemaking process “in the coming months.”) Under the first NPRM, ED proposes eight instances in which the Secretary may waive qualifying ED-held federal student loan debt. These waivers are based on four themes, which entail waivers of loan amounts for borrowers who 1. owe more on their federal student loans than they did when their loans entered repayment; 2. have loans that first entered repayment about 20 or 25 years ago; 3. are eligible for existing loan discharge, cancellation, or forgiveness opportunities but who have not successfully obtained such benefits; or 4. obtained loans to attend poorly performing institutions of higher education (IHEs) or programs. The Secretary also proposes to waive certain commercially held federal student loans in three narrower circumstances than would be available for ED-held loans. Waiver of loan amounts would be available based on (1) the time since a loan first entered repayment, (2) eligibility for a closed school discharge, and (3) attendance at a poorly performing IHE. ED estimates that about 27.6 million borrowers would be eligible for some amount of debt relief under the proposed waivers. Although ED did not provide a grand total estimate for the costs associated with the waivers, ED’s individual cost estimates for each proposed waiver sum to approximately $147 billion. ED’s efforts may raise several policy, administrative, and legal considerations. Policy considerations include whether the proposed regulations would be sufficiently targeted to meet intended objectives and associated cost implications for the federal government. Administrative considerations relate to whether waiver benefits might be successfully operationalized, including whether automating benefits administration is achievable given current statutory constraints. Finally, legal considerations include interpreting the scope of the Secretary’s waiver authority, as well as whether any third party would be able to challenge student loan debt relief measures through litigation.