This summer could be shaping up to be a blockbuster period for student loan borrowers. Here are some key developments to watch for in the coming months.
1. Extension of student loan pause, again 2. Extension of the Limited PSLF Waiver 3. Broad student loan forgiveness 4. Borrower Defense to Repayment
Extension of student loan pause, again
For over two years now, the Department of Education has paused payments on all government-held federal student loans and reduced interest rates to zero percent. In addition, the Department has suspended collections efforts against defaulted federal student loan borrowers.
The relief, originally enshrined into law through the CARES Act in response to the Covid-19 pandemic in March 2020, is now entering its final few months following President Biden’s most recent extension to August 31, 2022. But the Biden administration is increasingly hinting at another extension.
This week, Education Secretary Miguel Cardona suggested another extension is on the table. “We recognize that while the economy has improved, many Americans are still struggling to make ends meet,” Cardona said at a Senate subcommittee hearing earlier this week.
“I don’t have any information now to share with you about when [the student loan payment pause] would end… I know we have a date, and it could be that it’s extended. Or it could be that it starts [on September 1]. But what I will say is that our borrowers will have ample notice. And we’ll communicate that with you as well.”
So far, the Department has not started sending out mass communications to borrowers about the resumption of payments on September 1, 2022, which is now less than 90 days away. If borrowers are supposed to get “ample notice,” another extension of the payment pause may very well be coming.
Extension of the Limited PSLF Waiver
Last October, the Biden administration established a historic fix to the Public Service Loan Forgiveness (PSLF) program, which has long been the subject of intense criticism for mismanagement and dismal approval rates. Called the Limited PSLF Waiver, the initiative allows the Education Department to retroactively count past periods of repayment towards PSLF that otherwise would have been rejected, including payments made outside of normal payment windows, payments made on non-qualifying repayment plans or non-qualifying loans, and repayment periods prior to Direct loan consolidation.
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In April, the Biden administration went even further and announced reforms to Income-Driven Repayment (IDR) programs. This initiative also impacts PSLF borrowers, as they will now be able to retroactively count certain past periods of deferment and forbearance towards loan forgiveness, as well.
But with the Limited PSLF Waiver program set to expire on October 31, 2022, advocates for student loan borrowers are increasingly expressing concern that the window may be closing for public service borrowers to obtain relief. This is particularly true for borrowers who may have to take certain steps to qualify, such as consolidating FFEL loans into a Direct loan or submitting PSLF employment certification forms.
“The relief our members are feeling is palpable,” said Randi Weingarten, president of the American Federation of Teachers (AFT), in a statement this week, one of several national labor unions urging the Biden administration to extend the Limited PSLF Waiver beyond October.
“This is not the time to cut corners in getting that relief to as many people as possible, which is why President Biden must extend the limited PSLF waiver and support us in helping our members access PSLF.”
A report released this week by the Student Borrower Protection Center (SBPC) suggests that millions of borrowers could be left out of PSLF if the waiver is allowed to expire.
Broad student loan forgiveness
While the Biden administration has been focused on “targeted” student loan forgiveness by expanding access to existing loan forgiveness programs, top officials — and President Biden himself — have also indicated that they are considering broad student loan forgiveness through executive action.
Last month, the administration suggested that action was imminent. And reports indicated that the White House was nearing a decision on a plan to forgive $10,000 in student loan debt for borrowers, with eligibility restricted based on income.
Since then, however, the timeline has gotten murkier. This week, reports indicate that any decision on broad student loan forgiveness has been pushed out, likely until closer to August, when the student loan payment pause is set to end.
Education Secretary Miguel Cardona said last week that the Department of Education is “ready to roll” and will implement whatever student loan forgiveness initiative the Biden administration decides to move forward with whenever a decision is made.
Borrower Defense to Repayment
The Borrower Defense to Repayment program allows borrowers to request cancellation of their federal student loans if their school misrepresented or made false promises about key elements of the applicable degree or certificate programs, such as admissions criteria or a student’s job prospects.
But the Borrower Defense program has been caught up in political and legal wrangling since regulations for the program were first enacted in 2016. And tens of thousands of applications have been sitting with the Department of Education, in some cases for years, with no final determination.
Last week, the Biden administration announced that over half a million former students of Corinthian Colleges — a notorious for-profit college chain that collapsed in 2015 following numerous state and federal investigations into its activities — would get automatic debt cancellation through Borrower Defense to Repayment.
And that may be just the beginning. This week, attorneys on both sides of an ongoing class action lawsuit (Sweet v. DeVos) brought by student loan borrowers against the Education Department over rejected or stalled Borrower Defense applications told a federal judge they had reached a settlement agreement. Details on the settlement were vague at best, however. So the judge ordered the parties to move forward with Summary Judgment — a legal maneuver designed to end a lawsuit in favor of one party or the other.
On Thursday, the attorneys representing the class of student loan borrowers did just that and filed their Motion for Summary Judgment. However, settlement talks likely are to continue. So, regardless of the mechanism — whether it’s Summary Judgment or an agreed-upon settlement arrangement — a final conclusion to this Borrower Defense dispute could arrive sometime this summer, potentially paving the way for thousands of student loan borrowers to obtain relief under the program.
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