The Biden administration in the US is moving toward a narrower student loan relief plan that would target specific groups of borrowers, "those with soaring interest, for example", rather than a sweeping plan like the one proposed earlier and rejected by the Supreme Court in June.
The country's education department on Monday, October 30, released a draft of new federal rules paving the way for a second attempt at student loan relief. The proposal targets groups that are seen as especially vulnerable, focusing on those who owe a heavy amount or make so little income that they otherwise may never repay their loans, as per a news report.
Though full details of the proposal are likely months away, the department says it wants to cancel some or all student debt for borrowers whose balances exceed what they originally owed; those who have loans that entered repayment 25 or more years ago; those who used loans to attend career-training programmes that led to "unreasonable" debt loads or insufficient earnings and those who are eligible for other loan forgiveness programmes but did not apply.
A fifth group is also being discussed: Tthose who are experiencing financial hardship that the current student loan system does not currently adequately address". Education Secretary Miguel Cardona said in a statement, "President Biden and I are committed to helping borrowers who've been failed by our country's broken and unaffordable student loan system."
The latest attempt rests on the Higher Education Act of 1965, a wide-reaching law that gives the education secretary power to "compromise, waive or release" certain debts. However, the law is unclear on how the secretary can wield that authority, creating a legal grey area that has been the subject of debate since Biden took office.
Meetings in this regard began earlier this month and are scheduled to continue into December. At the end of the process, negotiators will vote on a proposed rule. If they reach a consensus, the department will move forward with it. If they don't, the agency will propose its own plan, which can be finalised after a public comment period.
Notably, federal student loan payments resumed in October for the first time since the start of the pandemic. Some in the industry have warned of potential problems as understaffed loan servicers bring millions of borrowers back into repayment at the same time, as per the news report.
