The Department of Education on Tuesday released a first set of draft rules for President Joe Biden’s proposed plan to provide billions of dollars in forgiveness of student loan debt.
The rules will be formally published in the Federal Register on Wednesday, April 17, and open to public comment for 30 days. A second draft will be released “in the coming months” after officials sift through the comments, with the goal of providing debt relief starting in the fall.
Secretary of Education Miguel Cardona said the proposal shows that the Biden administration is serious about fixing “a broken higher education system” that saddles students with debt. "Student loan forgiveness isn't only about relief for today's borrowers,” he said. “It's about social mobility, economic prosperity, and creating America that lives up to its highest ideals.”
The draft includes nine rules that permit waivers authorized by the Higher Education Act, the Department of Education said. The waivers focus on canceling accrued interest; eliminating debt for those making payments for 20 years; providing forgiveness for those who qualify but have not received relief due to “paperwork requirements, bad advice, or other obstacles”; and helping those who attended “low-financial-value programs or institutions.”
The administration is also working on a separate proposal to “help many other borrowers experiencing hardship related to student loans that creates a barrier to them fully repaying their loans or the cost of collection is not justified.” The rule for that proposal will be released in the next few months.
Estimating the cost: As we noted last week, analysts at the Penn Wharton Budget Model estimate that Biden’s proposal would cost about $84 billion and affect about 17 million people. Combined with an earlier debt forgiveness effort from the Biden administration that focuses on those in the income-driven repayment plan called SAVE, and the cost increases by $475 billion, for a total cost of $559 billion. The combined plans would affect about 28 million people.
On Tuesday, the Committee for a Responsible Federal Budget released an analysis that puts the estimated cost of Biden’s new proposed plan at $147 billion. The analysts say that if the administration also forgives student loan debt based on hardship or likely default, the cost could rise significantly to between $250 billion and $750 billion over a decade, though there is considerable uncertainty to how this type of forgiveness would play out.
“In total, our $250 billion to $750 billion estimate for the total cost of the plan would be in line with the cost of the Administration’s $400 billion blanket debt cancellation, which was ruled illegal by the Supreme Court,” CRFB said.
