Student loan borrowers can rejoice, because there is a way the Biden Administration can forgive student loans without needing an Act of Congress. But, the process is a bit complicated and will require more than just the stroke of a pen.
Waiver Authority Is Not Enough
The waiver authority in the Higher Education Act of 1965 does not allow the President to forgive federal student loans except as previously authorized by Congress. The President does not have the legal authority to forgive student loans through executive order. Only Congress has the power of the purse, and Congress has not yet passed legislation to provide broad student loan forgiveness.
Regulatory Authority Might Work
Regulatory authority, however, is the path to forgiveness.
The President may be able to forgive student loans through the U.S. Department of Education’s existing regulatory authority, as previously authorized by Congress. The U.S. Secretary of Education can legally implement broad student loan forgiveness through a regulatory change to Income-Contingent Repayment (ICR).
Income-Driven Repayment Already Provides Student Loan Forgiveness
The four income-driven repayment plans are effectively loan forgiveness programs. They base the loan payments on a percentage of discretionary income, as opposed to the amount owed by the borrower and forgive the remaining debt after 20 or 25 years in repayment. But, only ICR provides the U.S. Department of Education with broad regulatory authority.
Regulatory Authority for ICR
The Higher Education Act of 1965 provides the U.S. Secretary of Education with the legal authority to issue regulations to make changes in the ICR program. It uses language like “The Secretary shall establish procedures” and “The Secretary may promulgate regulations.”
The regulatory authority allows the U.S. Department of Education to reduce the length of the repayment term, reduce the percentage of discretionary income and change the definition of discretionary income. That’s everything needed to implement a broad student loan forgiveness program.
It Has Been Done Before
This is not just a theoretical exercise. It has already been done twice before. The U.S. Department of Education used the regulatory authority to create Pay-As-You-Earn Repayment (PAYE) in 2011 and Revised Pay-As-You-Earn Repayment (REPAYE) in 2015.
The U.S. Department of Education used this regulatory authority to cut the repayment term from 25 years to 20 years, to change the definition of discretionary income from the amount by which adjusted gross income (AGI) exceeds 100% of the poverty line to the excess over 150% of the poverty line, and to cut the loan payment from 20% of discretionary income to 10% of discretionary income.
Limitations on the Regulatory Authority
There are, however, a few limitations on the regulatory authority.
- Although the repayment term can be less than 25 years, the Higher Education Act of 1965 requires the repayment term to be at least 5 years, unless the borrower requests a shorter repayment term. There is also some statutory language that suggests that the repayment term must be at least 10 years. However, the economic hardship deferment, income-driven repayment plans, the standard repayment plan and the paused payments during the pandemic all count toward the repayment term.
- The loan payments must be based on a portion of the borrower’s annual income, suggesting that the student loan forgiveness must be means-tested. The U.S. Department of Education could limit eligibility to borrowers with incomes under a specific dollar figure or a specific multiple of the poverty line. They could also implement an income-phaseout on eligibility for student loan forgiveness or implement a cap on the amount of student loan forgiveness.
- An application process may be required to get borrower approval for transferring income information from the IRS, which would prevent the loan forgiveness from being implemented automatically. However, the U.S. Department of Education may already have income information for borrowers in an income-driven repayment plan, which is a third of federal student loan borrowers.
- The loan forgiveness will be limited to loans in the Direct Loan program. However, loans in the Federal Family Education Loan Program (FFELP) and Federal Perkins Loan program could be made eligible, and the statutory language requires counting qualified payments made in those loan programs.
Is It Legal?
Any type of broad student loan forgiveness is likely to face legal challenge. However, student loan forgiveness implemented through a regulatory change is more likely to survive legal challenge than student loan forgiveness implemented through an executive order.
The Congressional Review Act of 1996 gives Congress the ability to overturn new regulations within 60 legislative days by passing a joint resolution. If Congress does not do this, it is a sign that the new regulations are consistent with the intent of Congress. This eliminates one of the primary legal arguments against broad student loan forgiveness. The regulatory changes also benefit from clear statements of regulatory authority in the statute and the precedent set by prior use of this regulatory authority.
The new regulations could also face legal challenge under the Administrative Procedures Act (APA). But, if the Biden Administration follows proper procedure in establishing the new regulations, with a reasoned explanation for the regulatory change, the courts are unlikely to find that the new regulations are “arbitrary and capricious.”
"can" - Google News
March 23, 2022 at 08:08PM
https://ift.tt/F0QBMI5
Biden Can Forgive Student Loans By Issuing New Regulations - Forbes
"can" - Google News
https://ift.tt/qkXTnDR
https://ift.tt/9DPz6Ln
Bagikan Berita Ini
0 Response to "Biden Can Forgive Student Loans By Issuing New Regulations - Forbes"
Post a Comment