Student Debt Relief for the William D. Ford Federal Direct Loan Program (Direct Loans), the Federal Family Education Loan (FFEL) Program, the Federal Perkins Loan (Perkins) Program, and the Health Education Assistance Loan (HEAL) Program

Federal RegisterApr 17, 2024

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DEPARTMENT OF EDUCATION

34 CFR Parts 30 and 682

[Docket ID ED-2023-OPE-0123]

RIN 1840-AD93

Student Debt Relief for the William D. Ford Federal Direct Loan Program (Direct Loans), the Federal Family Education Loan (FFEL) Program, the Federal Perkins Loan (Perkins) Program, and the Health Education Assistance Loan (HEAL) Program

AGENCY:

Office of Postsecondary Education, Department of Education.

ACTION:

Notice of proposed rulemaking (NPRM).

SUMMARY:

The Secretary proposes to amend the regulations related to the Higher Education Act of 1965, as amended (HEA) to provide for the waiver of certain student loan debts.

In this NPRM, the Department proposes regulations, in accordance with the Secretary's authority to waive repayment of a loan provided by the HEA, to provide targeted debt relief as part of efforts to address the burden of student loan debt. The proposed regulations would modify the Department's existing debt collection regulations to provide greater specificity regarding certain non-exhaustive situations in which the Secretary may exercise discretion to waive all or part of any debts owed to the Department.

DATES:

We must receive your comments on or before May 17, 2024.

ADDRESSES:

For more information regarding submittal of comments, please see

SUPPLEMENTARY INFORMATION

. Comments must be submitted via the Federal eRulemaking Portal at

Regulations.gov.

However, if you require an accommodation or cannot otherwise submit your comments via

Regulations.gov,

please contact Rene Tiongquico at (202) 453-7513 or by email at

Rene.Tiongquico@ed.gov.

Federal eRulemaking Portal:

Please go to

www.regulations.gov

to submit your comments electronically. Information on using

Regulations.gov,

including instructions for finding a rule on the site and submitting comments, is available on the site under “FAQ.” In accordance with the Providing Accountability Through Transparency Act of 2023 (Pub. L. 118-9), a summary of not more than 100 words in length of the proposed rule, in plain language, is posted on

Regulations.gov

in the rulemaking docket:

https://www.regulations.gov/docket/ED-2023-OPE-0123.

Privacy Note:

The Department's policy is to generally make comments received from members of the public available for public viewing on the Federal eRulemaking Portal at

Regulations.gov.

Therefore, commenters should include in their comments only information about themselves that they wish to make publicly available. Commenters should not include in their comments any information that identifies other individuals or that permits readers to identify other individuals. If, for example, your comment describes an experience of someone other than yourself, please do not identify that individual or include information that would allow readers to identify that individual. The Department may not make comments that contain personally identifiable information (PII) about someone other than the commenter publicly available on

Regulations.gov

for privacy reasons. This may include comments where the commenter refers to a third-party individual without using their name if the Department determines that the comment provides enough detail that could allow one or more readers to link the information to the third-party individual. If your comment refers to a third-party individual, please refer to the third-party individual anonymously to reduce the chance that information in your comment could be linked to the third party. For example, “a former student with a graduate level degree” does not provide information that identifies a third-party individual as opposed to “my sister, Jane Doe, had this experience while attending University X,” which does provide enough information to identify a specific third-party individual. For privacy reasons, the Department reserves the right to not make available on

Regulations.gov

any information in comments that identifies other individuals, includes information that would allow readers to identify other individuals, or includes threats of harm to another person or to oneself.

FOR FURTHER INFORMATION CONTACT:

For further information related to general waivers and length of time in repayment, contact Richard Blasen at (202) 987-0315 or by email at

Richard.Blasen@ed.gov.

For further information related to current balances that exceed original amounts borrowed, contact Bruce Honer at (202) 987-0750 or by email at

Bruce.Honer@ed.gov.

For further information related to waiver eligibility based on repayment plan and targeted debt relief, contact Vanessa Freeman at (202) 987-1336 or by email at

Vanessa.Freeman@ed.gov.

For further information related to secretarial actions and Gainful Employment programs with low financial value, contact Rene Tiongquico at (202) 453-7513 or by email at

Rene.Tiongquico@ed.gov.

For further information related to FFEL Program loans, contact Brian Smith at (202) 987-0385 or by email at

Brian.Smith@ed.gov.

If you are deaf, hard of hearing, or have a speech disability and wish to access telecommunications relay services, please dial 7-1-1.

SUPPLEMENTARY INFORMATION:

Executive Summary

Since 1980, the total cost to receive a four-year postsecondary credential has nearly tripled, even after accounting for inflation.

Pell Grants once covered nearly 80 percent of the cost of a four-year public college degree for students from low- and middle-income families, but now they only cover a third of those costs.

This price growth has dramatically increased the need for students to secure student loans, particularly Federal student loans from the Department, to cover their educational costs. The gap between prices and income means that many students from low- and middle-income families have to borrow Federal student loans in addition to grants and out-of-pocket spending so they can earn a postsecondary credential. These trends have resulted in cumulative Federal loan debt of $1.6 trillion and rising for more than 43 million borrowers, which has placed a significant financial burden upon middle-income borrowers and has had an even more devastating impact on vulnerable low-income borrowers.

Trends in College Pricing 2023: Data in Excel. Table CP-2. Available at

https://research.collegeboard.org/trends/college-pricing.

https://www.cbpp.org/research/pell-grants-a-key-tool-for-expanding-college-access-and-economic-opportunity-need.

https://studentaid.gov/data-center/student/portfolio; https://www.census.gov/library/stories/2021/08/student-debt-weighed-heavily-on-millions-even-before-pandemic.html; https://www.philadelphiafed.org/-/media/frbp/assets/consumer-finance/reports/cfi-sl-1-payments-resumption.pdf; https://www.aarp.org/money/credit-loans-debt/info-2021/student-debt-crisis-for-older-americans.html; https://www.stlouisfed.org/publications/economic-equity-insights/gender-racial-disparities-student-loan-debt.

After convening the Student Loan Debt Relief negotiated rulemaking committee (Committee) and reaching consensus on various issues discussed in this NPRM, the Department proposes regulations, in accordance with the Secretary's authority to waive repayment of a loan provided by section 432(a) of the HEA, to provide debt relief targeted to address certain specific circumstances as part of a

comprehensive effort to address the burden of Federal student loan debt. The proposed regulations would modify the Department's existing debt collection regulations to provide greater specificity regarding the Secretary's discretion to waive Federal student loan debt and specify the Secretary's authority to waive all or part of any debts owed to the Department based on a number of different circumstances, such as growth in a borrower's loan balance beyond what was owed upon entering repayment, the amount of time since the loan first entered repayment, whether the borrower meets certain criteria for loan forgiveness or discharge under existing authority, and whether a loan was obtained to attend an institution or program that was subject to secretarial actions, that closed prior to secretarial actions, or was associated with closed Gainful Employment programs with high debt-to-earnings rates or low median earnings.

Summary of Select Provisions of This Regulatory Action

The Department proposes to amend subparts A, C, E, and F of 34 CFR part 30 and to add a new subpart G. The Department also proposes to amend part 682 by adding a new § 682.403.

These proposed regulations, in accordance with the HEA, would specify the Secretary's discretionary authority to waive repayment of the following amounts:

• The full amount by which the current outstanding balance on a loan exceeds the amount owed when the loan entered repayment for loans being repaid on any Income-Driven Repayment (IDR) plan if the borrower's income is at or below $120,000 if the borrower's filing status is single or married filing separately, $180,000 if a borrower files as head of household, or $240,000 if the borrower is married and files a joint Federal tax return or the borrower files as a qualifying surviving spouse (§ 30.81).

• Up to $20,000 or the amount by which the current outstanding balance on a borrower's loan exceeds the balance owed upon entering repayment (§ 30.82).

• The outstanding balance of a loan taken out to pay for the borrower's undergraduate education, or a Federal Consolidation Loan or a Direct Consolidation Loan that only repaid loans received for a borrower's undergraduate education, that first entered repayment on or before July 1, 2005 (§ 30.83).

• The outstanding balance of loans that first entered repayment on or before July 1, 2000, if the borrower has any loans obtained for study other than undergraduate study (§ 30.83).

• The outstanding balance of a loan for borrowers who would be otherwise eligible for forgiveness under an IDR plan or an alternative repayment plan but who are not currently enrolled in such a plan (§ 30.84).

• The outstanding balance of a loan for borrowers determined to be otherwise eligible for loan discharge, cancellation, or forgiveness, but who did not successfully apply (§ 30.85).

• The outstanding balance of a loan obtained to pay the cost of attending an institution or program where the Secretary or other authorized Department official has issued a final decision, denial of recertification, or determination that terminates or otherwise ends the institution's or program's title IV eligibility due at least in part to the institution's or program's failure to meet required accountability standards based on student outcomes or to its failure to provide sufficient financial value to students (§ 30.86).

• The outstanding balance of a loan obtained to pay the cost of attending an institution or program that closed and the Secretary or other Department official has determined the institution or program failed, for at least one year, to meet an accountability standard based on student outcomes, or failed to deliver sufficient financial value to students and there was a pending program review, investigation, or other Department action at the time of closure (§ 30.87).

• The outstanding balance of a loan that is associated with enrollment in a Gainful Employment (GE) program that has closed and prior to closure had high debt-to-earnings rates or low median earnings rates (§ 30.88).

• In the case of FFEL Program loans held by a private loan holder or a guaranty agency, the outstanding balance of a FFEL Program loan when a loan first entered into repayment on or before July 1, 2000; when the borrower is otherwise eligible for, but has not successfully applied for, a closed school discharge; or when the borrower attended an institution that lost its title IV eligibility due to a high cohort default rate (CDR), if the borrower was included in the cohort whose debt was used to calculate the CDR or rates that were the basis for the institution's loss of eligibility (§ 682.403).

Costs and Benefits:

As further detailed in the Regulatory Impact Analysis (RIA), the proposed regulations would specify the Secretary's authority to grant waivers that would have significant effects on borrowers, the Department, and taxpayers. For borrowers for whom the Secretary chooses to exercise his authority, the draft rules would provide significant benefits by waiving all or a portion of their repayment obligations. In cases where the Secretary decides to waive the entire outstanding balance of a loan, borrowers receiving such waivers would benefit from no longer having to repay their debt and no longer being at risk of delinquency or default. The debts that could be waived in their entirety under this proposed NPRM have the following characteristics: they are generally older; otherwise eligible for forgiveness, but the borrower has not currently enrolled in or successfully applied to receive relief; or were taken out to attend programs or institutions that failed to provide sufficient financial value as indicated by certain outcomes and conditions. Borrowers who may receive a waiver of some of their loan balances would benefit by seeing their total outstanding balance reduced, which would help with their ability to repay their loans in full in a reasonable period of time.

The Department would also benefit if the Secretary chose to exercise his discretion to issue waivers proposed in these draft rules. These benefits would largely come from no longer incurring costs to service or collect on loans that are unlikely to be otherwise repaid in full in a reasonable period.

The costs in this rule would largely come from the transfers between the Department and borrowers that would occur if the Secretary chose to use his discretion to issue waivers. There would also be some administrative costs borne by the Department to implement the proposed regulations. As detailed in Table 4.1 of the RIA, the net budget impacts across all loan cohorts through 2034 for each of the proposed changes are estimated to be as follows:

• $13.8 billion for the provision related to time since the loan first entered repayment (§ 30.83).

• $8.6 billion for the provision related to borrowers who are eligible for forgiveness based upon a repayment plan (§ 30.84).

• $15 million for the provision related to borrowers who took out loans during cohorts that caused a school to lose access to aid due to high cohort default rates (CDRs) as described in § 30.86.

• $7.6 billion for the provision related to borrowers who are eligible for a closed school loan discharge but have not successfully applied (§ 30.85).

• $27.2 billion for the provision related to borrowers who attended a gainful employment program that lost access to aid or closed (§§ 30.86 through 30.88).

• $11.0 billion for the provision related to borrowers whose current balance exceeds the amount owed upon entering repayment and are on IDR plan with income below certain thresholds (§ 30.81).

• $62.1 billion for the provision related to borrowers whose current balance exceeds the amount owed upon entering repayment (§ 30.82).

• $17.1 billion for the provisions related to borrowers with commercial FFEL loans that first entered repayment 25 years ago; who are eligible for a closed school discharge but have not applied; or who received loans to attend a school that lost access to aid due to high CDRs (682.403).

Invitation to Comment:

We invite you to submit comments regarding these proposed regulations. For your comments to have maximum effect in developing the final regulations, we urge you to clearly identify the specific section or sections of the proposed regulations that each of your comments addresses and to arrange your comments in the same order as the proposed regulations. The Department will not accept comments submitted after the comment period closes. Please submit your comments only once so that we do not receive duplicate copies.

The following tips are meant to help you prepare your comments and provide a basis for the Department to respond to issues raised in your comments in the notice of final regulations (NFR):

• Be concise but support your claims.

• Explain your views as clearly as possible and avoid using profanity.

• Refer to specific sections and subsections of the proposed regulations throughout your comments, particularly in any headings that are used to organize your submission.

• Explain why you agree or disagree with the proposed regulatory text and support these reasons with data-driven evidence, including the depth and breadth of your personal or professional experiences.

• Where you disagree with the proposed regulatory text, suggest alternatives, including regulatory language, and your rationale for the alternative suggestion.

• Do not include personally identifiable information (PII) such as Social Security numbers or loan account numbers for yourself or for others in your submission. Should you include any PII in your comment, such information may be posted publicly.

• Do not include any information that directly identifies or could identify other individuals or that permits readers to identify other individuals. Your comment may not be posted publicly if it includes PII about other individuals.

Mass Writing Campaigns:

In instances where individual submissions appear to be duplicates or near duplicates of comments prepared as part of a writing campaign, the Department will post one representative sample comment along with the total comment count for that campaign to

Regulations.gov.

The Department will consider these comments along with all other comments received.

In instances where individual submissions are bundled together (submitted as a single document or packaged together), the Department will post all of the substantive comments included in the submissions along with the total comment count for that document or package to

Regulations.gov.

A well-supported comment is often more informative to the agency than multiple form letters.

Public Comments:

The Department invites you to submit comments on all aspects of the proposed regulatory language specified in this NPRM in §§ 30.1, 30.9, 30.20, 30.23, 30.25, 30.27, 30.29, 30.30, 30.33, 30.62, 30.70, 30.80-30.89, and 682.403, the Regulatory Impact Analysis, and Paperwork Reduction Act sections.

The Department may, at its discretion, decide not to post or to withdraw certain comments and other materials that are computer-generated. Comments containing the promotion of commercial services or products and spam will be removed.

We may not address comments outside of the scope of these proposed regulations in the NFR. Generally, comments that are outside of the scope of these proposed regulations are comments that do not discuss the content or impact of the proposed regulations or the Department's evidence or reasons for the proposed regulations, which includes any comments related to the Department's negotiated rulemaking for borrowers experiencing hardship.

Comments that are submitted after the comment period closes will not be posted to

Regulations.gov

or addressed in the NFR.

Comments containing personal threats will not be posted to

Regulations.gov

and may be referred to the appropriate authorities.

We invite you to assist us in complying with the specific requirements of Executive Orders 12866, 13563, 14094 and their overall requirement of reducing regulatory burden that might result from these proposed regulations. Please let us know of any further ways we could reduce potential costs or increase potential benefits while preserving the effective and efficient administration of the Department's programs and activities.

During and after the comment period, you may inspect public comments about these proposed regulations by accessing

Regulations.gov.

Assistance to Individuals with Disabilities in Reviewing the Rulemaking Record:

On request, we will provide an appropriate accommodation or auxiliary aid to an individual with a disability who needs assistance to review the comments or other documents in the public rulemaking record for these proposed regulations. If you want to schedule an appointment for this type of accommodation or auxiliary aid, please contact the Information Technology Accessibility Program Help Desk at

ITAPSupport@ed.gov

to help facilitate.

Background

Section 432(a) of the HEA describes the legal powers and responsibilities of the Secretary of Education that are relevant to this rulemaking. In particular, section 432(a)(6) provides that, “in the performance of, and with respect to, the functions, powers and duties, vested in him by this part, the Secretary may enforce, pay, compromise, waive, or release any right, title, claim, lien, or demand, however acquired, including any equity or any right of redemption.” These provisions apply to the FFEL, Direct Loan

and HEAL programs.

Section 432(a)(6) is in, and explicitly applies to, Part B, which establishes the FFEL program. In creating the Direct Loan program, Congress established parity between the FFEL and Direct Loan program, providing that Federal Direct Loans “have the same terms, conditions, and benefits as loans made to borrowers” under the FFEL program. 20 U.S.C. 1087a(b)(2).

See Sweet

Cardona,

641 F.Supp.3d 814, 823-825 (ND Cal., 2022);

Weingarten

DOE,

468 F.Supp.3d 322, 328 (D.D.C. 2020);

McCain

US,

2011 WL 2469828 (Ct.Cl. 2011). The legislative history of the Direct Loan program shows that 20 U.S.C. 1087a(b)(2) is broadly read to apply the provisions of the FFEL statutory provisions to Direct Loan except as provided by statute or inconsistent with the different structure of the Direct Loan program. For example, the Direct Loan program provides total and permanent disability discharges, closed school loan discharges and forbearances to borrowers although none of those are mentioned in the Direct Loan statutory provisions.

When transferring the HEAL loan program to the Department, Congress explicitly stated that the Secretary's powers with respect to collecting FFEL loans extend to HEAL loans. See Division H, title V, section 525(d) of the Consolidated Appropriations Act, 2014 (Pub. L. 113-76) (Consolidated Appropriations Act, 2014). The Secretary's waiver authority under section 432(a)(6) of the HEA extends to HEAL loans.

The Department's statutory waiver authority dates back to the enactment of

the Higher Education Act in 1965.

The Department has historically viewed its waiver authority as permitting the Secretary to waive the Department's right to require repayment of a debt

when doing so advances the goals of the title IV programs and functions, while also aligning with the HEA's overall statutory parameters and principles. Having such bounded flexibility is critical for the Department's administration of the comprehensive and complex student loan programs wherein there are unforeseen challenges that arise and, absent waiver, such challenges could interfere with the Secretary's ability to effectively and efficiently administer the title IV programs.

See

Public Law 89-29, 79 Stat. 1246 (Nov. 8, 1965).

Waiving the Department's right to repayment of all or part of a debt correspondingly releases the borrower of further liability on account of all or part of that debt.

The Department's waiver authority operates within the context of the HEA's goals and also the principles that govern waiver more broadly. Some agencies that exercise waiver authority consider whether collection of debts would be against equity and good conscience or the best interest of the United States, thereby implicating general principles of government debt collection. Agencies have also articulated numerous factors that may weigh in favor of waiving an individual's debt, including when collection would defeat the purpose of the benefit program or impose financial hardship, among other considerations.

On June 30, 2023, the Department announced that it would conduct a negotiated rulemaking process to specify the Secretary's use of the authority to waive loan debts under section 432(a) of the HEA. This NPRM reflects regulations discussed during that process and would allow the Secretary to address significant challenges identified with student loan repayment that implicate considerations of equity and fairness, as well as a borrower's inability to repay their loans in full within a reasonable period or circumstances where the costs of enforcing the debt exceed the expected benefits of continued collection. In particular, this NPRM focuses on issues related to circumstances—

• When borrowers' balances have grown beyond what they originally owed at the start of repayment.

• When loans first entered repayment at least two decades ago.

• When a borrower is eligible for forgiveness or a discharge opportunity but has not successfully applied for such relief or enrolled in the repayment plan that would provide that forgiveness or discharge opportunity.

• When a borrower received loans for attendance in a program or at an institution that has since lost access to Federal aid because it failed to meet required student outcomes standards, was subject to an action by the Secretary due to failing to provide sufficient financial value or closed after failing required student outcomes metrics or the initiation of a Secretarial action process.

These proposed provisions account for particular challenges facing individual borrowers, while also recognizing that many borrowers are similarly situated in experiencing such circumstances. The Department has a longstanding view and practice of providing appropriate relief when it identifies specific circumstances that warrant relief and those circumstances affect multiple borrowers. Such relief, on an automated or individual basis, is appropriate when such individuals' circumstances share the features relevant for determining relief. This approach comports with the HEA's statutory requirements and can also help to improve administrative efficiency and provide consistency across borrowers.

Public Participation

On July 6, 2023, the Department published a notice in the

Federal Register

(88 FR 43069) announcing our intent to establish a negotiated rulemaking committee to prepare proposed regulations pertaining to the Secretary's authority under section 432(a) of the HEA, which relates to the modification, waiver, or compromise of loans.

On July 18, 2023, the Department held a virtual public hearing at which individuals and representatives of interested organizations provided advice and recommendations relating to the topic of proposed regulations on the modification, waiver, or compromise of loans. The Department has significantly engaged the public in developing this NPRM, including through review of oral comments made by the public during the public hearing and written comments submitted between July 6, 2023, and July 20, 2023. You may view the written comments submitted in response to the July 6, 2023,

Federal Register

notice on the Federal eRulemaking Portal at

Regulations.gov,

within docket ID ED-2023-OPE-0123. Instructions for finding comments are also available on the site under “FAQ.” Transcripts of the public hearings may be accessed at

https://www2.ed.gov/policy/highered/reg/hearulemaking/2023/index.html.

The Department also held three negotiated rulemaking sessions of two days each. During each daily negotiated rulemaking session, we provided an opportunity for public comment and expanded that time to one hour for the second and third sessions. The Department held a fourth two-day session in February 2024 to discuss the separate issue of possible hardship criteria for discharge and the public had an opportunity to comment on the first day of that session. Additionally, non-Federal negotiators shared feedback from their stakeholders with the negotiating committee.

Negotiated Rulemaking

Section 492 of the HEA, 20 U.S.C. 1098a, requires the Secretary to obtain public involvement in the development of proposed regulations affecting programs authorized by title IV of the HEA. After obtaining extensive input and recommendations from the public, including individuals and representatives of groups involved in the title IV, HEA programs, the Secretary, in most cases, must engage in the negotiated rulemaking process before publishing proposed regulations in the

Federal Register

. If negotiators reach consensus on the proposed regulations, the Department agrees to publish without substantive alteration a defined group of regulations on which the negotiators reached consensus—unless the Secretary reopens the process or provides a written explanation to the participants stating why the Secretary has decided to depart from the agreement reached during negotiations. Further information on the negotiated rulemaking process can be found at:

https://www2.ed.gov/policy/highered/reg/hearulemaking/2023/index.html.

On August 31, 2023, the Department published a notice in the

Federal Register

announcing its intention to establish the Committee to prepare proposed regulations for the title IV, HEA programs. The notice set forth a schedule for Committee meetings and requested nominations for individual negotiators to serve on the negotiating committee. In the notice, we announced the topics that the Committee would address.

88 FR 60163 (August 31, 2023).

The Committee included the following members, representing their respective constituencies:

•

Civil Rights Organizations:

Wisdom Cole, NAACP, and India Heckstall (alternate), Center for Law and Social Policy.

•

Legal Assistance Organizations that Represent Students or Borrowers:

Kyra Taylor, National Consumer Law Center, and Scott Waterman (alternate), Student Loan Committee of the National Association of Chapter 13 Trustees.

•

State Officials, including State higher education executive officers, State authorizing agencies, and State regulators of institutions of higher education:

Lane Thompson, Oregon DCBS—Division of Financial Regulation, and Amber Gallup (alternate), New Mexico Higher Education Department.

•

State Attorneys General:

Yael Shavit, Office of the Massachusetts Attorney General, and Josh Divine (alternate), Missouri Attorney General's Office who withdrew from the committee during the third session.

•

Public Institutions of Higher Education, Including Two-Year and Four-Year Institutions:

Melissa Kunes, The Pennsylvania State University, and J.D. LaRock (alternate), North Shore Community College.

•

Private Nonprofit Institutions of Higher Education:

Angelika Williams, University of San Francisco, and Susan Teerink (alternate), Marquette University.

•

Proprietary Institutions:

Kathleen Dwyer, Galen College of Nursing, and Belen Gonzalez (alternate), Mech-Tech College.

•

Historically Black Colleges and Universities, Tribal Colleges and Universities, and Minority Serving Institutions (institutions of higher education eligible to receive Federal assistance under title III, parts A and F, and title V of the HEA):

Sandra Boham, Salish Kootenai College, and Carol Peterson (alternate), Langston University.

•

Federal Family Education Loan (FFEL) Lenders, Servicers, or Guaranty Agencies:

Scott Buchanan, Student Loan Servicing Alliance, and Benjamin Lee (alternate), Ascendium Education Solutions, Inc.

•

Student Loan Borrowers Who Attended Programs of Two Years or Less:

Ashley Pizzuti, San Joaquin Delta College, and David Ramirez (alternate), Pasadena City College.

•

Student Loan Borrowers Who Attended Four-Year Programs:

Sherrie Gammage, The University of New Orleans, and Sarah Christa Butts (alternate), University of Maryland.

•

Student Loan Borrowers Who Attended Graduate Programs:

Richard Haase, State University of New York at Stony Brook, and Dr. Jalil Bishop (alternate), University of California, Los Angeles.

•

Currently Enrolled Postsecondary Education Students:

Jada Sanford, Stephen F. Austin University, and Jordan Nellums (alternate), University of Texas.

•

Consumer Advocacy Organizations:

Jessica Ranucci, New York Legal Assistance Group, and Ed Boltz (alternate), Law Offices of John T. Orcutt, P.C.

•

Individuals with Disabilities or Organizations Representing Them:

John Whitelaw, Community Legal Aid Society Inc., and Waukecha Wilkerson (alternate), Sacramento State University.

•

U.S. Military Service Members, Veterans, or Groups Representing Them:

Vincent Andrews, Veteran. Originally the alternate, Mr. Andrews became the primary negotiator for this constituency group after Michael Jones withdrew from the Committee.

•

Federal Negotiator:

Tamy Abernathy, U.S. Department of Education.

At its first meeting, the Committee reached agreement on its protocols and proposed agenda. The protocols provided, among other things, that the Committee would operate by consensus. The protocols defined consensus as no dissent by any negotiator of the Committee for the committee to be considered to have reached agreement and noted that consensus votes would be taken on each separate part of the proposed rules.

The Committee reviewed and discussed the Department's drafts of regulatory language and alternative language and suggestions proposed by negotiators.

At its third meeting in December 2023, the Committee reached consensus on proposed regulations addressing the Secretary's authority to waive loan debts—when a loan is eligible for forgiveness based upon repayment plan but the borrower is not currently enrolled in such plan; based upon Secretarial actions; following a closure prior to Secretarial actions; or obtained for attendance in closed GE programs with high debt-to-earnings rates or low median earnings. In addition, the Committee reached consensus on two provisions for waivers that would apply only to FFEL Program loans held by a loan holder or guaranty agency: Those based on a determination that a borrower has not successfully applied for a closed school discharge but otherwise meets the eligibility requirements for such a discharge, and cases where a borrower received a loan for attendance at an institution that lost title IV eligibility due to high CDRs.

This NPRM includes proposed regulations on these consensus items, identified in the summary of proposed regulations section, as well as the remaining items on the Committee's agenda, summarized generally above. The Department convened a fourth session of the negotiating committee on February 22 and 23, 2024, focused on discussing proposed regulations related to possible waivers for borrowers facing hardship. Proposed regulations for waivers for hardship are not included in this NPRM.

For more information on the negotiated rulemaking sessions, including the work of the Subcommittee, please visit:

https://www2.ed.gov/policy/highered/reg/hearulemaking/2023/index.html.

Summary of Proposed Changes

These proposed regulations would—

• Modify §§ 30.70(a)(1) and 30.70(c)(1) to specify that, when compromising a debt or when terminating or suspending collection of a debt, the Secretary may use the Federal Claims Collection Standards (FCCS).

• Add § 30.80 specifying the Secretary's authority to waive all or part of any debts owed to the Department, including, but not limited to, waivers under §§ 30.81 through 30.88.

• Add § 30.81 specifying the Secretary's authority to provide a one-time waiver of the amount by which the borrower's current loan has an outstanding principal balance exceeding the amount owed when the loan first entered repayment if they are enrolled in an IDR plan and their income is less than or equal to $120,000 if the borrower's filing status is single or married filing separately; $180,000 if the borrower's filing status is head of household; or $240,000 if their tax filing status is married filing jointly or qualifying surviving spouse.

• Add § 30.82 specifying the Secretary's authority to provide a one-time waiver of the lesser of $20,000 or the amount by which a borrower's current loan balance exceeds the balance owed when the borrower entered repayment.

• Add § 30.83 specifying the Secretary's authority to waive the outstanding balance when a borrower who only has student loans for the borrower's undergraduate studies first entered repayment on or before July 1, 2005 (20 years) or on or before July 1, 2000 (25 years) when a borrower has student loans other than loans for the borrower's undergraduate studies.

• Add § 30.84 specifying the Secretary's authority to waive the outstanding balance of a loan when a borrower is not currently enrolled in an

IDR plan, but otherwise meets the criteria for forgiveness under an IDR plan.

• Add § 30.85 specifying the Secretary's authority to waive the outstanding balance of a loan when a borrower has not applied for, or not successfully applied for, any loan discharge, cancellation, or forgiveness opportunity under parts 682 or 685, but otherwise meets the eligibility criteria for discharge, cancellation, or forgiveness.

• Add § 30.86 specifying the Secretary's authority to waive the outstanding balance of a loan obtained to attend an institution or program where the Secretary or other authorized Department official has issued a final decision, denial of recertification, or determination that terminates or otherwise ends its title IV eligibility due at least in part to the institution's or program's failure to meet required accountability standards based on student outcomes or to its failure to provide sufficient financial value to students.

• Add § 30.87 specifying the Secretary's authority to waive the outstanding balance of a loan obtained to attend a program or an institution that closed and the Secretary has determined the institution or program has not met for at least one year an accountability standard based on student outcomes; or failed to provide sufficient financial value to students and was subject to a program review, investigation, or any other Department action that remained unresolved at the time of closure.

• Add § 30.88 specifying the Secretary's authority to waive the outstanding balance of a loan received by a borrower associated with enrollment in a GE program that has closed and prior to closure either had a high debt-to-earning rate or low median earnings, or was at a GE program where the Department did not produce debt-to-earnings and earnings premium measures but the institution closed and prior to the closure received a majority of funds from programs with high debt-to-earnings or low median earnings.

• Add § 682.403(a) outlining the procedures under which the Secretary determines that a FFEL Program loan held by a lender or guaranty agency qualifies for a waiver, the waiver claim is processed, and the Secretary grants the waiver.

• Add § 682.403(b)(1) specifying the Secretary's authority to waive the outstanding balance of a FFEL Program loan if the loan first entered repayment in 2000 or earlier.

• Add § 682.403(b)(2) specifying the Secretary's authority to waive the outstanding balance of a FFEL Program loan if the borrower has not applied for, or not successfully applied for, but otherwise meets the eligibility requirements for a closed school discharge.

• Add § 682.403(b)(3) specifying the Secretary's authority to waive the outstanding balance of a FFEL Program loan if the loan was received for attendance at an institution that lost its eligibility to participate in a title IV, HEA program because of its high CDRs.

• Add §§ 682.403(c), 682.403(d), and 682.403(e) describing the waiver claim filing process for a lender, guaranty agency, and the Department.

• Add § 682.403(f) specifying that if the conditions for a waiver are met but the loan has been repaid by a Federal Consolidation Loan that has an outstanding balance, the Secretary may waive the portion of the outstanding balance of the consolidation loan attributable to such a loan once the loan has been assigned to the Secretary.

• Make conforming changes to §§ 30.1(c), 30.62(a), and 30.70(e)(1) based on revisions to the sections noted above.

Significant Proposed Regulations

We discuss substantive issues under the sections of the proposed regulations to which they pertain. Generally, we do not address proposed regulatory provisions that are technical or otherwise minor in effect. For each section of the regulations discussed, we include the statutory citation, the current regulations being revised (if applicable), the new proposed regulatory text, and the reasons for why we proposed to add new regulatory text or revise the existing regulatory text.

34 Part 30—Debt Collection

Subparts A, C, E, and F (§§ 30.1(c), 30.62(a), 30.70(a)(1), 30.70(c)(1) and 30.70(e)(1))

Statute:

Section 432(a) of the HEA (20 U.S.C. 1082(a)) provides that in the performance of, and with respect to, the functions, powers, and duties, vested in him by this part, the Secretary may enforce, pay, compromise, waive, or release any right, title, claim, lien, or demand, however acquired, including any equity or any right of redemption.

Current Regulations:

Section 30.1(c) contains the procedures that the Secretary may use in collecting on a debt owed to the United States.

Section 30.62(a) provides that for a debt based on a loan, the Secretary may refrain from collecting interest or charging administrative costs or penalties to the extent that compromise of these amounts is appropriate under the standards for compromise of a debt contained in 31 CFR part 902, which were formerly contained in 4 CFR part 103.

Sections 30.70(a)(1) and 30.70(c)(1) specify that the Secretary uses the standards in the FCCS to determine whether compromise of a debt, or suspension or termination of a debt, is appropriate.

Section 30.70(e)(1) provides that the Secretary may compromise a debt in any amount or suspend or terminate collection of a debt in any amount, if the debt arises under the FFEL Program authorized under title IV, part B, of the HEA, the Direct Loan Program authorized under title IV, part D of the HEA, or the Perkins Loan Program authorized under title IV, part E, of the HEA.

Proposed Regulations:

These proposed regulations would identify certain conditions under which the Secretary may waive debt, identify the loan programs eligible for such waivers, clarify the existing compromise provisions, correct outdated references, and remove obsolete references. These regulations do not alter the scope of the Secretary's authority under Section 432(a) of the HEA. Relatedly, the non-exhaustive waiver provisions neither limit the Secretary's discretion to waive debt in other circumstances permitted under Section 432(a) nor do they require the Secretary to undergo rulemaking before taking any action authorized under Section 432(a). Nevertheless, by providing greater clarity regarding the Secretary's waiver authority, these regulations are beneficial to inform the public about how the Secretary may exercise waiver in a consistent manner to provide appropriate relief to borrowers in accordance with the provisions and purposes of the HEA.

Proposed § 30.1(c)(7) would provide that the Secretary may waive repayment of a debt under subpart G of 34 CFR part 30. Proposed § 30.62(a) would add to the current compromise provisions language that would allow the Secretary to waive the collection of interest or charging administrative costs or penalties on a loan in accordance with § 30.80. Proposed §§ 30.70(a)(1) and 30.70(c)(1) would specify that, when compromising a debt or when suspending or terminating a debt, the Secretary “may” use the FCCS. Proposed § 30.70(e)(1) would add HEAL Program loans to the list of loan types for which the Secretary may compromise a debt or suspend or terminate collection of a debt.

Technical corrections updating and clarifying various references and provisions contained in subparts A, C, E, and F of part 30 would also be made. In addition, severability provisions would be added to these subparts as new §§ 30.9, 30.39, 30.69, and 30.79. The severability provisions would specify that if any provision of a part is held to be invalid, the remaining provisions would not be affected.

Reasons:

The current regulations in part 30 describe the policies and procedures that the Secretary uses to collect on a debt owed to the Department. The Department is proposing a new subpart G to part 30 which would provide greater specificity regarding the Secretary's discretion to waive Federal student loan debt. This greater specificity will allow the Department to take more transparent steps that help to consistently alleviate the significant financial burden Federal student loans have become for struggling or vulnerable borrowers by waiving some or all of their outstanding loan balances. Such waivers would either reduce monthly payments, total amounts owed, or both. The proposed new language in subpart G would require conforming changes to some of the existing regulatory language in part 30.

The proposed revision to § 30.1(c)(7) is necessary to provide a cross-reference to proposed subpart G and the proposed revision to § 30.62(a) is necessary to provide a cross-reference to proposed § 30.80.

In 2016, the Department revised § 30.70 to reflect a series of statutory changes that expanded the Secretary's authority to compromise, or suspend or terminate the collection of, debts.

In particular, the Department wanted to highlight the ability of the agency to resolve debts of less than $100,000 without needing to obtain approval from the U.S. Department of Justice (DOJ) and to include the ability of DOJ to seek review of resolving claims of more than $1 million. But the inclusion of this provision has created questions around whether the Department's compromise, suspension, and termination authority is strictly bound by FCCS standards. The Department's view is that it is not. To begin, The Federal Claims Collection Act (FCCA) and the FCCS regulations do not, by their own terms, apply to the Department's student loan programs.

In addition, the Department's own regulations also do not strictly bind the Secretary to the FCCS. The history of revisions to 34 CFR 30.70 reflects that it has been revised over time to reflect new requirements and authorities but has consistently recognized the Secretary's broad authority to compromise student loan debts “in any amount.” Reading § 30.70 as subjecting the Secretary's authority to the FCCS requirements would be contrary to the stated purpose of the 2016 amendments, which were intended to “reflect a series of statutory changes that have

expanded

the Secretary's authority to compromise, or suspend or terminate the collection of, debts” (emphasis added).

The proposed changes to §§ 30.70(a)(1) and 30.70(c)(1) would clarify that the Secretary's compromise, termination, and suspension authority remain broad and are not restricted by the FCCA and FCCS.

See 81 FR 39330 (June 16, 2016); 81 FR 75926 (November 1, 2016).

When the FCCA was enacted in 1966, it stated that “[n]othing in this Act shall increase or diminish the existing authority of the head of an agency to litigate claims, or diminish his existing authority to settle, compromise, or close claims.” Federal Claims Collection Act of 1966, Public Law 89-508, 4, 80 Stat. 308 (1966). And the FCCS specifically provides that it does not “preclude [ ] agency disposition of any claim under statutes and implementing regulations other than [the FCCA],” and that “[i]n such cases, the laws and regulations that are specifically applicable to claims collection activities of a particular agency generally take precedence.” 31 CFR 900.4. The FCCA and FCCS do not, on their own terms, limit the Secretary's authority because the HEA endows the Secretary with separate and independent authority to compromise a debt, or suspend or terminate collection of a debt.

See

§ 1082(a).

81 FR 39369 (June 16, 2016).

The addition of HEAL Program loans to § 30.70(e)(1) would clarify that the Secretary has the same authority to compromise, suspend, or terminate a HEAL loan debt as in the Direct Loan, FFEL, and Perkins loan programs. The negotiating committee agreed to add HEAL Program loans to § 30.70(e)(1) and raised no specific objections to the proposed conforming changes or technical corrections. Although there were no specific objections to the proposed revisions to the regulations in subparts A, C, E, and F of part 30, the Committee did not reach consensus on these proposed changes.

The severability provisions we propose to add as new §§ 30.9, 30.39, 30.69, 30.79, and 30.89 are intended to clarify that each regulatory provision in these subparts stands on its own. For the severability sections in subparts A through F of part 30, these additions reflect that the subcomponents of each section, as well as the sections themselves, are distinct. For instance, subpart C lays out the provisions related to administrative offset. The process in § 30.21 that addresses when the Secretary may offset a debt and the provisions regarding borrower notice in § 30.22 are separate, and those, in turn, are separate from the provisions in § 30.25 related to how an oral hearing may occur.

The severability provision in § 30.89 reflects that the different waivers proposed in subpart G each address a different set of circumstances in which the Department is concerned that borrowers may not be able to repay their loans within a reasonable period. This severability language also acknowledges that each of these proposed waivers have their own distinct rationale for their inclusion, and the effects would vary. For instance, some sections in subpart G would result in a complete waiver of a borrower's full remaining balance, while others would only result in a partial waiver. Moreover, as discussed elsewhere in this rule, there are also provisions within sections where if either element of this provision were invalidated by a reviewing court, the element that stayed in effect would continue to provide important relief to borrowers. This, for instance, can be seen in proposed §§ 30.81 and 30.82. Proposed § 682.403 is already covered by an existing severability provision in § 682.424.

These provisions were not subject to a consensus check on the part of the negotiators, although none of the negotiators raised objections to adding these provisions.

Subpart G

§ 30.80 Waiver of Federal Student Loan debts.

Statute:

Current Regulations:

None.

Proposed Regulations:

Proposed § 30.80 would specify the Secretary's authority to waive all or part of any Department-held FFEL Program loan, William D. Ford Federal Direct Loan, Federal Perkins Loan, and HEAL Loan debts owed to the Department under the conditions included in, but not limited to, §§ 30.81 through 30.88.

Reasons:

Proposed new subpart G to part 30, which includes sections §§ 30.80-30.89, would provide greater specificity regarding the Secretary's discretion to waive Federal student loan debt to alleviate the significant financial burden of student loans on borrowers and their families. The regulations in part 30 pertain to debts owed to the Department, therefore proposed § 30.80

would only apply to student loans held by the Department. This includes FFEL Program loans that have been assigned to the Department, as well as Perkins loans and HEAL loans in default. It also includes consolidation loans that repaid a FFEL, Perkins, or HEAL loan. Waivers specific to FFEL Program loans held by private lenders or managed by guaranty agencies would be provided under proposed § 682.403 of the FFEL Program regulations. The proposed regulations for § 682.403 are discussed later in this NPRM.

Proposed § 30.80 provides an introduction to subpart G and explains the types of loans covered by this subpart. The Department proposes to include all the types of Federal student loans held by the Department, including Direct Loans, FFEL Loans, Perkins Loans, and HEAL Loans because we believe it is appropriate to consider waivers for all the loan types managed by the Secretary and organizationally consider similar subject matter under one subpart. As discussed in other sections, not all these provisions will apply equally to all loan types because there are certain benefits that are not otherwise available on all types of loans. For example, only Direct and FFEL Loans are eligible to be repaid under IDR plans.

The Department believes adding subpart G in these proposed regulations better clarifies some circumstances in which the Secretary may use his existing and longstanding authority under section 432(a) of the HEA. Current regulations do not describe how the Secretary uses this waiver authority. Clarifying how this authority would be used through these regulations would better inform the public about how the Secretary may exercise his waiver authority in a consistent and equitable manner.

Providing such specificity would also allow the Department to highlight circumstances where we are particularly concerned about borrowers' ability to successfully repay their debt in full in a reasonable period or where the costs of collection are anticipated to exceed the amount recoverable. Each of these proposed waivers are intended to address a variety of conditions that borrowers may encounter where a waiver may be appropriate. They can and would operate independently of each other.

The Committee reached consensus on proposed § 30.80.

§ 30.81 Waiver when the current balance exceeds the balance upon entering repayment for borrowers on an IDR plan.

Statute:

Current Regulations:

None.

Proposed Regulations:

Proposed § 30.81 would provide that the Secretary may waive the amount by which each of a borrower's loans has a total outstanding balance that exceeds the amount owed upon entering repayment if the borrower is enrolled in an IDR plan and meets certain additional criteria. The original balance would be measured based upon the original amount disbursed for loans disbursed before January 1, 2005, and the balance of the loans on the day after the grace period for loans disbursed on or after January 1, 2005. Waiver of repayment of consolidation loans would be based upon the original balances of the loans repaid by the consolidation loan.

A borrower would be eligible to receive this waiver once on their loans if they enrolled in an IDR plan under §§ 682.215, 685.209, or 685.221 as of a date determined by the Secretary; and the borrower's adjusted gross income, or other calculation of income as shown on acceptable documentation, demonstrates that the borrower's annual income is equal to or less than $120,000 if their tax filing status is single or married filing separately; $180,000 if their tax filing status is head of household; or $240,000 if they are married filing jointly or a qualifying surviving spouse.

Reasons:

Over the past several years, the Department has taken several significant steps to address the negative effects of interest accrual and capitalization on borrowers. Effective July 1, 2023, the Department ceased capitalizing interest in all situations where it is not required by statute (87 FR 65904). This includes when a borrower enters repayment, exits a forbearance, leaves any IDR plan besides Income-Based Repayment (IBR), and enters default. In August 2023, the Department also implemented a provision in the SAVE plan regulations under which the Department does not charge any amount of accrued interest that is not otherwise covered by a borrower's required payment (88 FR 43820). These changes provide significant benefits that may help borrowers avoid situations where they find themselves struggling to repay their debts because their balance has grown far beyond what they originally borrowed.

The intent of the Department is to take action on a one-time basis on a borrower's loans to address excessive interest accrual on Federal student loans. The primary drivers of this accumulation are when borrowers make payments on an IDR plan that do not cover the full amount of accumulating interest; periods of non-payment, such as deferments, forbearances, delinquency, and default; and interest capitalization. Because prior to the establishment of the Saving on A Valuable Education (SAVE) Plan IDR plans were the only repayment plans where payments do not have to at least cover accumulating monthly interest, the Department is concerned that borrowers owe large balances that are higher than what they were at repayment entry from prior enrollment in IDR. Owing such large balances can result in borrowers needing to repay far more than would have been reasonably expected by the Department, and the borrower themselves, at the time that the borrower entered repayment. It can also significantly extend the amount of time a borrower needs to repay their loans in full. Prior to SAVE, interest balances climbed even though borrowers made monthly required payments on IDR plans. Echoing concerns and statements the Department heard in public comments prior to the formation of the negotiated rulemaking committee and during the public comment periods held on most days the negotiated rulemaking committee met, borrowers have reported that growing balances while in repayment can lead to negative psychological impacts on borrowers who are attempting to repay their debt but are unable to, including that they lose hope and motivation to repay their debt.

https://www.pewtrusts.org/en/research-and-analysis/reports/2020/05/borrowers-discuss-the-challenges-of-student-loan-repayment; https://www.newamerica.org/education-policy/reports/in-default-and-left-behind/.

Additionally, while the Department has eliminated all non-statutorily required instances of interest capitalization, borrowers today owe higher balances from previous instances of interest capitalization. Interest capitalization can significantly increase what a borrower owes and extend the time it takes to repay their loans. The Department is concerned that such instances are harmful to the borrower and should therefore be corrected retroactively by waiving the borrower's obligation to pay such interest accrual after a borrower has entered repayment.

While the Department has addressed the issue of balance growth for those in IDR going forward, there are borrowers who have spent time in repayment prior to the implementation of these changes who have experienced the balance of their loans grow such that their loan balances are now greater than what they originally borrowed. The persistence of those situations is a problem the Department seeks to address. Recent focus group reports and extensive borrower testimony have shown that growing loan balances lead to both financial and psychological challenges to successful repayment by borrowers.

While borrowers who experienced balance growth have a way to prevent balance growth in the future, they still must overcome the consequences of this past balance growth.

See 87 FR 41878 (July 13, 2022); 87 FR 65904 (November 1, 2022); 88 FR 43820 (July 10, 2023). See also

Because the Department has taken steps to address the problem of excess interest accrual and capitalization going forward, this provision would only be applied once per a borrower's loans to eliminate balance growth for all but the highest income borrowers enrolled in an IDR plan, allowing those who experienced this situation to successfully make progress on repaying their debts. Providing targeted relief in this manner would be consistent with the general principles of Federal debt collection, which permit agencies to provide relief to borrowers when there is evidence the agency would not otherwise be able to collect the debt in full within a reasonable time.

See

31 U.S.C. 3711(a)(3). In addition, Congress permitted ED to compromise or collect debt pursuant to the standards articulated by ED's own debt collection regulations or Treasury's debt collection regulations,

see

31 U.S.C. 3711(d), which similarly permit relief where there is evidence the agency would not collect the debt in full within a reasonable period of time.

See, e.g.,

31 CFR 902.2(a)(2); 34 CFR 30.70(a)(1) (referencing 31 CFR part 902).

The Department proposes to provide the benefits in § 30.81 only to borrowers enrolled in IDR plans for both operational and administrative reasons. First, borrowers in IDR plans have demonstrated their concern that they cannot repay their loans on the standard repayment timeline, making them an important group for the Department to consider for relief. Second, until the creation of the SAVE plan, borrowers on IDR plans frequently experienced balance growth from accruing interest, which this policy seeks to address. Specifically, the nature of the IDR plans' lower monthly payments meant borrowers' payments often did not cover monthly interest. Borrowers in the past who did not recertify their income could also be removed from an IDR plan at which point any unpaid interest would be capitalized. For both reasons, it is reasonable for the Department to focus its resources on providing relief to borrowers on IDR plans to address the current negative effects of prior interest accumulation and potentially capitalization. In addition, administrative considerations weigh in favor of limiting the policy to borrowers in IDR because the Department has data that will allow it to verify that borrowers fall below the income cap.

The Department proposes to limit this benefit to borrowers with income below certain levels to benefit only borrowers for whom their past instances of balance growth may have a greater possible negative effect on their ability to repay their debts in the future. The SAVE plan's interest benefit works in a similar manner. As a borrower's income rises, their payment covers a greater amount of accumulating monthly interest. Eventually, for any given debt level there is an income amount at which a borrower's payment will equal or exceed accumulating monthly interest. At that point, the borrower does not derive any assistance from the SAVE plan's interest benefit.

The Department proposes to limit the benefit in this section to borrowers whose incomes are at or below a certain threshold. To determine this threshold, the Department looked at the income level at which a borrower in a single-person household would have a calculated payment on the SAVE plan that is sufficient to pay off all the interest accumulating on a monthly basis if their debt level was equal to $138,000 which is the maximum amount of Federal loans a borrower can take out for undergraduate and graduate education without taking out any PLUS loans. We exclude amounts related to PLUS loans because they do not have an absolute dollar loan limit, as they can be obtained for up to the total cost of attendance, less other aid received.

Because of the lack of an absolute dollar loan limit, there are some borrowers who have debts that are much higher than the debt loads of the overwhelming majority of borrowers. We do not think it was reasonable to anchor to such outlier amounts, and we therefore take the conservative approach of not including these dollar amounts. However, typical balances for Parent PLUS and Graduate PLUS loans are well below the amounts contemplated here.

Using a value of $138,500 is inclusive of over 95 percent of loan balances in repayment. Furthermore, Parent PLUS borrowers are only eligible for an IDR plan if the borrower has repaid those Parent PLUS loans through consolidation.

For example, the average balance for a Parent PLUS loan recipient is almost $30,000 and the average balance for a Grad PLUS loan recipient is about $58,000. As of Q4, 2023, see Federal Student Aid Portfolio by Loan Type, available at:

https://studentaid.gov/data-center/student/portfolio.

We calculated income thresholds for waiver eligibility in the following way: First, we assumed that a borrower had a total balance equal to the maximum non-PLUS amount that a borrower can receive for undergraduate and graduate education, which is $138,500. We then assumed that a borrower received the maximum amount of loans for an undergraduate dependent student ($31,000) and the remainder for graduate school ($107,500). We did this calculation off a dependent undergraduate maximum because those are the more common types of student loan borrowers, and it allows undergraduate loans to make up a smaller share of the total amount borrowed. If the independent undergraduate limit were used, the SAVE payment amount would decrease due to the increased share of undergraduate loans. Using independent limits would produce an unfair income amount for dependent borrowers, while independent students are not harmed by using the dependent limit. In order to determine the interest rate to use for this analysis we assigned the unweighted average interest rate charged on undergraduate loans from the 2013-14 award year through the 2023-24 award year to the undergraduate loans and the equivalent graduate loan rate for the non-PLUS graduate loans. We used this period to generate an average interest rate because prior to 2013-14 there were different rates charged on subsidized versus unsubsidized loans. This produced averages of 4.3 percent for undergraduate loans and 5.87 percent for graduate loans. We then weighted these interest rates by the share of the balance owed for undergraduate and graduate school. This resulted in an interest rate of 5.52 percent. Next, we used the balance amount and the interest rate to calculate the amount of interest that would accumulate on $138,500 at a 5.52 percent interest rate in one month. That amount is $637.10.

We then calculated the income that a single person would need to earn to have a monthly payment on SAVE equal to $637.10. In doing this, we used the

2024 Federal Poverty Guideline (FPL) amount of $15,060. Using those data, we calculated that a single person who owes the maximum non-PLUS amount would have to make more than $119,971 to cease receiving an interest benefit on SAVE. We then rounded that amount to the nearest $1,000, which yields a threshold of $120,000.

The Department proposes to use a threshold of $120,000 for borrowers whose tax filing status is single. We propose to adopt the same threshold for married-filing-separately taxpayers, mimicking many rules in the Internal Revenue Code that treat the two filing statuses similarly. For example, the basic standard deduction for single and married-filing-separate filers is the same. We propose to use $180,000 for a borrower whose filing status is head of household, which mimics the treatment under the Internal Revenue Code, in which the standard deduction is one-and-a-half times what is used for a single-person household (subject to rounding rules). We propose to use two times the amount for a single-person household—$240,000 for borrowers whose status is married filing jointly or qualifying surviving spouse. This too mirrors how the Internal Revenue Code handles the standard deduction for these filing statuses relative to someone whose filing status is single.

The Department acknowledges that this approach to establishing income thresholds for filing statuses besides single or married filing separately is different from how we calculate payments on IDR plans. For IDR plans, we adjust payments for larger households by using some multiplier of the Federal Poverty Guidelines based upon the size of the household. The result is that a two-person household does not have double the amount of income protected that a single-person household has. We think taking a different approach here is warranted for several reasons. The consideration under IDR plans is about ensuring borrowers have enough money set aside to cover their monthly key obligations, such as food and housing. Those items have economies of scale, which can be reflected in the household size adjustment. For instance, a two-person household may be sharing one bedroom, meaning the per-person household cost is not simply double that for a single person. By contrast, this waiver is an action that would occur once per borrower and is not focused on their monthly payment amount. Moreover, because this waiver is concerned with balance growth borrowers have experienced during their time since entering repayment, it is possible that some of this growth would have occurred before borrowers married, had children, or otherwise grew their household size. For instance, the median age at repayment entry for borrowers is about 25, while the typical age of first marriage is about 30 for men and 29 for women.

Based on the American Community Survey 2022 5-year estimates of Median Age at First Marriage.

The Department is not proposing to amend the regulations for SAVE in this NPRM and will not consider comments related to adjusting the payment calculations on SAVE in response to this NPRM.

Borrowers whose income exceeds these thresholds would not receive a waiver under this provision but could have the lesser of $20,000 or the amount by which their balance upon entering repayment exceeds their current outstanding balance waived under § 30.82.

The Department's overall goal with this provision is to only address balance growth that occurred after a borrower entered repayment. We do not propose to address interest that accumulated before a borrower first entered repayment, which, prior to July 1, 2023, was capitalized on their balance at the end of the grace period. The accumulation of interest while a borrower is in school is a statutory component of Federal Student Loans.

However, the Department faces certain data limitations that make it impossible to accurately ascertain the balance upon entering repayment for loans disbursed before January 1, 2005. For those loans, data regarding the balance upon the end of the grace period is not stored in the Department's records. We are concerned that attempts to approximate that amount may not be accurate and could result in either providing too much or too little assistance to borrowers. Accordingly, this provision would provide differential treatment for loans based upon whether they were disbursed before or after the date by which the Department can accurately assess the balance owed upon repayment entry. For loans disbursed after January 1, 2005, we would measure the original balance based upon the last day of a borrower's grace period, so that no interest that accumulated prior to entering repayment is included. For loans disbursed before that date, the Department would use the original disbursed balance of the loan due to operational limitations. Because the Department does not have a valid and reliable data point for balance at repayment entry for borrowers with these older loans, we think the balance at disbursement is the best available data to use for loans disbursed before January 1, 2005. This would be used only for borrowers whose loans are 20 or more years old, which also means that the vast majority of loans that are that old and are still outstanding belong to borrowers who have had long-term struggles repaying. For instance, Department data in the RIA that accompanies this NPRM show that 83 percent of borrowers whose loans are at least 20 (undergraduate debt) or 25 (graduate debt) years old have previously experienced a default. Moreover, to the extent borrowers with these older loans had subsidized loans, they would not have seen interest accumulate before entering repayment on those loans. These dates properly balance the policy goals of not waiving interest prior to repayment entry with the operational reality of using the best available data. Because the January 1, 2005, disbursement date creates a clear dividing line that establishes two groups of borrowers, one with loans disbursed before January 1, 2005, and another with loans disbursed after that date, if either element of this provision were invalidated by a reviewing court, the element that stayed in effect would continue to provide important relief to borrowers.

See 20 U.S.C. 1077a and 1087e(b).

The Committee did not reach consensus on proposed § 30.81.

§ 30.82 Waiver when the current balance exceeds the balance upon entering repayment.

Statute:

Current Regulations: None.

Proposed Regulations:

Proposed § 30.82 would provide that the Secretary may waive the lesser of $20,000 or the amount by which a borrower's loans have a total outstanding balance that exceeds the balance owed upon entering repayment, for loans disbursed before January 1, 2005, the balance of the loans on the day after the grace period for loans disbursed on or after January 1, 2005, or the total original principal balance of all loans repaid by a Federal Consolidation Loan or a Direct Consolidation Loan. A borrower who has received a waiver under § 30.81 would not be eligible for a waiver under this provision.

Reasons:

Proposed § 30.82 would provide one-time relief to borrowers who experienced balance growth. While the Department has taken steps to address the harms of balance growth and interest capitalization going forward, the recent changes do not address past instances of balance growth that have resulted in some borrowers owing more than they originally did when they entered repayment. As explained, this balance growth adversely affects a borrower's ability to pay off their loans in full within a reasonable period. We are also concerned that growing balances while in repayment may lead to negative psychological impacts on borrowers who are attempting to repay their debt but are unable to do so.

There are several reasons why a borrower may have seen their loan balance grow beyond what it was when they entered repayment. They may have spent time in deferments and forbearances during which interest accumulated on their loans. This includes both deferments for unemployment or economic hardship, as well as deferments and forbearances related to military service. Borrowers may also have seen their balances grow if they previously spent time on an IDR plan during which their income-based payment amounts were not sufficient to repay all the monthly accumulating interest. Borrowers may also have spent time in which they were not repaying their loans, including periods of delinquency and in default.

Borrowers who accumulated outstanding unpaid interest also may have experienced interest capitalization events, such as after a forbearance ends or after they left an IDR plan, in which outstanding interest was added onto the loan's principal balance. Once capitalization occurs, borrowers then pay interest that is calculated off that higher principal balance, increasing the total amount of interest they need to repay.

The Department took steps in recent years to avoid balance growth and in particular to decrease the instances in which borrowers see their unpaid interest capitalize. Specifically, the Department has recently taken action to end interest capitalization where it is not required by statute as well as to create an interest benefit under the SAVE plan wherein the borrower is not charged for the remaining interest after a payment is applied. Providing relief through § 30.82 allows the Department to address the current and ongoing issues for borrowers caused by this past balance growth.

The Department proposes to make the benefits of § 30.82 available to all borrowers because we are concerned about the negative effects of balance growth regardless of borrowers' past repayment history or circumstances. While we have proposed a separate provision in § 30.81 that would provide relief for borrowers who are on an IDR plan and have incomes below certain levels, the Department sees §§ 30.81 and 30.82 as provisions that can operate in a separate and distinct manner from each other. Therefore, in developing the parameters for this provision, the Department considered the optimal structure for this provision as a standalone benefit. The only interplay between this provision and § 30.81 is the proposed limitation in § 30.82(b) that a borrower may not receive relief to address balance growth under both provisions because the Department intends to provide one-time relief from balance growth for a borrower if the Secretary exercises his discretion to grant such relief through this provision.

The Department believes it is important to provide a benefit under § 30.82 that is available to all borrowers. An automatic and universal approach is the simplest to administer and also avoids problems commonly seen by the Department with application-based benefits in which the borrowers who would most benefit from the relief fail to apply. The JP Morgan Chase Institute found in 2022 that there are two borrowers who could benefit from IDR for every one that is enrolled.

Similarly, the U.S. Department of the Treasury found that 70 percent of borrowers who were in default in 2012 would have benefitted from a reduced payment of an IDR plan at the time.

Providing this benefit on a broadly applicable, automatic basis would allow us to reach all borrowers who face the adverse effects of balance growth and would create a streamlined process.

www.jpmorganchase.com/institute/research/household-debt/student-loan-income-driven-repayment.

U.S. Government Accountability Office, 2015. Federal Student Loans: Education Could Do More to Help Ensure Borrowers are Aware of Repayment and Forgiveness Options. GAO-15-663.

However, because the Department would provide a universal benefit, we do not believe it would be appropriate to provide uncapped relief. In particular, there are borrowers who have experienced amounts of balance growth significantly higher than all other borrowers who have seen their balances grow. The Department is concerned that waiving those excessive amounts of balance growth would provide unnecessary windfall benefits in which there would be significant costs incurred to help a relatively small number of borrowers.

We propose capping the amount of relief at $20,000 for a borrower which would strike the balance between granting a level of benefits that would provide assistance to borrowers while not granting windfall amounts of relief. This $20,000 amount represents the 90th percentile of the amount by which balances exceed what borrowers originally owed upon entering repayment. This amount is informed by using a statistical approach to identify excess balance values that are dissimilar to most other values. There are several common ways of defining outliers in a distribution, and we use a process here that uses multiples of the interquartile range, referred to as a “fence.”

The upper inner fence is commonly defined as the 75th percentile value plus the interquartile range multiplied by 1.5. In Department data, the inner fence is about $18,500, which we round up to $20,000 to create a simpler value to understand.

For more information on this approach see the National Institute of Standards and Technology,

https://www.itl.nist.gov/div898/handbook/prc/section1/prc16.htm,

or statistical textbooks such as Ott & Longnecker,

An Introduction to Statistical Methods and Data Analysis.

A cap on relief under this provision also acknowledges that generally borrowers must have larger loan balances in order to experience greater amounts of balance growth, and that typically borrowers with larger loan balances have greater earnings potential than those with lower loan balances.

Examples highlight the connection between loan balance amounts and the potential for balance growth. Consider a borrower who owes $9,500 at an interest rate of 4.32 percent, the maximum amount of debt an undergraduate student can take out in a single year and the average interest rate for undergraduate loans over the last 11 years. If they did not make a single payment for 10 years their balance would grow by $4,104. By contrast, a borrower who owes $150,000 all in graduate loans at an interest rate of 5.87 percent (the average graduate rate over the last 11 years), would see their balance grow by $88,050 if they did not make a payment over 10 years. Therefore, among two otherwise similarly situated borrowers, the borrowers who owe more, particularly in graduate loans, will see their balance grow faster.

Borrowers with very high balances tend to have higher incomes than do lower-balance borrowers. That may be because many higher-balance borrowers

accumulated some or most of their debt from graduate school, and among college-educated individuals, those with a graduate degree generally have higher wages than those with only an undergraduate credential or without any credential at all.

A higher earning borrower may not only have a greater ability to pay off their debt in full in a reasonable period, there is also a greater likelihood that they may be on an earnings trajectory in which their initial earnings start out lower and then increase over time. For instance, many health care professions start with lower wages until the individual completes their residency. This earnings growth phenomenon is something the Department has acknowledged in other contexts, such as in the Financial Value Transparency and GE final regulations in which the Department proposes to assess the earnings of graduates from certain programs from the period six or seven years after completion instead of the standard three or four years used for most other program types. Based upon the proposed cap of $20,000 on balance growth, we looked at data on borrowers who experienced balance growth to try to understand any points where borrowers who would receive relief beyond that cap amount appear to have a greater likelihood of showing their ability to repay their debt. This analysis included looking at factors such as the share of borrowers with loans from graduate school, the rate at which borrowers received Pell Grants, and whether students had past evidence of default. While the Department does not have data on borrower incomes, we imputed income for borrowers based on individuals with similar demographic and educational characteristics from Census data. This procedure is imperfect, but we believe it provides a reasonable approximation of income. We found that borrowers who had less than $20,000 of excess balance were less likely to have gone to graduate school and have a lower imputed income. They were also more likely to have received a Pell Grant or to have experienced student loan default. This further confirmed our belief that preventing windfall amounts of relief also helped make this provision better targeted.

Borrowers with professional doctoral degrees, which include fields like medicine, pharmacy, veterinary medicine, and law, have the highest cumulative student loan balances among those who have completed postsecondary education (see

https://nces.ed.gov/programs/coe/indicator/tub/graduate-student-loan-debt

). These are also fields that tend to have the highest wages (see for example,

https://www.bls.gov/oes/current/oes_nat.htm

). Borrowers with master's degrees or higher, also tend to have higher debt (see Bhutta et al. “Changes in U.S. Family Finances from 2016 to 2019: Evidence from the Survey of Consumer Finances,” Federal Reserve Bulletin, 2020, 106 (5).

https://www.federalreserve.gov/publications/files/scf20.pdf

) For research on the returns to graduate degrees, see, for example, Altonji & Zhong (2021). The labor market returns to advanced degrees.

Journal of Labor Economics,

39(2).

The Department specifically invites feedback from the public on the approaches considered here. In particular, we are interested in comments on whether to consider a higher or lower cap on the amount of balance growth that could be waived and on the rationales for choosing such caps. We also welcome feedback on whether there should be separate waiver policies to consider unique circumstances of different groups of borrowers and how they might be affected by balance growth. Such groups, for example, could recognize the effect of balance growth as being different for parent borrowers versus student borrowers because the former have less access to IDR plans and as a result have less of an ability to have balances forgiven after a certain period in repayment.

The different dates for measuring the original balance in § 30.82(a) reflect data limitations the Department faces in accurately calculating the right balance to use as a baseline. These data limitations are explained in the discussion of reasons for § 30.81.

During the third negotiated rulemaking session, the Department proposed two regulatory sections that are similar to proposed § 30.82. The Committee did not reach consensus on these proposed sections.

§ 30.83 Waiver based on time since a loan first entered repayment.

Statute:

Current Regulations:

None.

Proposed Regulations:

Proposed § 30.83(a)(1) specifies the conditions under which the Secretary may waive the outstanding balance of Federal student loans received for the borrower's undergraduate study.

Under this proposed rule, borrowers would have their outstanding balances waived only for loans that were received for undergraduate study or Direct Consolidation Loans that repaid only loans that were obtained for undergraduate study, and which first entered repayment on or before July 1, 2005. Proposed § 30.83(a)(2) describes the conditions under which the Secretary may grant waivers on outstanding balances of Federal student loans other than those loans that were received for undergraduate study, and first entered repayment on or before July 1, 2000.

Proposed § 30.83(b) specifies how the Department would calculate the date when a loan originally entered repayment. For a loan that is not a PLUS loan or a consolidation loan, the Department would use the day after the loan's initial grace period ends. For PLUS loans made to either a parent or a graduate or professional student, the Department would use the date the loan is fully disbursed. For a Federal Consolidation Loan or Direct Consolidation Loan made prior to July 1, 2023, the Department would consider the earliest date a loan repaid by the consolidation loan had the following occur:

• For a non-PLUS, non-consolidation loan, the day after its initial grace period ended,

• For a PLUS loan to a graduate or professional student or a parent, the date the loan was disbursed.

For a Direct Consolidation Loan made on or after July 1, 2023, the date for measuring repayment entry would be based upon the latest day a loan repaid by the consolidation loan had its initial grace period end or was fully disbursed.

Reasons:

The standard repayment plan that acts as the default option for borrowers provides a repayment schedule of 120 monthly installments of fixed amounts, the equivalent of 10 years.

Similarly, the income contingent repayment authority provides that borrowers repay over an extended period, but such repayment period is not to exceed 25 years.

More recently, the IBR plan provides that a borrower's repayment term ends when they reach the equivalent of 20 or 25 years of monthly payments, depending on when they first took out loans.

See 20 U.S.C. 1078(b)(9)(A)(i) and 20 U.S.C. 1087e(d)(1)(A).

See 20 U.S.C. 1087e(d)(1)(D).

See 20 U.S.C. 1098e.

The Department is concerned that despite the presence of ways for repayment to end, too many borrowers end up owing loans for years, if not decades, longer than the repayment plans generally require. In estimates presented later in the RIA, millions of borrowers have been in repayment for over 20 or 25 years.

The Department

is particularly concerned that when loans persist for this long, they are unlikely to be repaid in a reasonable period of time. In recognition of this problem, Congress and the Department have made several statutory and regulatory changes to the student loan program so that borrowers can fully repay their debt within a reasonable time. However, borrowers who took out loans prior to the creation of these changes spent years or decades without the generous benefits that exist today and, as a result, may have faced more repayment challenges and be less likely to retire their debts within a reasonable time. The Department has already taken some steps to address this concern through the payment count adjustment. In that situation, the Department was concerned that because of inaccurate recordkeeping, borrowers may not have received appropriate credit toward forgiveness on IDR plans that they had earned. We were also worried about incorrect application of policies designed to limit repeated use of forbearances or properly tracking which deferments are supposed to count toward forgiveness. To that end, we credit all months a borrower spent in a repayment status, plus any months during which a borrower spent 12 consecutive or 36 cumulative months in a forbearance, and any deferments besides being in-school prior to 2013. We also do not reset progress toward forgiveness based upon loan consolidation. While the payment count adjustment provides important assistance, it does not capture the full set of circumstances in which a borrower may struggle to accrue time to forgiveness. This includes time spent in default and time spent in forbearance that does not meet the criteria of the payment count adjustment.

There is also evidence of many borrowers being in repayment for a long time in a paper by the Urban Institute using credit panel data estimated that there are nearly 100,000 borrowers with loans that were first originated prior to 1990, making

them well more than 30 years old. The author also estimated that 1.5 million borrowers had a loan with an origination date before 2000. The author notes these statistics may well be an underestimate because older debts may no longer appear on a borrower's credit report even though they are still outstanding.

https://www.urban.org/sites/default/files/publication/101492/when_student_loans_linger_0.pdf.

The Department views proposed § 30.83 as providing a waiver to borrowers who have had their loans for such an extended period that they are unlikely to fully repay within a reasonable period.

In drafting § 30.83, the Department has proposed to adopt several parameters to mirror the existing IDR plans. For instance, we would use debt relief thresholds of 20 or 25 years because those are the same periods available on IDR plans. We propose applying this provision to loans that entered repayment on or before July 1, 2005 for borrowers who do not have any graduate loans because these borrowers will have been in repayment for all or part of 20 calendar years or more when the regulation is implemented; and we propose applying this provision to loans that entered repayment on or before July 1, 2000 for borrowers who have any graduate loans because these borrowers will have been in repayment for all or part of 25 calendar years when this provision is implemented. We also elected to use the differential treatment of undergraduate and graduate borrowers that exists in SAVE and was carried over from the since-replaced Revised Pay As You Earn (REPAYE) plan. The Department further believes after reviewing information identified in FSA's Enterprise Data Warehouse, that the differential treatment for undergraduate versus graduate loans is reasonable because Department data show that undergraduate borrowers go into delinquency or default at significantly higher rates than graduate borrowers. According to these data, 90 percent of borrowers who are in default on their loans had only taken out loans for their undergraduate education. By contrast, only 1 percent of borrowers who are in default only had graduate loans.

In proposing this treatment of loans that entered repayment a long time ago, the Department would not adopt the terms for a shortened period until forgiveness that is included in SAVE. That provision allows borrowers to receive forgiveness after as few as 120 payments if their original principal balance was $12,000 or less. The Department does not think it is appropriate to adopt that threshold here because this timeline is only available under the SAVE plan. By contrast, the goal of § 30.83 is to address situations where borrowers have been unable to fully repay in a reasonable time and have not even been able to repay in full over an extended period. This extended period is consistent with the forgiveness timelines on other IDR plans, which provide repayment terms of up to 20 or 25 years.

The Department also proposes to include language in § 30.83(b) explaining how we would determine the date of repayment entry in several different situations. For loans that are not PLUS loans or consolidation loans, we propose to use the date after the final day of a loan's grace period. That is the most intuitive date associated with what it means to enter repayment. For PLUS loans made to either a parent or a graduate or professional student we propose using the day the loan is fully disbursed. This recognizes that PLUS loans have multiple options for when borrowers enter repayment. Since 2008, parent borrowers have had the option to defer repayment entry until after the dependent undergraduate leaves school. But not all choose to do this, and some parents choose to enter repayment right away, in which case their repayment entry date is the same as the disbursement date. Similarly, graduate borrowers have the option to decline their in-school deferment. Using the date of disbursement is therefore a consistent treatment of PLUS loans regardless of whether the borrower elected to go into repayment right away.

The Department proposes a simpler solution for picking the date to assign for repayment entry for a consolidation loan. We are concerned that simply counting the date of the consolidation loan's disbursement would be unfair to borrowers because it could result in erasing years of time since repayment entry for borrowers, unwittingly. The Department has addressed concerns about a full reset of forgiveness clocks through consolidation in recent regulations on IDR and PSLF and maintains that concern here. In those circumstances we have addressed that issue through using a weighted average of the underlying loans.

Instead, for this regulation we propose an approach that is simpler to administer and clearer to understand. For consolidation loans made before July 1, 2023, we propose using the earliest date that any loan that was repaid by a consolidation loan ended its initial grace period or was disbursed in the case of a PLUS loan. We propose this date of July 1, 2023, because it was the day after the Department announced this rulemaking in a press release and there was no way a borrower could have known to consolidate and receive this benefit.

As such, borrowers could not have engaged in any strategic consolidation to receive this benefit before July 1, 2023. For consolidation loans disbursed on or after July 1, 2023, we propose to instead use the latest date that any loan repaid by the consolidation ended its initial grace period, or in the case of a PLUS loan was disbursed. By establishing these different thresholds, a borrower's repayment progress will not fully reset when a borrower consolidates loans on which a borrower had previously made payments. In addition,

this also makes certain that a borrower could not consolidate after the Department announced this proposal in order to receive a waiver of newer loans alongside older ones. We have determined that this approach is more operationally feasible and carries a lower risk of errors.

See 34 CFR 685.209(k)(4)(v)(B) and 34 CFR 685.219(c)(3).

https://www.ed.gov/news/press-releases/fact-sheet-president-biden-announces-new-actions-provide-debt-relief-and-support-student-loan-borrowers.

During negotiated rulemaking, the Department proposed only waiving loans that first entered repayment 20 or 25 years ago at the time we would implement this section. Negotiators and public commenters raised significant concerns about how such an approach would create a “cliff effect” in which a borrower who falls just a month or two short of 20 or 25 years would not be eligible for a waiver, despite facing significant financial burden of student loan debt over time and facing many of the same repayment challenges as those borrowers eligible for relief under this provision.

The Department understands the concerns raised by negotiators and members of the public about the challenges with operating this policy only once. At the same time, however, the Department is concerned that an ongoing policy would not recognize how the Department has taken steps to address many repayment challenges on a going-forward basis by introducing several IDR plans, including the new SAVE plan, which should make it substantially easier going forward for borrowers to make payments that qualify for forgiveness. We have not yet identified a solution to this issue that would still encourage borrowers who have not yet reached forgiveness to continue making required payments until they reach the 20- or 25-year mark. And for any solution for this cliff, we would need a way to appropriately model the likelihood that a borrower does take necessary steps in the future to be eligible for relief under this approach so that we can assign it the proper estimated cost in the net budget impact.

Given the considerations outlined above and in light of the changes the Department has made under recent IDR plans, we invite feedback from the public about how to acknowledge and address the repayment challenges of borrowers who entered repayment a long time ago, but not long enough to immediately qualify under this provision, and who are unlikely to repay their loan in full in a reasonable period. We also invite feedback on how to determine the likelihood that any borrower who does not yet reach forgiveness under the proposed policy would qualify for forgiveness under any suggested alternative one. For example, if the Department were to award credit toward forgiveness timelines for all months since entering repayment up until July 2024 (when all of SAVE's provisions become effective), and a borrower first entered repayment at least 15 years ago, what standards are appropriate for determining whether the borrower reaches the 20- or 25-year threshold in light of the Department's recent steps to fix repayment challenges through SAVE? In addition, how would the Department determine the likelihood that such borrower ultimately takes necessary steps to reach a 20 or 25-year forgiveness threshold under the proposed standard?

The Committee did not reach consensus on proposed § 30.83.

§ 30.84 Waiver when a loan is eligible for forgiveness based upon repayment plan.

Statute:

Current Regulations:

None.

Proposed Regulations:

Proposed § 30.84 would specify that the Secretary may waive the outstanding balance of a loan for borrowers who are otherwise eligible for forgiveness under an IBR plan, Income-contingent Repayment (ICR) plan, or an alternative repayment plan but are not currently enrolled in the plan where they could receive forgiveness. The amount of the waiver would be the same as what the borrower would receive under the applicable IDR plan. Currently borrowers who are repaying their loans under an IDR plan must meet the eligibility requirements to enroll and qualify for forgiveness of their Federal student debt. Under all IDR plans, any remaining loan balance is forgiven if their loans are not fully repaid at the end of the repayment period.

Reasons:

Congress and the Department have provided borrowers with various income-based repayment plan options over time. The Department currently offers four IDR plans: the IBR plan, ICR plan, Pay as You Earn Repayment (PAYE) plan, and the new SAVE plan that replaced the former REPAYE plan. For purposes of this NPRM we refer to IBR, ICR, PAYE, SAVE, and REPAYE collectively as IDR plans.

The HEA sets forth the requirements for borrowers to receive relief under the terms of the various IDR plans. For both ICR and IBR, a borrower may receive relief as long as they have accumulated the requisite amount of time making qualified payments or being in a qualified deferment.

The HEA does not require these qualifying payments or deferments to occur while the borrower is enrolled in an ICR plan to receive relief under ICR,

nor must they occur while a borrower is on an IBR plan to receive relief under IBR.

Rather, the HEA permits borrowers to receive relief under these plans so long as the borrower participates in them at some point after such qualifying payments or deferments have occurred.

While the HEA's ICR and IBR provisions do specify steps and procedures for obtaining a borrower's income information to calculate reduced payments under these plans, there is no requirement that borrowers provide such information as a condition of receiving relief. Instead, the HEA leaves the specific details of how to operationalize the procedures for enrolling in IDR plans up to the Secretary. Under this proposed provision, the Secretary would use information within the Department's possession to identify borrowers already eligible for relief and provide them with the opportunity to enroll in the IDR plan by choosing not to opt-out of receiving a waiver.

See 20 U.S.C. 1087e(e)(7) (ICR provision describing qualifying payments and deferments for relief); 20 U.S.C. 1098(b)(7) (IBR provision describing qualifying payments and deferments for relief).

See

20 U.S.C. 1087e(e)(7).

20 U.S.C. 1098(b)(7) (stating the Secretary may repay or cancel any outstanding balance of principal and interest for a borrower who “at any time, elected to participate in” an IBR plan and meets the conditions for qualified payments or deferment).

See

20 U.S.C. 1087e(e)(7); 20 U.S.C. 1098(b)(7).

Such waivers would benefit many borrowers because the Department's current IDR regulations require borrowers to apply to enroll in IDR plans.

Unfortunately, Department experience and independent research shows that there have been persistent challenges getting borrowers who would benefit from IDR plans to enroll in them.

And when borrowers do enroll, large shares of them fail to successfully recertify and stay enrolled. For example, one study by the JP Morgan Chase Institute found that for every borrower enrolled in IDR there are two others who would benefit from such a plan but

are not enrolled.

Similarly, the Federal Reserve Bank of Philadelphia found that many borrowers were unaware of the new SAVE plan, especially among borrower groups who were most likely to benefit from it, and potential beneficiaries remained uncertain even after learning about plan features and benefits.

34 CFR 685.209(l).

Goldstein, Adam, Charlie Eaton, Amber Villalobos, Parijat Chakrabarti, Jeremy Cohen, and Katie Donnelly. “Administrative Burden in Federal Student Loan Repayment, and Socially Stratified Access to Income-Driven Repayment Plans.”

RSF: The Russell Sage Foundation Journal of the Social Sciences

9, no. 4 (2023): 86-111.

https://www.jpmorganchase.com/institute/research/household-debt/student-loan-income-driven-repayment#finding-1.

https://www.philadelphiafed.org/-/media/frbp/assets/consumer-finance/reports/cfi-sl-payments-3-resumption.pdf.

The Department is concerned that its past practices of administering IDR plans have made it too challenging for borrowers to successfully navigate these processes. The result has been borrowers struggling to figure out which IDR plan is best, determine whether they are eligible, and then submit an application.

Herbst, Daniel. “The impact of income-driven repayment on student borrower outcomes.”

American Economic Journal: Applied Economics

15, no. 1 (2023): 1-25.; Conkling, Thomas S., and Christa Gibbs. “Borrower experiences on income-driven repayment.”

Consumer Financial Protection Bureau, Office of Research Reports Series

19-10 (2019).

Under the Department's current regulations, borrowers must also re-enroll in the IDR plan each year and risk being removed from the plan if they fail to recertify their participation in a timely basis. The Department has taken many steps in recent years to address this problem. We created the SAVE plan, which addresses many of the issues that borrowers experienced in other IDR plans. We also are implementing a regulatory change

that makes it possible for borrowers to automatically recertify their IDR enrollment by providing approval for the disclosure of their Federal tax information.

https://www.federalregister.gov/documents/2023/07/10/2023-13112/improving-income-driven-repayment-for-the-william-d-ford-federal-direct-loan-program-and-the-federal.

The Department is also concerned about how past challenges with administering IDR plans may have exacerbated these issues for borrowers with older loans. In April 2022, the Department announced it was taking executive action to address concerns about a lack of consistent tracking of borrower progress toward forgiveness and improper implementation of policies designed to limit the use of extended time in forbearances.

Through that process we have identified and provided relief to hundreds of thousands of borrowers who were eligible for IDR forgiveness but had not enrolled. Simultaneously, the Department put in place processes to fix these issues going forward, including giving borrowers a clear count of their progress toward forgiveness and addressing the use of forbearances. However, we are concerned that there is still a group of borrowers who did not reach forgiveness through the payment count adjustment and who are not so new to borrowing that all their time in repayment would be covered by these improvements. In particular, these would be borrowers who are eligible for the forgiveness benefits under the SAVE plan, which provides forgiveness after as few as 120 months (10 years) in repayment for borrowers who originally took out $12,000 or less. Keeping borrowers such as these in the repayment system when they could receive a discharge immediately creates costs for the Department because we have to continue to pay servicers to manage these loans.

https://www.ed.gov/news/press-releases/department-education-announces-actions-fix-longstanding-failures-student-loan-programs?utm_content=&utm_medium=email&utm_name=&utm_source=govdelivery&utm_term=.

The Department proposes applying this section to borrowers repaying under all types of IDR plans, including those created under the income-contingent repayment authority and IBR, and the alternative plan. We include the alternative plan as well because that plan contains an option to provide borrowers forgiveness after a set period of time, even if they have not paid off the full balance. In that regard it is similar to IDR plans. By contrast, other payment plans do not provide forgiveness and so are not appropriate to include in this section.

In applying this waiver, the Secretary would provide borrowers with relief identical to what they would have otherwise received on the relevant IDR plan. They are not receiving benefits any larger than they otherwise would have if they successfully navigated the enrollment or re-enrollment process.

The non-Federal negotiators supported the Department's proposal to waive the outstanding balance of loans and encouraged the Department to automate the process and expedite the approval and debt relief as much as possible.

The Committee reached consensus on proposed § 30.84.

§ 30.85 Waiver when a loan is eligible for a targeted forgiveness opportunity.

Statute:

Current Regulations:

None.

Proposed Regulations:

Proposed § 30.85 would provide that the Secretary may waive up to the entire outstanding balance of a loan where the Secretary determines that a borrower has not successfully applied for, but otherwise meets, the eligibility requirements for any other loan discharge, cancellation, or forgiveness program under 34 CFR parts 682 or 685. This includes opportunities such as false certification discharge, closed school loan discharges, and Public Service Loan Forgiveness (PSLF).

The proposed regulations also specify that if a borrower has a Direct Consolidation Loan or a Federal Consolidation Loan where only part of it would meet the criteria of this section that the Secretary may waive the portion of the outstanding balance of the consolidation loan attributable to such loan.

Reasons:

The HEA outlines several opportunities for borrowers in the Direct or FFEL Programs to receive Federal student loan forgiveness in certain situations if the borrower meets the eligibility requirements. For both loan types, this includes forgiveness when a borrower is enrolled at a school that closes, if they have a total and permanent disability, or have a loan that has been falsely certified. Direct Loan borrowers are also eligible for PSLF.

The Department has historically seen many situations where borrowers do not successfully apply for available relief when they are eligible. For example, in August 2021, the Department issued a final rule that provided automatic forgiveness for borrowers who were identified as eligible for a total and permanent disability discharge through a data match with the Social Security Administration.

The Department had been using such a match for years to identify eligible borrowers but required them to opt in to receive relief. After switching to an opt out model, we have provided relief to more than 350,000 borrowers, showing that a default of inclusion helps these programs to reach the people who need them. Absent this action it is possible many of these borrowers would still have loans today. Similarly, GAO studies of closed school loan discharges have found that many borrowers eligible for a closed school loan discharge fail to apply, and that those who in the past received automatic closed school loan discharges after a three-year waiting period were

highly likely to default during the waiting period.

87 FR 65904 (November 1, 2022).

https://www.gao.gov/assets/gao-21-105373.pdf.

The waivers proposed in this section would build on efforts made by the Department over the past several years to improve regulations for existing discharge programs to allow the Secretary to award borrowers relief under different programs if we determine that they otherwise meet the criteria. Beyond the regulatory programs to automatically provide discharges to eligible borrowers, the Secretary may have or obtain information showing that additional borrowers are or should be eligible for relief on their loans. For example, borrowers whose schools closed while they were enrolled outside of the time periods that the Department provided automatic relief would nonetheless be eligible for this relief if they applied. By giving these borrowers an opportunity to obtain the relief intended for them by choosing not to opt out, this rule would make that relief available in a fairer manner that lessens the burdens on borrowers. Although schools can be liable for relief provided based on the closed school discharge regulation, schools would not face a liability for waivers granted under this section. Because the Secretary would have waived the amounts owed by the borrower there is no liability that could then be established against the institution and then pursued through administrative proceedings.

It is possible that a borrower whose loans have been consolidated could have some of the loans repaid by the consolidation that are eligible for a waiver and some that would not be. For example, a borrower could have loans from one school that are eligible for a closed school loan discharge and other loans that are not. In such situations the Department would waive repayment of the portion of the consolidation loan attributable to that loan repaid by the consolidation loan that is eligible for the waiver.

Overall, the Department believes that this waiver will provide additional flexibility and help get relief to more borrowers who are eligible for Federal student loan forgiveness.

One non-Federal negotiator opposed this proposed regulation. The negotiator stated concerns for other borrowers who are already eligible for Federal student loan discharges who would be treated differently under the waiver authority and may lose other benefits currently provided by existing Federal student loan discharge programs. This same negotiator provided an example of a borrower who may face tax consequences if they receive this benefit under the waiver instead of utilizing other discharge programs where such a discharge would be statutorily excluded from being considered taxable income. By law, there is no Federal taxation on Federal student loans forgiven by the Department through the end of 2025.

Before any usage of this authority the Department would also consider whether a borrower is already eligible for a discharge under the existing forgiveness opportunity.

See Title IX, Subtitle G, Part 8, section 9675 of the American Rescue Plan Act, 2021 (Pub. L. 117-2).

The Committee did not reach consensus on proposed § 30.85.

§ 30.86 Waiver based upon Secretarial actions.

Statute:

Current Regulations:

None.

Proposed Regulations:

Under proposed § 30.86(a), the Secretary may waive the entire outstanding balance of a loan associated with attending an institution or a program at an institution if the Secretary or other authorized Department official took certain final agency actions. These final agency actions are: termination of the institution or academic program's participation in the title IV, HEA programs; a denial of the institution's request for recertification; or determination that the institution or program loses title IV eligibility. To qualify under this section, the final agency action must have been taken in whole or in part due to the institution or academic program failing to meet an accountability standard based on student outcomes for determining eligibility in the title IV, HEA programs or the Department determining that the institution or program failed to deliver sufficient financial value to students. Such situations that are evidence of failure to provide sufficient financial value include when the institution or program has engaged in substantial misrepresentations, substantial omissions, misconduct affecting student eligibility, or other similar activities. Currently, proposed 30.86(a)(2) also includes the following language: “this paragraph applies to circumstances when the institution or program has lost accreditation at least in part due to such activities.” The intent of the consensus language was to clarify that the underlying finding that supports the Department's determination that an institution or program failed to deliver financial value under proposed § 30.86(a)(2) could be a finding made by the Department or it could be a finding made by an accreditor that terminated accreditation based at least in part on that finding. Since the Committee reached consensus on the language included in 30.86, the Department included it in these proposed regulations. However, the Department believes that this intent could be stated more clearly as: “The institution or program has failed to deliver sufficient financial value to students, including in situations where either (i) the Department has determined that the institution or program has engaged in substantial misrepresentations, substantial omissions, misconduct affecting student eligibility, or other similar activities; or (ii) the Department has determined that the accrediting agency has terminated its accreditation based at least in part upon a finding that the institution or program has engaged in the activities described in paragraph (a)(2)(i) of this section.” The Department invites comments on this possible change.

Proposed § 30.86(b) would specify that the waiver applies to a borrower's loans received for attending that program or school during the period that corresponds with the findings or outcomes data unless the Department believes the use of a different period is appropriate. In the case of a Federal Consolidation Loan or Direct Consolidation Loan that has an outstanding balance, under proposed § 30.86(c) the Secretary would waive the portion of the outstanding balance of the consolidation loan attributable to such loan received for attending that program or school during the period that corresponds with the findings or outcomes data.

Reasons:

Conducting rigorous oversight and enforcing accountability measures are key functions for the Department.

Identifying situations in which institutions or programs are failing to meet requirements of the HEA and taking action to prevent the flow of future title IV aid dollars is an important way to solidify that taxpayer funds are well spent and to protect future borrowers and aid recipients from harm.

However, while we take aggressive action to protect future borrowers and aid recipients, we often do not address loans held by borrowers who attended programs or institutions at the very time we observed the issues that led to the termination of future aid receipt. For example, a borrower who attended an institution that lost access to aid because of high CDRs, is still left to repay their loans, even as the Department takes steps to protect future borrowers from going into debt at those institutions.

Some examples of the Department's oversight and compliance measures over institutions include but are not limited to: program reviews authorized under Sec. 498A of the HEA; requiring most institutions to submit a compliance and financial audit authorized under Sec. 487(c) of the HEA; and others.

This waiver would provide relief to borrowers who received loans to attend programs or institutions that lost access to title IV aid for specific agency actions if they took out loans during the period that generated the outcomes data that led to the aid termination or who attended during the period covered by evidence that was used to justify cutting off title IV aid into the future.

The Department believes waivers in this situation are appropriate because we think it is unfair to expect borrowers to continue repaying loans from a time when we know the issues at the institution or program were so significant that they warranted adverse Secretarial action. These are loans where we know the borrower is not getting the benefit of the bargain one should expect when they take out loans for postsecondary education or, in cases such as substantial misrepresentation, that the loans should not have been made in the first place.

Waivers of Federal student loan debt under proposed § 30.86 would only apply after a final agency action. That means the institution would have exhausted its administrative appeals for that final action. For example, if the Secretary denies an institution's request for recertification, that institution would still be afforded the opportunity to appeal that denial in accordance with 34 CFR part 668, subpart G and only until the institution exhausts its appeals options for the denial of the recertification—or indicates that it does not intend to appeal the decision—would the Department consider waiving affected borrowers' loan balances in accordance with this regulation. If an institution does not appeal a liability in a specific finding in a Final Program Review Determination (FPRD), the finding in that FPRD would be considered final. Relying only on final agency actions also means that instances in which the Secretary initiates an action and then does not finalize it due to a successful appeal would not be included. For example, if an institution successfully appeals a failing CDR and does not lose aid eligibility, borrowers who attended the institution would not be eligible for a waiver under this section.

The Department also recognizes that sometimes agency actions are ultimately resolved through settlements. We propose that settlements where there is an acknowledgement of wrongdoing would qualify as a final agency action under this section, while settlements that lack such an acknowledgment of wrongdoing would not. We believe this approach is appropriate because the proposed regulation applies if the Department determines the program or institution failed an accountability measure related to student outcomes or failed to provide sufficient financial value.

Institutions would also not be liable for the costs associated with any waivers granted under this section. Because this is an exercise of the Secretary's waiver authority there would not be a liability to seek against an institution. The one exception is for liabilities related to certain loans issued while an institution appeals or requests for an adjustment to its CDR. Liabilities for those amounts are discussed in § 668.206(f).

This waiver would be used only when the termination of the institution's title IV participation occurred for specific reasons. These fall into two categories. The first is the institution's failure of accountability standards based on student outcomes, namely those related to CDRs and Gainful Employment. This includes failures of those measures that occurred in the past when they resulted in loss of title IV eligibility.

The Department chose these types of measures because those are situations in which the Department directly measured the outcomes of borrowers in a specific cohort and found the results so lacking that aid could not continue.

There are some institutions that previously lost title IV eligibility because of failing CDRs, and qualifying loans associated with those institutions would be eligible. By contrast, there are not any programs that previously lost title IV eligibility based on failing GE measures because the prior rule was rescinded before any program lost eligibility, and the new rule does not go into effect until July 2024.

An institution would have to fail its CDR or GE metrics enough times to warrant a final action from the Department and that failure would have to be sustained following any appeal options available to the institution or program.

This waiver would not apply to the failure of other metrics that are not directly tied to student outcomes. This includes the calculation of an institution's financial responsibility composite score prescribed in 34 CFR part 668, subpart L or for proprietary institutions, their 90/10 non-Federal revenue calculation prescribed in 34 CFR 668.28. These other performance standards are important but do not directly measure student outcomes.

The Department is not concerned that granting a waiver based upon student outcomes would create an incentive for future borrowers to willfully default on their loans or take other actions that could cause the program to fail the debt-to-earnings or earnings premium measures used in Gainful Employment. First, all these measures operate on the observed outcomes across either all borrowers who entered repayment or all those who received title IV aid and graduated. They also generally require measuring performance across multiple years. The lone exception to this being a one-year CDR in excess of 40 percent, which leads to a loss of loan eligibility. Intentionally failing the measure would require extremely coordinated activity across likely multiple years of students. Making such a situation further unlikely is the fact that the consequences of intentionally failing a measure with uncertain odds of success could be significant. Defaulting on a student loan has significant consequences. Borrowers can see their credit scores plummet and tax refunds seized. Regarding Gainful Employment metrics, borrowers would be having to settle for lower earnings, which has additional effects on their ability to afford basic necessities.

The second type of actions relate to situations where there is a determination that the institution or program failed to deliver sufficient financial value. We propose defining this as findings that an institution engaged in substantial misrepresentations or omissions of fact, misconduct affecting student eligibility, or other similar activities. We chose these situations because those would be cases in which the institution engaged in behavior that affected the value of what a borrower received for their loans. For instance, if the Department terminates aid on a prospective basis because it finds that an institution had been consistently lying to borrowers about their ability to get jobs when in fact internal statistics showed that fewer than half of students obtained employment in the field in which they were being prepared then that is a sign that the borrower did not receive what they were promised. We would also waive repayment of the loans of borrowers who were included in those periods used to determine that the actual employment rates were far lower than what was promised. Waivers

granted because of this section could also include circumstances where the Secretary terminates aid because an institution or program loses accreditation at least in part for the same type of reasons.

The Department recognizes that borrowers eligible for relief under this provision may also be eligible for relief under the Department's other discharge programs, such as borrower defense. As a general matter, the Department does not see a problem with providing overlapping pathways to relief. Such overlaps are not uncommon in the student loan system. For example, there have been many borrowers who have been eligible for both a closed school loan discharge and a borrower defense discharge. In such instances, the Department has opted to proceed with the most operationally efficient discharge since the borrower receives the same benefits under either option. Where possible, the Department intends to provide eligible borrowers relief through other existing discharge programs, such as borrower defense or closed school discharge. But the Department's experience is that there are some circumstances where a borrower may not receive relief under these discharges but meets the conditions of § 30.86(a)(2).

Waivers in this section would not be granted in response to every action the Department takes to terminate aid access at an institution. For instance, an institution that loses access to aid because of financial problems, solely because it closed, or other situations that do not speak to the returns received by students would not be captured here. Because those aid loss circumstances do not relate to the benefit received by borrowers, we do not think it is appropriate to include them here as a waiver. The Department would make the determination as to whether an action meets this requirement for each institution or program.

Final actions under proposed § 30.86 would include those sanctions in 34 CFR part 668, subparts G and H, other final actions stemming from an institution's loss of eligibility under 34 CFR part 600, subpart D, as well as other final action by the Department. As the Department explained during negotiated rulemaking sessions, these final actions are situations where the Secretary or other Departmental official has taken formal action to cease an institution or program's participation in the title IV, HEA programs on a prospective basis.

A non-Federal negotiator encouraged us to include an institution's loss of accreditation as a condition under which the Department could waive repayment of Federal student loan debt and another negotiator believed a more expansive general loss of title IV eligibility should be used as a basis for waiving repayment. The Department concurred and incorporated in § 30.86(a)(2), circumstances when the institution or program loses accreditation as a basis for waiving Federal student loan debt under this proposed section.

Under proposed § 30.86(b), the Department would apply this provision to a borrower's loans received for attending that institution or program during the period that corresponds with the findings or outcomes data that forms the basis for the final action for this waiver. For example, if an institution lost access to title IV aid due to CDRs in excess of the statutory limits for borrowers who entered repayment in 2016, 2017, and 2018, then we would waive repayment of the loans from that institution of borrowers who borrowed during that period. Similarly, if an institution lost access to aid because of substantial misrepresentations in a nursing program in 2023, then we would waive repayment of the loans of borrowers who took out loans for that program in that period of the final action.

Limiting this waiver only to borrowers whose enrollment overlaps during the corresponding period enables the scope of the findings or outcomes data to apply to similarly situated borrowers and provides consistent treatment to all affected borrowers. At the same time, the Department recognizes that there could be unique circumstances in which the period used for the Secretarial action does not fully capture the period during which the Department believes the actions covered by this section otherwise occurred. In such circumstances, proposed § 30.86(b), allows for the Secretary to designate an alternative period for determining a borrower's eligibility for a waiver. Examples of such considerations could be capturing additional years related to CDR failures where the Department has reason to believe an institution would have failed except for efforts to manipulate rates to keep them artificially low. Another instance might also be years that took place after an investigation that led to a Secretarial action and a school action started but the institution later closed making it infeasible for the Department to add the years after its investigation finished to be included in the period of identified conduct. For example, if the Department investigated an institution from 2020 to 2022 and finished the process of a Secretarial action in 2024, after which the school closed, the Secretary may choose to consider whether loans disbursed from 2023 and 2024 should also be considered under this provision.

Finally, the Department also concurred with a non-Federal negotiator who suggested we include an additional paragraph which states that if the conditions of the waiver are met and the loan was repaid by a consolidation loan that has an outstanding balance, the Department would waive the portion of the outstanding balance of the consolidation loan attributable to such loan. We believe that it is logical to waive only the underlying loan that was part of a consolidation loan associated with the final action associated for this waiver. Borrowers who otherwise consolidated their loans would have a pathway toward this waiver and would not lose their opportunities for this waiver because of the consolidation.

The Committee reached consensus on proposed § 30.86.

§ 30.87 Waiver following a closure prior to Secretarial actions.

Statute:

Section 432(a) of the HEA (20 U.S.C. 1082(a)) provides that in the performance of, and with respect to, the functions, powers and duties, vested in him by this part, the Secretary may enforce, pay, compromise, waive, or release any right, title, claim, lien, or demand, however acquired, including any equity or any right of redemption.

Current Regulations:

None.

Proposed Regulations:

Under proposed § 30.87(a)(1), the Secretary may waive the entire outstanding balance of a loan associated with attending an institution or a program at an institution if the institution or program closes and the Secretary or other authorized Department official has determined that, based on the most recent reliable data for an institution or program, the institution or program has not satisfied, for at least a year, an accountability standard based on student's outcomes for determining that institution or program's eligibility for title IV funds. Under proposed §§ 30.87(a)(2)(i) and (ii) the Secretary may also waive the entire outstanding balance of a loan associated with attending a closed institution or a closed program at an institution if the institution or program failed to deliver sufficient financial value to students and is the subject of a Departmental action that remains unresolved at the time of that institution or program's closure, in whole or in part, on certain conduct specified in regulation.

Currently, proposed § 30.87(a)(2)(i) also includes the following language: “this paragraph applies to

circumstances when the institution or program has lost accreditation at least in part due to such activities.” The intent of the consensus language was to clarify that the underlying finding that supports the Department's determination that an institution or program failed to deliver sufficient financial value under proposed § 30.87(a)(2)(i) could be a finding made by the Department or it could be a finding made by an accreditor that terminated accreditation based at least in part on that finding. Since the committee reached consensus on the language included in 30.87, the Department has included it in these proposed regulations. However, the Department believes that the intent could be stated more clearly as: “The institution or program has failed to deliver sufficient financial value to students, including in situations where either (A) the Department has determined that the institution or program has engaged in substantial misrepresentations, substantial omissions, misconduct affecting student eligibility, or other similar activities; or (B) the Department has determined that the accrediting agency has terminated its accreditation based at least in part upon a finding that the institution or program has engaged in the activities described in (A).” The Department invites comments on this possible change.

Under proposed § 30.87(b), a waiver under this section would apply to a borrower's loans received for attending that institution or program during the period that corresponds with the findings or outcomes data. Proposed § 30.87(c) would provide that in the case of Federal Consolidation Loans and Direct Consolidation Loans, the Secretary would waive the portion of the outstanding balance of the consolidation loan attributable to such loan received for attending that institution or program during the period that corresponds with the findings or outcomes data.

Institutions or programs that close where the Secretary determined that the institution or program has not satisfied an accountability standard based on student outcomes would include institutions that fail or failed to meet the CDR standards prescribed in 34 CFR part 668, subpart N and programs that do not lead to Gainful Employment prescribed in 34 CFR part 668, subpart S. An institution or program that failed to deliver sufficient financial value to students would include an institution or program that engaged in: substantial misrepresentations, substantial omissions, misconduct affecting student eligibility, or circumstances around loss of accreditation associated with such activities. The Department would predicate this determination through a program review, investigation, or any other action that remains unresolved at the time of closure and that action as based in whole or in part to the aforementioned misconduct.

Waivers of Federal student loan debt under proposed § 30.87 would apply to actions the Department has taken as soon as one year after the institution or program has not satisfied an accountability standard based on student outcomes. This provision would also apply to an institution or program failing to deliver sufficient financial value to students and was the subject to a program review, investigation, or any other Department action that remains unresolved at the time of closure and that action was based, in whole or in part, on such conduct.

Under these proposed regulations, we would not assess liabilities against the institution as a result of the Secretary waiving a borrower's Federal student loan debt. As such, institutions would not be subject to any request to repay funds waived under this provision.

Reasons:

Similar to proposed § 30.86, the Department seeks to capture circumstances where an institution or program failed accountability standards based on student outcomes. The main difference between this provision and § 30.86 is that § 30.87 captures situations in which an institution or program chooses to close before the action becomes final and could be considered under § 30.86. The Department is proposing a separate section to address situations where an institution or program has closed because we have seen past situations where programs or institutions fail accountability measures and voluntarily close, and the closure leaves the Department with insufficient data to conduct a final agency action. The same is true of situations in which the Department begins an investigation or program review related to whether the institution or program is providing sufficient financial value, but the institution or program chooses to close before that investigation or program review is finished. When that occurs, the Department may not finish those processes. In the circumstances described above, the Department believes that it would be reasonable for the Secretary to infer that in the absence of additional data or completion of program review or investigation that the Department would have terminated aid access going forward and the borrower would be eligible for a waiver. In other words, we do not hold borrowers responsible for the Department's inability to obtain necessary additional information. Institutions and programs, meanwhile, are not affected by this inference because they have ceased participation in the title IV programs and would not face any liabilities from these waivers.

While § 30.87 is designed to provide parity with the waivers in § 30.86 so that a borrower is not made worse off because a school decided to close, this provision would not cover all borrowers enrolled at the school at the time of closure. Because the institution closed, borrowers who did not complete and were enrolled at or just before the date of closure would be eligible for a closed school discharge.

Some examples highlight the differences between § 30.86 and § 30.87 that necessitate a separate section. In general, institutions are subject to loss of eligibility to participate in the Direct Loan

and Pell Grant

programs if that institution's CDR is equal to or greater than 30 percent for each of its three most recent cohort fiscal years. An institution that voluntarily closes to avoid loss of eligibility due to a high CDR would not face sanctions, but those students could still be repaying loans incurred for attendance in what would otherwise be an ineligible institution. Proposed § 30.87 would cover such instances if an institution or program voluntarily closes.

Section 435(a)(2) of the HEA (20 U.S.C. 1085(a)(2)).

Section 401(j) of the HEA (20 U.S.C. 1070a(j)).

The Department has encountered situations in the past during oversight and compliance measures over institutions and programs where those institutions or programs choose to close before further reviews can be completed. During program reviews, investigations, or other actions, institutions would voluntarily close the institution or program rather than face the consequences of sanctions. Borrowers enrolled at those institutions or programs who did not continue their postsecondary education would be eligible for a closed school loan discharge if the institution closed. But a borrower who completed their program during this period would not be eligible for a closed school discharge. A borrower who graduated, meanwhile, may also not be able to raise a successful defense to repayment claim based on the specific factual circumstances. This provision would provide an alternative path to relief where the Department has sufficient evidence to determine the institution or

program did not provide sufficient financial value.

This waiver would operate in a manner separate and distinct from closed school loan discharges. The idea behind closed school loan discharges is to provide relief to borrowers who are left with loan debt and are unable to complete their programs. That is why closed school loan discharges are unavailable to borrowers who graduated. By contrast, the purpose of this waiver is to provide relief to borrowers who did not get the benefit of the bargain of postsecondary education in the sense that their institution or program did not meet required student outcomes standards or failed to provide sufficient financial value, but it closed prior to the final agency action that would have made that determination. The underlying reason for the waiver and for why relief would be appropriate are different from the reason for closed school discharges. Negotiators expressed support for this provision during negotiated rulemaking sessions.

One negotiator encouraged us to also include an institution or program's loss of accreditation as a condition of waiving Federal student loan debt under this section. In response, the Department concurred and incorporated in proposed § 30.87(a)(2)(i) circumstances when the institution or program loses accreditation as a basis for waiving Federal student loan debt.

Similar to § 30.86, this provision would only provide waivers to borrowers who took out loans during the period used to measure student outcomes or for the program review or investigation. For example, if an institution had a high CDR for borrowers who entered repayment in 2019 and then closed, the Department would waive loans taken to attend that institution for borrowers in that repayment cohort. Borrowers whose loans are not included in those periods would not receive a waiver.

The Committee reached consensus on proposed § 30.87.

§ 30.88 Waiver for closed Gainful Employment (GE) programs with high debt-to-earnings rates or low median earnings.

Statute:

Current Regulations:

None.

Proposed Regulations:

Under proposed § 30.88(a), the Secretary may waive the entire outstanding balance of a loan received by a borrower associated with enrollment in a GE program if the following conditions are met: the program or institution closed; the GE program was not a professional medical or dental program; and, for a period in which the borrower received loans for enrollment in the GE program, the Secretary has reliable and available data demonstrating that title IV recipients in the GE program failed the debt-to-earnings rates or earnings premium measure described in § 30.88(a)(3).

For purposes of a waiver under § 30.88(a)(3)(i), the GE program would be considered failing if that program had a debt-to-earnings rate greater than 8 percent of their median annual earnings and 20 percent of their median discretionary income. Discretionary earnings would be calculated as median annual earnings minus 150 percent of the Federal Poverty Guideline for a single individual for the measurement year. Denominators of either measures that are zero or negative would be considered a failure if the numerator is a non-zero number. A GE program would also be considered failing if it fails the earnings premium measure described in § 30.88(a)(3)(ii). For the earnings premiums measure, a GE program would be considered failing if the median annual earnings of GE program graduates are equal to or less than the median annual earnings for typical high school graduates in the labor force (

i.e.,

either working or unemployed) between the ages of 25-34. The median annual earnings would be compared to the high school graduates in the State in which the institution is located, or nationally in the case of a GE program at a foreign school, or if fewer than 50 percent of the students in the GE program are from the State where the institution is located.

Under proposed § 30.88(b), a GE program would be identified by its six-digit Classification of Instructional Program (CIP) code, the institution's six-digit Office of Postsecondary Education ID (OPEID) number and the program's credential level. If the Department does not have reliable and available data at the GE program's six-digit CIP code, it would use the four-digit CIP code. The Department would calculate the annual loan payment by determining the median loan debt of students who completed the GE program during the applicable cohort and amortizing that debt based upon the average of the Direct Unsubsidized Loan interest rates based on the applicable credential level and the years preceding the completion year.

Additionally, under proposed § 30.88(c), the Secretary may waive loans received for enrollment in a GE program if the institution closed, and the institution received a majority of its title IV funds for GE programs for which the Department could calculate debt-to-earnings rates and earnings premium measures, and the Department was unable to calculate measures for that program.

Proposed § 30.88(d) would provide that in the case of Federal Consolidation Loans and Direct Consolidation Loans, the Secretary waives the portion of the outstanding balance of the consolidation loan attributable to such loan received for attending that GE program in the corresponding period for which the Secretary is waiving those borrowers' Federal student loan debt.

Reasons:

The Department published final regulations related to GE to address ongoing concerns about educational programs that are supposed to prepare students for gainful employment in a recognized occupation but that instead leave them with unaffordable amounts of student loan debt in relation to their earnings, or with no gain in earnings compared to others with no more than a high school education.

Going forward, if a program fails to meet the standards required of the GE rates, borrowers may be eligible for waivers under either § 30.86 or § 30.87. However, the Department is also concerned about circumstances in which it has evidence that a program is failing to meet the GE standards and the program closes. Such situations may not result in a waiver under § 30.87 even though the Department knows that the borrowers included in the metrics are facing challenges similar to those where programs formally fail the measures once and then close.

88 FR 70004 (October 10, 2023).

The provisions in § 30.88 particularly would address situations where there have been data showing failures of GE metrics, but they are not necessarily official rates, and the program has closed. For example, during rulemaking processes to establish GE regulations, the Department released debt-to-earnings rates about programs across the country. In January 2017,

the Department also produced a round of official rates under the 2014 GE final rule

but did not publish subsequent GE rates under those rules. In response to these rates some institutions preemptively closed programs that did

not meet the standards. The Department believes it is important to provide a waiver in these situations because these metrics show similar concerns about the potential that a borrower may be unable to successfully repay their loans. We believe it is reasonable to draw an inference in favor of the borrower since the program closed and there will not be other data available showing the longer-term performance of the program.

See January 17, 2017 Gainful Employment Electronic Announcement #100—Upcoming Release of Final Gainful Employment Debt-to-Earnings (D/E) Rates.

79 FR 64890 (October 31, 2014).

While the proposed waiver in § 30.88 would only be available when an institution or program closes, it is distinct from closed school discharge. The purpose of a closed school discharge is to provide relief to a borrower who is unable to complete their program. That is why it excludes graduates from eligibility. By contrast, this proposed waiver would provide relief to borrowers where data shows that the typical borrower who took out loans is not getting the benefit of the bargain. The purpose of the closure requirement is to address how the Department would handle situations where it does not have, and has no way to obtain, additional data that would otherwise be needed to take a final agency action and deny continued title IV participation if the institution or program were to continue to fail the metrics. This section establishes how the Department would go about drawing an inference in favor of the borrower to determine that they did not receive the benefit of the bargain.

Because the circumstances addressed in proposed § 30.88 are not ones where the Department would calculate official GE rates, we have crafted a framework to explain how the Secretary would otherwise assess a GE program's debt-to-earnings rates and earnings premium measure for purposes of this section.

In § 30.88(a)(2) the Department explains that we would not apply this section to GE medical or dental programs. These are GE programs identified as Doctor of Medicine (MD), Doctor of Osteopathy (DO), or Doctor of Dental Science (DDS) based upon their level and CIP code. We propose to not include those programs here because in past versions of the GE regulations we have said that students in these programs would have had their earnings evaluated after a longer time following graduation than other types of programs. The Department does not have data for this longer measurement period so we cannot accurately assess these GE programs.

Section 30.88(a)(3) describes how the Department would calculate whether a program fails to meet GE standards. These definitions for debt-to-earnings and earnings premium are all modeled on how the Department proposes to calculate these measures in the recently finalized GE regulation.

The definitions for debt-to-earnings rates are also similar to what was used in the GE regulations finalized in 2014.

88 FR 70004 (October 10, 2023).

79 FR 64890 (October 31, 2014).

The provisions in § 30.88(b) provide greater detail related to how the Department would identify programs as well as how we would calculate typical earnings and debt payments. In § 30.88(b)(1), we propose identifying GE programs by the six-digit CIP code level, or at the four-digit CIP code if we did not have data available. We propose this to mirror the definition of a GE program defined in 34 CFR 668.2. We more fully explain in the 2023 GE final rule

our analysis of data coverage and our basis for assessing GE programs at the six-digit CIP code and, where appropriate, the four-digit CIP code to meet the minimum n-size requirements for GE metrics. This approach also recognizes the data limitations that exist related to past data used to assess GE programs.

88 FR 70035, 70127 (October 10, 2023).

Other provisions of § 30.88(b) similarly reflect choices made and explained in greater detail in the 2023 GE final rule. This includes how we would calculate the annual loan payment and calculate median annual earnings.

The language in proposed § 30.88(c) addresses circumstances where borrowers attended programs that did not have GE results calculated at an institution that has since closed. It proposes to provide relief to students who borrowed to enroll in a program at an institution that closed in which, prior to the closure, the institution received a majority of its title IV, HEA funds from programs that met the conditions under proposed § 30.88(a)(3) and there were no metrics calculated for that program. Because the majority of the title IV, HEA funds received by the institution went to failing programs, the Secretary could reasonably infer that the title IV, HEA funds that went to other programs for which there were insufficient data would have likely failed, as well, and such borrowers should be granted relief. Loans from programs at such an institution where we did have data showing the program did not fail the GE metrics would not result in a waiver.

Finally, § 30.88(d) clarifies that if the conditions of the waiver are met and the loan was repaid by a Federal Direct Consolidation Loan or a Direct Consolidation Loan that has an outstanding balance, the Department would waive the portion of the outstanding balance of the consolidation loan attributable to such loan. We believe that it is logical to waive the only underlying loan associated with this waiver that was part of a consolidation loan. Borrowers who otherwise consolidated their loans would have a pathway toward this waiver and would not have their chances at a waiver foreclosed because of the consolidation.

The Committee reached consensus on proposed § 30.88. The Department has made one clarifying technical change to this language in paragraph (a)(2) to change the word “this” to “the program.”

Part 682—Federal Family Education Loan (FFEL) Program

Subpart D—Administration of the Federal Family Education Loan Programs by a Guaranty Agency Waiver of FFEL Program Loan Debt (§ 682.403)

Statute:

Current Regulations:

None.

Proposed Regulations:

Proposed § 682.403(a) would outline the procedures under which the Secretary may determine that a FFEL Program loan held by a guaranty agency or a lender qualifies for a waiver of all or a portion of the outstanding balance and the steps for providing a waiver. Under proposed § 682.403(a)(1), the Secretary would notify the lender that a loan qualifies for a waiver and the lender would submit a claim to the guaranty agency. The guaranty agency would pay the claim, be reimbursed by the Secretary, and assign the loan to the Secretary. After the loan is assigned, the Secretary would grant the waiver. Proposed § 682.403(a)(2) would define the terms “the lender” and “the guaranty agency” for the purposes of waiver claims under proposed § 682.403.

Proposed § 682.403(b) would specify the conditions under which the Secretary waives FFEL Program loans held by a guaranty agency or a lender. A FFEL Program loan would qualify for a waiver under one of the following conditions—

• The loan first entered repayment on or before July 1, 2000;

• The borrower has not applied for, or not successfully applied for, a closed

school discharge but otherwise meets the eligibility requirements for the discharge; or

• The loan was received for attendance at an institution that lost its eligibility to participate in any title IV, HEA program because of its CDR and the borrower was included in the cohort whose debt was used to calculate the CDR or rates that were the basis for the loss of eligibility.

Proposed § 682.403(c) would provide that if the Secretary determines that a loan qualifies for a waiver, the Secretary notifies the lender and directs the lender to subm

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