Biden’s student loan waiting game drags on

Presented by Consumer Action for a Strong Economy (CASE)

TEETERING ON THE EDGE OF A STUDENT LOAN CLIFF: The nation’s 40 million student loan borrowers are still waiting on the Biden administration to announce whether they’ll have to resume monthly payments in September. And whether they’ll have any of their debt canceled outright.

— The last-minute drama over restarting the $1.5 trillion student loan portfolio is familiar, as the White House weighs a seventh extension of the moratorium on payments and interest. But this time, the administration is cutting it closer to the restart of payments than any other point in the past two and a half years.

— President Joe Biden is set to return to Washington this week after a family vacation in South Carolina. He’ll be signing the major climate, tax and health care law that Democrats in Congress passed last week. The White House has not yet signaled whether any student loan decision is on tap for this week, though officials have repeatedly promised an answer by month’s end.

— For perspective: Most federal student loan borrowers have had monthly payments and interest suspended since the beginning of the pandemic roughly two and a half years ago. The freeze has been continued through a patchwork of legislation and subsequent executive actions that span several months at a time.

— But the debate over restarting student loan payments has never come this close to the edge of the cliff without an answer from the White House in either administration.

— The Trump administration twice extended the pause: Once in August 2020, 53 days before it was set to expire in the heat of the presidential campaign. And again in December, just before leaving office. It announced a one-month extension 27 days before the relief was set to end.

— The Biden team announced during the transition in January 2021 that they would extend the payment pause, then set to expire in 23 days. Biden subsequently extended the relief in August 2021 (55 days in advance of its expiration); in December 2021 (40 days); and most recently in April 2022 (25 days).

— As of today, borrowers have 16 days before the relief is officially set to expire.

— Reading the tea leaves: It’s widely expected that the Biden administration will again extend the payment pause. Among other signs, the Education Department has told student loan servicers to hold off on sending borrowers bills and has not been gearing up to restart payments. But, of course, it’s not official until it’s official.

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HAPPENING TODAY

CARDONA IN THE PALMETTO STATE: Education Secretary Miguel Cardona heads to South Carolina today to visit a historically Black university with House Majority Whip Jim Clyburn (D-S.C.), according to the Post and Courier.

— “The trip was first announced by S.C. State University, and later confirmed by Clyburn’s office,” the paper reports. “In addition to a roundtable discussion with students and a tour of the campus, Cardona’s visit will also include a meeting with leaders of South Carolina’s historically Black colleges and universities.”

Student Loans

EDUCATION DEPT BEGINS REINSTATING AID FOR SOME DEFAULTED BORROWERS: The Biden administration has begun notifying some colleges that it has reinstated the ability of certain defaulted borrowers to receive new federal student loans — as part of the “fresh start” initiative that officials announced earlier this year.

—Defaulted borrowers are typically barred from receiving additional federal student loans, but the Biden administration is moving to erase defaults and allow borrowers to take out additional loans to attend college.

—In April, the Biden administration announced that it would expunge the defaults of millions of Americans who fell behind on their federal student loans. The “fresh start” initiative is aimed at bringing those defaulted borrowers into good standing — which the Education Department has said is part of its broader plan to help borrowers when loan repayments eventually resume. But the agency hasn’t publicly said exactly how the new benefit for defaulted borrowers will work.

—The Education Department recently notified some colleges that it had begun reinstating eligibility for federal student aid. One of the notices viewed by POLITICO said that a particular borrower’s default status would not disqualify the borrower from receiving additional student aid “until one year after the COVID-19 emergency relief (student loan payment pause) ends.”

—But it’s not clear if all defaulted borrowers are eligible to take out new loans to attend school this fall — or how widespread the notices were sent.

—Justin Draeger, president of the National Association of Student Financial Aid Administrators, said the notices have sparked frustration among schools because the administration has not answered “basic questions” about how the reinstatement of aid will work. “It’s disappointing that one of the administration’s signature programs has apparently launched before schools have received guidance on how to operationalize it,” Draeger said.

—The Education Department declined to comment on the notices to schools or say which defaulted borrowers are now able to access federal student aid.

—Undersecretary of Education James Kvaal last week offered some new details about the contours of the “fresh start” program. Kvaal said, for example, that the department would help defaulted borrowers “take advantage of today’s repayment options and pathways to forgiveness.” Those borrowers, under current rules, aren’t eligible for income-driven repayment plans.

—“We will restore students’ access to financial aid so they can go back to school and complete their degrees, earn higher wages and succeed in life,” Kvaal added, speaking at a virtual event hosted by the Student Borrower Protection Center. “We will halt costly collection fees and punitive collection efforts. We will help borrowers who rehabilitate loans during the loan freeze. And we’ll update the Credit Alert Verification Reporting System, or CAIVRS, so that people can get access to the financial products that they need.”

Higher Education

COMMENTS POUR IN ON CARDONA’S STUDENT LOAN OVERHAUL PLAN: The Biden administration’s plan to expand major, existing student debt relief programs garnered thousands of public comments by last Friday’s deadline for public feedback on the proposed regulations.

—The plan: The Education Department’s proposed new regulations would make it easier for certain “targeted” populations of borrowers to obtain loan forgiveness: defrauded students; borrowers with severe disabilities; students who attend a college that suddenly closes; and public service workers. In addition, the administration plans to stop adding interest onto a borrower’s principal balance in certain circumstances where it is not required by Congress.

—Senate Democrats praised the proposal. In a letter led by Sen. Patty Murray and Senate Majority Leader Chuck Schumer, Democrats called the proposal “an enormous step forward for students and borrowers.” But they called on the administration to take a more expansive approach to providing relief in some programs.

—Congressional Republicans, meanwhile, blasted the administration’s plans as outside of its executive authority. The package of rules “brazenly seeks to enact Democrats’ wish list of policies through executive fiat,” Sen. Richard Burr (R-N.C.) and Rep. Virginia Foxx (R-N.C.), the top GOP lawmakers overseeing education, wrote in a joint letter.

—Burr and Foxx argued that the administration especially lacks the authority to make changes to the borrower defense standards and expand the Public Service Loan Forgiveness program. “Congress did not give the Department a blank check to spend federal taxpayer dollars ad infinitum,” the wrote, adding that the Supreme Court’s recent ruling against EPA’s climate rules further curtails the scope of the Education Department’s power to write new rules on student loans.

Syllabus

— Florida students return to schools reshaped by Gov. DeSantis’ anti-'woke’ education agenda: CNN.

— Indiana, Purdue universities plan Indianapolis campus split: The Associated Press.

— Colleges warn students about monkeypox risk as fall term approaches: The Washington Post.

— There’s a nationwide shortage of Black male school psychologists: NPR.