[Federal Register Volume 89, Number 211 (Thursday, October 31, 2024)]
[Proposed Rules]
[Pages 87130-87163]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-25067]



[[Page 87129]]

Vol. 89

Thursday,

No. 211

October 31, 2024

Part III





Department of Education





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34 CFR Part 30





Student Debt Relief Based on Hardship 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; Proposed Rule

Federal Register / Vol. 89 , No. 211 / Thursday, October 31, 2024 / 
Proposed Rules

[[Page 87130]]


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DEPARTMENT OF EDUCATION

34 CFR Part 30

[Docket ID ED-2023-OPE-0123]
RIN 1840-AD95


Student Debt Relief Based on Hardship 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.

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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. The proposed regulations would 
specify the Secretary's authority to waive all or part of any student 
loan debts owed to the Department based on the Secretary's 
determination that a borrower has experienced or is experiencing 
hardship related to such a loan.

DATES: We must receive your comments on or before December 2, 2024.

ADDRESSES: Comments must be submitted via the Federal eRulemaking 
Portal at Regulations.gov. Information on using Regulations.gov, 
including instructions for finding a rule on the site and submitting 
comments, is available on the site under ``FAQ.'' If you require an 
accommodation or cannot otherwise submit your comments via 
Regulations.gov, please contact <a href="/cdn-cgi/l/email-protection#beccdbd9cbd2dfcad7d1d0cdd6dbd2cedadbcdd5fed9cddf90d9d1c8"><span class="__cf_email__" data-cfemail="27554240524b46534e4849544f424b574342544c6740544609404851">[email protected]</span></a> or by phone 
at 1-866-498-2945. The Department will not accept comments submitted by 
fax or by email or comments submitted after the comment period closes. 
Please submit your comment only once so that we do not receive 
duplicate copies. Additionally, please include the Docket ID at the top 
of your comments.
    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. 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: Tamy Abernathy, U.S. Department of 
Education, Office of Postsecondary Education, 400 Maryland Avenue SW, 
5th floor, Washington, DC 20202. Telephone: (202) 245-4595. Email: 
<a href="/cdn-cgi/l/email-protection#8bc5eeecd9eeecc5dbd9c6c3eee7fbcbeeefa5ece4fd"><span class="__cf_email__" data-cfemail="0a446f6d586f6d445a5847426f667a4a6f6e246d657c">[email protected]</span></a>.
    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

    A brief summary of these proposed regulations is available at 
https://www.regulations.gov/docket/ED-2023-OPE-0123. These proposed 
regulations would clarify the use of the Secretary's longstanding 
authority to grant a waiver of some or all of the outstanding balance 
on a Federal student loan.\1\ Under this proposed rule, the Department 
would specify how the Secretary would exercise discretionary authority 
to grant waivers using the following standard: the Secretary would 
determine that a borrower is experiencing or has experienced hardship 
related to the loan: (1) that is likely to impair the borrower's 
ability to fully repay the Federal government, or (2) that renders the 
costs of enforcing the full amount of the debt not justified by the 
expected benefits of continued collection of the entire debt (proposed 
Sec.  30.91(a)).
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    \1\ As discussed more fully below, these proposed regulations 
focus on the Secretary's waiver authority under sections 432(a)(6) 
and 468(2) of the HEA. 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 . . . waive, 
or release any right, title, claim, lien, or demand, however 
acquired, including any equity or any right of redemption.'' 20 
U.S.C. 1082(a)(6). Section 468(2), the Perkins Loan Program's 
authorizing statute, features a similar waiver provision. 20 U.S.C. 
1087hh(2). The Department views sections 432(a)(6) and 468(2) as 
permitting the Secretary to waive the Department's right to require 
repayment of a debt when there are circumstances that warrant such 
relief, such as the circumstances specified in these proposed 
regulations. The Department acknowledges that several states have 
challenged the Department's authority to waive loans under sections 
432(a)(6) and 468(2) through litigation focused on separate proposed 
rules issued by the Department on April 17, 2024 (89 FR 27564) that 
also rely on the Department's waiver authority under the HEA. See 
Missouri v. Biden, No. 24-cv-1316 (E.D. Mo.). In that separate 
litigation, a Federal district court has preliminarily enjoined the 
Department ``from implementing the Third Mass Cancellation Rule,'' a 
term that the plaintiffs used to refer to the April 2024 NPRM, and 
``from mass canceling student loans, forgiving any principal or 
interest, not charging borrowers accrued interest, or further 
implementing any other actions under the Rule or instructing federal 
contractors to take such actions.'' Memorandum and Order, Doc. 57 at 
3, Missouri v. Biden, No. 24-cv-1316 (E.D. Mo. Oct. 3, 2024). As of 
the publication of this NPRM, this litigation remains pending with 
no final decision on the merits, including no final decision 
pertaining to the Secretary's authority under sections 432(a)(6) and 
468(2) of the HEA.
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    The proposed regulations would then provide a non-exhaustive list 
of factors the Secretary may consider in deciding whether to grant 
relief (proposed Sec.  30.91(b)). Then, proposed Sec.  30.91(c) would 
provide a process by which the Secretary may grant individualized 
automatic relief through a predictive assessment based on the factors 
in proposed Sec.  30.91(b). Should the Secretary choose to exercise 
such discretion, proposed Sec.  30.91(c) would provide immediate, one-
time relief as soon as practicable. And, proposed Sec.  30.91(d) would 
provide a primarily application-based process by which the Secretary 
may provide additional relief on an on-going basis.
    The proposed regulations describe two different pathways that the 
Secretary could take to exercise discretion to grant a waiver in 
instances where the borrower meets the hardship standard in proposed 
Sec.  30.91(a). We describe those pathways in greater detail in the 
preamble below to assist the public in understanding how the proposed 
regulations would operate and to clarify terminology to guide such a 
discussion.
    The first pathway would be a ``predictive assessment,'' pursuant to 
proposed Sec.  30.91(c), under which the Secretary would consider 
information in

[[Page 87131]]

the Department's possession to determine whether the borrower meets the 
proposed standard for hardship in Sec.  30.91(a) such that their loans 
are at least 80 percent likely to be in default within the next two 
years. The Department would make a predictive assessment that considers 
factors indicating hardship (described in proposed Sec.  30.91(b)) and 
may, in the Secretary's discretion, then provide immediate relief by 
granting waivers to eligible borrowers, without requiring any action by 
those borrowers to seek that relief.
    The second pathway, which is under proposed Sec.  30.91(d), would 
be a determination based on a ``holistic assessment'' of the borrower's 
circumstances (based on the factors in proposed Sec.  30.91(b)) that 
meets the proposed hardship standard for waiver specified in proposed 
Sec.  30.91(a). This assessment would focus on borrowers who are not 
otherwise eligible for the immediate relief under proposed Sec.  
30.91(c) and who are not eligible for relief sufficient to redress 
their hardships through other Department programs supporting student 
loan borrowers. Under this pathway for relief, the Department would 
conduct a holistic assessment of the borrower's hardship based on 
information about the borrower's experience with the factors in 
proposed Sec.  30.91(b) obtained through an application or based on 
information already within the Department's possession, or a 
combination of the above. A borrower would be eligible for relief if, 
based on the Department's holistic assessment, the Department 
determines that the borrower is highly likely to be in default or 
experience similarly severe negative and persistent circumstances, and 
other options for payment relief would not sufficiently address the 
borrower's persistent hardship.
    The two pathways for relief described above, namely the immediate 
relief in proposed Sec.  30.91(c) and the additional relief in proposed 
Sec.  30.91(d), would operate separately and distinctly from each other 
and would therefore be fully severable. Because these proposed 
regulations only concern waivers due to hardship, these proposed 
hardship waivers would therefore also be separate and distinct from 
other proposed rules related to waivers of Federal student loan 
debt.\2\
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    \2\ See 89 FR 27564 (April 17, 2024). As described above, see 
n.1, supra, a Federal district court has issued an injunction 
focused on these separate proposed rules published on April 17, 
2024. See Missouri v. Biden, No. 24-cv-1316 (E.D. Mo.). As of the 
date of publishing this NPRM, that separate litigation focused on 
the April 2024 NPRM remains pending with no final decision on the 
merits. These regulations differ from the waivers proposed in the 
April 2024 NPRM along various dimensions, including that the 
provisions in these final regulations apply distinct and different 
eligibility criteria, and these provisions address different 
challenges with student loan repayment faced by borrowers and the 
Department. As further described throughout these proposed 
regulations, these provisions specify relief for borrowers that are 
experiencing or have experienced hardship that meet certain 
criteria. Specifically, under proposed Sec.  30.91(c), the Secretary 
could provide individualized automatic relief through a predictive 
assessment based on certain factors. Under proposed Sec.  30.91(d), 
the Secretary could provide relief based on a holistic assessment of 
the borrower's specific circumstances using the standard specified 
in these proposed regulations. Accordingly, the waivers in these 
proposed regulations would operate separately and distinctly from 
the waivers proposed in the April 2024 NPRM.
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Summary of This Regulatory Action

    These proposed regulations would add a new Sec.  30.91, which would 
reflect in regulations the Secretary's existing discretionary authority 
under section 432(a)(6) of the HEA to waive some or all of the 
outstanding balance of a loan owed to the Department when the Secretary 
determines that a borrower has experienced or is experiencing hardship 
related to the loan such that the hardship is likely to impair the 
borrower's ability to fully repay the Federal government, or the costs 
of enforcing the full amount of the debt are not justified by the 
expected benefits of continued collection of the entire debt. In 
addition to establishing this standard, the proposed provision would 
also specify the factors that the Secretary would consider in 
evaluating hardship and the particular processes by which the Secretary 
may provide relief under the standard for determining hardship.
    We note that the Department published a Notice of Proposed 
Rulemaking in the Federal Register on April 17, 2024 (April 2024 NPRM) 
(89 FR 27564) but explained at that time that the April 2024 NPRM did 
not include proposed regulations for waivers related to hardship.\3\ As 
discussed in greater detail in the Negotiated Rulemaking section of 
this NPRM, hardship waivers were discussed at a fourth session of the 
negotiating committee on February 22 and 23, 2024. The Committee 
reached consensus on proposed language, which is included in this NPRM.
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    \3\ As described above, see n.1, supra, a Federal district court 
has issued an injunction focused on these separate proposed rules 
published on April 17, 2024. See Missouri v. Biden, No. 24-cv-1316 
(E.D. Mo.). As of the date of publishing this NPRM, that separate 
litigation focused on the April 2024 NPRM remains pending with no 
final decision on the merits.
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    Costs and Benefits: As further detailed in the Regulatory Impact 
Analysis (RIA), the proposed regulations would have significant impacts 
on borrowers, taxpayers, and the Department. Instances in which the 
Secretary decides to waive all or part of a borrower's outstanding loan 
balance would result in transfers between the Federal government and 
borrowers. This would create benefits for borrowers by eliminating the 
hardship they are facing with respect to their loans, allowing them to 
better afford necessities like food or housing, afford retirement, 
cover childcare or caretaking expenses, or otherwise improve their 
financial circumstances. In the case of a waiver of the full 
outstanding balance of the loan, a borrower would no longer have a 
repayment obligation and also no longer face the risk of delinquency or 
default. A borrower who receives a partial waiver would have a more 
affordable repayment obligation that could be repaid in full over time. 
The transfers resulting from the proposed regulations would be 
mitigated to the extent that the Secretary would exercise discretion to 
waive loans in whole or part where the borrower is unlikely to have the 
ability to repay, or where the costs of continued collection outweigh 
the benefits, allowing the Department to prioritize collection of loans 
that are most likely to be repaid.
    Beyond transfers, these regulations would create administrative 
costs for the Department to process and implement relief based upon 
information in the Department's possession or based upon applications 
filed by borrowers.
    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):
    <bullet> Be concise but support your claims.
    <bullet> Explain your views as clearly as possible and avoid using 
profanity.
    <bullet> Refer to specific sections and subsections of the proposed 
regulations throughout your comments, particularly in any headings that 
are used to organize your submission.

[[Page 87132]]

    <bullet> 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.
    <bullet> Where you disagree with the proposed regulatory text, 
suggest alternatives, including regulatory language, and your rationale 
for the alternative suggestion.
    <bullet> 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.
    <bullet> 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 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 Sec.  30.91, 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.
    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, and 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 one of the persons listed under FOR FURTHER 
INFORMATION CONTACT.

Directed Questions

    The Department is particularly interested in comments on the 
following directed questions:
    1. Is ``two years'' the appropriate measurement window for the 
waivers specified in proposed Sec.  30.91(c) related to borrowers who 
are likely to be in default, or should the Department use a different 
time frame, and if so, what timeframe and why?
    2. Is ``80 percent'' likelihood of being in default within the next 
two years the appropriate eligibility threshold for immediate relief in 
proposed Sec.  30.91(c), or should the Department consider a different 
likelihood percentage, and if so, what should it be and why?
    3. As described in this NPRM, eligibility for a hardship waiver 
under proposed Sec.  30.91(d) would be relatively rare and limited to 
circumstances where the Secretary finds: (i) the borrower is highly 
likely to be in default, or experience similarly severe negative and 
persistent circumstances, and (ii) other options for payment relief 
would not sufficiently address the borrower's persistent hardship. The 
Department invites feedback from the public on what circumstances 
constitute similarly severe negative and persistent circumstances that 
are comparable to default.
    4. Under proposed Sec.  30.91(d), is ``highly likely'' to be in 
default or to experience similarly severe negative and persistent 
circumstances the appropriate eligibility threshold? If so, why? If 
not, should the Department use a different likelihood threshold, and, 
if so, what threshold and why?
    5. How should the Department help make certain that borrowers have 
the opportunity to enroll or apply for other programs administered by 
the Department that may be advantageous to the borrower and 
successfully demonstrate a hardship that qualifies for a waiver under 
proposed Sec.  30.91(d)?
    6. How can the Department improve or refine the estimates in the 
RIA related to the anticipated volume of applications for the 
application-based hardship waiver process, as well as the estimates 
related to the approval rate for such applications?
    7. As described in this NPRM, the Department believes a presumption 
in favor of a full waiver is appropriate and would provide consistency 
in decision-making, but that this presumption could be rebutted in 
certain circumstances. For example, the Secretary may find the 
presumption in favor of full waiver is rebutted if there is evidence 
that a partial waiver would sufficiently reduce a borrower's monthly 
payment in a manner that alleviates their hardship under these 
regulations. The Department seeks input from the public on the types of 
circumstances and evidence that the Department should consider to 
determine when partial relief is more appropriate.
    8. Under what circumstances, pursuant to proposed Sec.  30.91(d), 
would a borrower who is eligible for a $0 monthly payment under an 
income-driven repayment plan meet the standard for relief in proposed 
Sec.  30.91(d) of being highly likely to be in default or experience 
similarly severe and persistent negative circumstances, and other 
options for payment relief would not sufficiently address the 
borrower's persistent hardship?
    9. Under what circumstances would a borrower be highly likely to be 
in default, or experience similarly severe negative and persistent 
circumstances, such that relief pursuant to proposed Sec.  30.91(d) 
would be appropriate?
    10. What type of data could the Department use to determine whether 
a borrower who has not submitted an application qualifies for relief 
under

[[Page 87133]]

proposed Sec.  30.91(d), and how could ED obtain those data?
    11. If the Department were to establish a cap on the amount of 
relief eligible borrowers could receive, what would be a reasonable cap 
and what data, research, or other information would support the setting 
of such a cap? The Department is particularly interested in different 
approaches for formulating and justifying the amount of capped relief. 
For example, the Department welcomes feedback on whether the Department 
should apply any of the following approaches: a universal cap, a 
progressive cap based on the extent of the hardship up to a maximum 
possible limit, or a cap that provides proportional relief based on 
other circumstances.

Background

    Federal student loans provide an important resource for Americans 
to enroll in postsecondary education programs if they do not have the 
financial means to pay the total cost of attendance up front. Because 
postsecondary education generally provides economic returns, the 
increased financial benefits from greater education and training can be 
used to repay the debts incurred to pay for those opportunities.
    Unfortunately, over the decades since the HEA was enacted, the 
increasing price of postsecondary education has exceeded the growth in 
family incomes.\4\ For many students, available grant aid is not 
sufficient to cover postsecondary expenses, leading Federal student 
loans to fill a critical and inescapable gap in postsecondary education 
financing for many families.
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    \4\ For example, the published tuition and fees for public four-
year, public two-year, and private nonprofit four-year institutions 
were, respectively, 209 percent, 151 percent, and 178 percent higher 
than those costs in the early 1990s (inflation adjusted). Over a 
similar time period, incomes rose by about 30 percent-40 percent 
among families outside of the top quintile, and 65 percent for 
families in the top quintile (inflation adjusted). See Ma, Jennifer 
and Matea Pender. Trends in College Pricing and Student Aid 2023 
(2023). New York: College Board.
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    Generally, financing postsecondary education with loans yields 
returns--such as increased income--that help borrowers afford their 
debts.\5\ Increasing access to higher education through student loans 
also provides well-documented benefits to communities and to the 
national economy and society. These benefits extend even to individuals 
who never attended college themselves. For example, college certificate 
and degree attainment typically lead to higher earnings, increasing the 
ability of individuals to spend money and invest in their local 
community.\6\
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    \5\ Avery, Christopher and Sarah Turner. ''Student loans: Do 
college students borrow too much--or not enough?.'' Journal of 
Economic Perspectives vol. 26, no. 1 (2012): 165-192. Lovenheim, 
Michael, and Jonathan Smith. ``Returns to different postsecondary 
investments: Institution type, academic programs, and credentials.'' 
Handbook of the Economics of Education vol. 6 (2023): 187-318. 
Elsevier.
    \6\ Matsudaira, Jordan. ``The Economic Returns to Postsecondary 
Education: Public and Private Perspectives.'' Postsecondary Value 
Commission (2021). Moretti, Enrico. Estimating the social return to 
higher education: evidence from longitudinal and repeated cross-
sectional data. Journal of Econometrics 121, no. 1-2 (2004): 175-
212.
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    The HEA contains many provisions intended to assist borrowers when 
their investment in postsecondary education does not result in the 
expected benefits. The Department offers several options for payment 
relief and other forgiveness opportunities. For example, when an 
educational institution misrepresents the value of an education 
financed with a student loan, the HEA authorizes discharge of the 
obligation through a borrower defense claim. The HEA also provides for 
discharge when a school falsely certifies a borrower's eligibility for 
a loan, or someone obtains a loan in the borrower's name through 
identity theft. Other types of loan discharges are available if a 
borrower is unable to complete a program because an institution closes, 
or if the borrower becomes totally and permanently disabled.
    The Department offers several different repayment options, some of 
which base payments on a borrower's income and forgive any remaining 
amounts after an extended period of payments, which is either 20 or 25 
years for most plans.\7\
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    \7\ See 20 U.S.C. 1087e(e) and 20 U.S.C. 1098e.
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    While existing discharge and repayment programs provide critical 
relief to borrowers, they do not capture the full set of circumstances 
that may impair borrowers' ability to fully repay their loans. Many 
situations unique to individual borrowers can cause borrowers to 
experience significant hardship repaying student loans and may make the 
cost of collecting the loan exceed the expected benefits of continued 
collection. Such situations often are not covered by existing avenues 
for relief. For example, older borrowers with high educational debt 
burdens can be at increased risk of financial insecurity since they are 
also more likely to be exposed to higher medical costs and declining 
incomes.\8\ But these risks are not factored into the determination of 
eligibility for relief under existing Department programs. Borrowers 
with significant medical expenses, dependent care expenses, or other 
extraordinary and necessary costs also may not qualify for other 
discharge and repayment programs, which do not assess such expenses in 
determining eligibility.
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    \8\ See, for example, this US Government Accountability Office 
(GAO) report that demonstrates higher rates of debt among older 
Americans, https://www.gao.gov/products/gao-21-170. For a discussion 
of how medical costs account for a larger share of expenditures 
among older individuals also see, Banks, James, Richard Blundell, 
Peter Levell, and James P. Smith. ``Life-cycle consumption patterns 
at older ages in the United States and the United Kingdom: Can 
medical expenditures explain the difference?.'' American Economic 
Journal: Economic Policy 11, no. 3 (2019): 27-54.
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    These proposed regulations would clarify how the Secretary would 
exercise their authority to waive some or all outstanding loan debt in 
certain situations where the Secretary determines that a borrower is 
facing hardship that impairs their ability to fully repay the loan or 
imposes unwarranted costs that exceed the benefits of continued 
collection. The proposed regulations describe the transparent, 
reasonable, and equitable factors the Secretary would use to determine 
when such waivers could be granted.
    Section 432(a) of the HEA outlines the Secretary's legal powers and 
responsibilities relevant to this rulemaking. That section delegates to 
the Secretary the discretion to exercise certain ``general powers.'' 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.''
    The provisions of section 432(a)(6) are in, and explicitly apply 
to, title IV, part B, of the HEA, which establishes the FFEL program. 
Section 432(a)(6), however, also applies to the Direct Loan program. In 
creating the Direct Loan program, Congress established parity between 
the FFEL and Direct Loan programs, providing in section 451(b)(2) of 
the HEA 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).\9\ By its plain language, section 451(b)(2) 
requires that the benefits of FFEL loans should be available under the 
Direct Loan program, including the benefit to a borrower when the 
Secretary exercises

[[Page 87134]]

discretionary authority under section 432(a)(6) to waive loan 
obligations for those experiencing hardship. A benefit is ``something 
that produces good or helpful results or effects,'' \10\ and 
disallowing Direct Loan borrowers experiencing hardships the same 
opportunity as FFEL borrowers to have all or part of the balance of 
their loans eliminated plainly would afford different benefits between 
the loan programs, the result section 451(b)(2) was created to avoid.
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    \9\ See Sweet v. Cardona, 641 F. Supp. 3d 814, 823-25 (N.D. Cal. 
2022); Weingarten v. DOE, 468 F. Supp. 3d 322, 328 (D.D.C. 2020); 
Chae v. SLM Corp., 593 F.3d 936, 945 (9th Cir. 2010).
    \10\ https://www.merriam-webster.com/dictionary/benefit.
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    The Secretary's waiver authority under section 432(a)(6) of the HEA 
also extends to HEAL and Perkins loans. 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). Likewise, section 468(2) of 
the HEA endows the Secretary with similarly broad and flexible powers 
with respect to loans arising under the Perkins program.
    The Department's statutory waiver authority dates to the enactment 
of the Higher Education Act in 1965.\11\ The Department has viewed its 
waiver authority as permitting the Secretary to waive the Department's 
right to require repayment of a debt.\12\ Having such bounded 
flexibility is critical for the Department's administration of the 
comprehensive and complex student loan programs, where unforeseen 
challenges could, absent waiver, interfere with the Secretary's ability 
to administer the title IV programs effectively and efficiently.
---------------------------------------------------------------------------

    \11\ See Public Law 89-329, 79 Stat. 1246 (Nov. 8, 1965).
    \12\ The authority to waive loan balances is provided by the 
statutory text of the HEA, such that the Secretary's exercise of 
this authority in this proposed regulation is unaffected by the 
Supreme Court's decision in Biden v. Nebraska, 600 U.S. 477 (2023). 
In Nebraska, the Court interpreted a provision of the HEROES Act, 
which authorizes waiver or modification of ``statutory or regulatory 
provisions'' applicable to the Federal student loan programs under 
certain circumstances. The Court found that the debt-relief program 
at issue there exceeded the scope of the HEROES Act authority to 
waive and modify rules. Here, unlike in Nebraska, the Secretary's 
waiver authority derives from section 432(a)(6) of the HEA, which 
broadly authorizes waiver of Department claims, and therefore 
applies directly to ``waiving loan balances or waiving the 
obligation to repay on the part of the borrower.'' Nebraska, 600 
U.S. at 497 (internal citation omitted).
---------------------------------------------------------------------------

    The Department's waiver authority operates within the context of 
the HEA's text, structure, and goals, and the well-established 
principles that govern debt collection and 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. 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. We have taken such 
factors into consideration here.
    On June 30, 2023, the Department announced that it would conduct a 
negotiated rulemaking process to specify the standard the Secretary 
plans to use in exercising the Secretary's authority to waive loan 
debts under section 432(a) of the HEA. On April 17, 2024, the 
Department published the April 2024 NPRM, laying out some of the 
proposals from the negotiated rulemaking process, including the waiver 
of loans that have seen their balances grow far beyond what they were 
upon entering repayment, loans that first entered repayment a long time 
ago, loans held by borrowers that are otherwise eligible for certain 
forgiveness opportunities, or debts taken out to attend programs or 
institutions that failed to provide sufficient financial value.\13\
---------------------------------------------------------------------------

    \13\ 89 FR 27564 (April 17, 2024). As described above, see n.1, 
supra, a Federal district court has issued an injunction focused on 
these separate proposed rules published on April 17, 2024. See 
Missouri v. Biden, No. 24-cv-1316 (E.D. Mo.). As of the date of 
publishing this NPRM, that separate litigation focused on the April 
2024 NPRM remains pending with no final decision on the merits.
---------------------------------------------------------------------------

    The waivers proposed in this NPRM are distinct from those in the 
April 2024 NPRM and are specifically related to determinations about 
whether borrowers are facing, or have faced, hardship. While it is 
possible that a borrower could qualify for a waiver under these 
proposed regulations as well as under other proposed and existing 
regulations, this NPRM is fully separate from, and these proposed 
regulations would operate independently of, such other regulations. In 
addition, paragraphs (a) through (d) of proposed Sec.  30.91 would 
operate independently of each other and therefore would be fully 
severable, as more fully explained below.

Pathways to Relief

    In this NPRM, the Department describes two pathways by which the 
Secretary could exercise discretion to provide waivers of some or all 
of the outstanding balance of a Federal student loan held by the 
Department. Both of these proposed pathways would operate separately 
and independently from each other and therefore would be fully 
severable. As noted above, the regulations specify: (i) a pathway for 
``immediate relief'' using a predictive assessment in proposed Sec.  
30.91(c); (ii) a pathway for ``additional relief'' using a holistic 
assessment in proposed Sec.  30.91(d) based on an application or data 
already in the Secretary's possession, or a combination of both.
    Under both pathways to relief, the Secretary proposes to analyze 
each individual borrower's circumstances, as reflected in the factors 
in proposed Sec.  30.91(b), to determine whether the borrower is 
experiencing or has experienced hardship as defined by these 
regulations.
    Under the first pathway to relief, using a ``predictive 
assessment'' as described in proposed Sec.  30.91(c), the Secretary 
would use data already in the Department's possession (that is, not 
acquired by application) to identify borrowers who meet the standard in 
proposed Sec.  30.91(a) such that they are at least 80 percent likely 
to be in default in the next two years after the proposed regulations' 
publication date.\14\ The Secretary would conduct this analysis by 
using a predictive model that considers the borrower's circumstances as 
described by factors in proposed Sec.  30.91(b). The Secretary then 
could choose to exercise discretion to grant ``immediate relief'' to 
borrowers who qualify under proposed Sec.  30.91(c).
---------------------------------------------------------------------------

    \14\ Borrowers who may be included in this model are those who 
have at least one federally held loan that has entered repayment.
---------------------------------------------------------------------------

    Under the second pathway for relief, described in proposed Sec.  
30.91(d), the Secretary may exercise discretion to grant a waiver to a 
borrower who meets the standard of hardship based on a holistic 
assessment of the borrower's circumstances, based on the factors 
described in proposed Sec.  30.91(b). The Department interprets the 
hardship required for relief under proposed Sec.  30.91(d) as: the 
borrower must be highly likely to be in default or experience similarly 
severe negative and persistent circumstances, and other options for 
payment relief would not sufficiently address the borrower's persistent 
hardship. This holistic assessment may rely on data already in the 
Secretary's possession or acquired from a borrower through an 
application process that would allow a borrower to provide additional 
data relevant to the factors in proposed Sec.  30.91(b), or a 
combination of both. The Department anticipates that the number of 
borrowers for whom the Department possesses sufficient information to 
conduct the

[[Page 87135]]

holistic assessment without data acquired from an application would be 
small.
    These proposed regulations account for challenges facing individual 
borrowers, while also recognizing that many borrowers are similarly 
situated. The Department has a longstanding practice of providing 
appropriate relief when it identifies specific circumstances that 
warrant relief and affect multiple borrowers. Such relief, regardless 
of how data is collected to make a determination about relief, is 
appropriate when individuals share relevant features. This approach 
comports with the HEA's statutory requirements and can also help to 
improve administrative efficiency and provide consistency across 
borrowers.\15\
---------------------------------------------------------------------------

    \15\ See HEA section 432(a)(6).
---------------------------------------------------------------------------

    Overall, these proposed regulations would provide important 
transparency and clarity about how the Secretary may exercise the 
discretion to provide relief in situations where a borrower is facing, 
or has faced, a hardship that might not be addressed through other 
means. Providing relief in such situations would help alleviate the 
challenge of repaying student loans for many individual borrowers and 
better target the costs involved in the Department's efforts to enforce 
collection and repayment.

Public Participation

    The Department has significantly engaged the public in developing 
this NPRM, as described here and below in the Negotiated Rulemaking 
section.
    On July 6, 2023, the Department published a document in the Federal 
Register \16\ 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.
---------------------------------------------------------------------------

    \16\ 88 FR 43069 (July 6, 2023).
---------------------------------------------------------------------------

    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 considered the oral comments made by the public during the 
public hearing and written comments submitted between July 6, 2023, and 
July 20, 2023. We also held four negotiated rulemaking sessions of two 
days each. During each daily negotiated rulemaking session, we provided 
an opportunity for public comment. The fourth two-day session in 
February 2024 focused exclusively on the issue of 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.
    The Department accepted written comments on possible regulatory 
provisions that were submitted directly to the Department by interested 
parties and organizations. You may view the written comments submitted 
in response to the July 6, 2023, Federal Register document 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.

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 document in the 
Federal Register \17\ announcing its intention to establish the 
Committee to prepare proposed regulations for the title IV, HEA 
programs. This document set forth a schedule for Committee meetings and 
requested nominations for individual negotiators to serve on the 
negotiating committee. In the document, we announced the topics that 
the Committee would address.
---------------------------------------------------------------------------

    \17\ 88 FR 60163 (August 31, 2023).
---------------------------------------------------------------------------

    The Committee included the following members, representing their 
respective constituencies:
    <bullet> Civil Rights Organizations: Wisdom Cole, NAACP, and India 
Heckstall (alternate), Center for Law and Social Policy.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> Private Nonprofit Institutions of Higher Education: 
Angelika Williams, University of San Francisco, and Susan Teerink 
(alternate), Marquette University.
    <bullet> Proprietary Institutions: Kathleen Dwyer, Galen College of 
Nursing, and Belen Gonzalez (alternate), Mech-Tech College.
    <bullet> 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.
    <bullet> Federal Family Education Loan (FFEL) Lenders, Servicers, 
or Guaranty Agencies: Scott Buchanan, Student Loan Servicing Alliance, 
and Benjamin Lee (alternate), Ascendium Education Solutions, Inc.
    <bullet> Student Loan Borrowers Who Attended Programs of Two Years 
or Less: Ashley Pizzuti, San Joaquin Delta College, and David Ramirez 
(alternate), Pasadena City College.
    <bullet> Student Loan Borrowers Who Attended Four-Year Programs: 
Sherrie Gammage, The University of New Orleans, and Sarah Christa Butts 
(alternate), University of Maryland.

[[Page 87136]]

    <bullet> 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.
    <bullet> Currently Enrolled Postsecondary Education Students: Jada 
Sanford, Stephen F. Austin University, and Jordan Nellums (alternate), 
University of Texas.
    <bullet> Consumer Advocacy Organizations: Jessica Ranucci, New York 
Legal Assistance Group, and Ed Boltz (alternate), Law Offices of John 
T. Orcutt, P.C.
    <bullet> Individuals with Disabilities or Organizations 
Representing Them: John Whitelaw, Community Legal Aid Society Inc., and 
Waukecha Wilkerson (alternate), Sacramento State University.
    <bullet> 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.
    <bullet> 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 some proposed regulations that have since been published 
in the April 2024 NPRM.\18\ That NPRM also included all other proposed 
provisions from the third session on which consensus was not reached.
---------------------------------------------------------------------------

    \18\ 89 FR 27564 (April 17, 2024). As described above, see n.1, 
supra, a Federal district court has issued an injunction focused on 
these separate proposed rules published on April 17, 2024. See 
Missouri v. Biden, No. 24-cv-1316 (E.D. Mo.). As of the date of 
publishing this NPRM, that separate litigation focused on the April 
2024 NPRM remains pending with no final decision on the merits.
---------------------------------------------------------------------------

    On February 2, 2024, the Department published a document in the 
Federal Register \19\ announcing a fourth session of Committee 
negotiations on February 22 and 23, 2024 to focus exclusively on the 
issue of borrowers facing hardship. Some primary or alternate 
negotiators were unable to attend the fourth session of Committee 
negotiations in February 2024. Where the primary was unable to attend, 
the alternate filled the role of primary. The following Committee 
members participated in the fourth session, representing their 
respective constituencies:
---------------------------------------------------------------------------

    \19\ 89 FR 7317 (February 2, 2024).
---------------------------------------------------------------------------

    <bullet> Civil Rights Organizations: Wisdom Cole, NAACP.
    <bullet> Legal Assistance Organizations that Represent Students or 
Borrowers: Scott Waterman (alternate who served as primary), Student 
Loan Committee of the National Association of Chapter 13 Trustees.
    <bullet> 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.
    <bullet> State Attorneys General: Yael Shavit, Office of the 
Massachusetts Attorney General.
    <bullet> Public Institutions of Higher Education, Including Two-
Year and Four-Year Institutions: Melissa Kunes, The Pennsylvania State 
University.
    <bullet> Private Nonprofit Institutions of Higher Education: 
Angelika Williams, University of San Francisco, and Susan Teerink 
(alternate), Marquette University.
    <bullet> Proprietary Institutions: Kathleen Dwyer, Galen College of 
Nursing, and Belen Gonzalez (alternate), Mech-Tech College.
    <bullet> 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): 
Carol Peterson (alternate who served as primary), Langston University.
    <bullet> Federal Family Education Loan (FFEL) Lenders, Servicers, 
or Guaranty Agencies: Scott Buchanan, Student Loan Servicing Alliance.
    <bullet> Student Loan Borrowers Who Attended Programs of Two Years 
or Less: Ashley Pizzuti, San Joaquin Delta College.
    <bullet> Student Loan Borrowers Who Attended Four-Year Programs: 
Sarah Christa Butts (alternate who served as primary), University of 
Maryland.
    <bullet> 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.
    <bullet> Currently Enrolled Postsecondary Education Students: 
Jordan Nellums (alternate who served as primary), University of Texas.
    <bullet> Consumer Advocacy Organizations: Jessica Ranucci, New York 
Legal Assistance Group, and Ed Boltz (alternate), Law Offices of John 
T. Orcutt, P.C.
    <bullet> Individuals with Disabilities or Organizations 
Representing Them: John Whitelaw, Community Legal Aid Society Inc.
    <bullet> U.S. Military Service Members, Veterans, or Groups 
Representing Them: Vincent Andrews, Veteran.
    <bullet> Federal Negotiator: Tamy Abernathy, U.S. Department of 
Education.
    For more information about the Committee membership in the fourth 
session, please visit our Session 4 Meeting Summary: https://www2.ed.gov/policy/highered/reg/hearulemaking/2023/final-session-4-summary-2-27-24.pdf.
    During that fourth session, the Department presented regulatory 
text for waivers that could assist borrowers who have experienced or 
are experiencing hardship. The negotiators reached consensus on this 
language.
    This NPRM only includes proposed regulations on hardship. Because 
the Committee reached consensus on the proposed regulations, the 
proposed regulatory text in this NPRM is the same text on which 
consensus was reached.
    For more information on the negotiated rulemaking sessions, please 
visit: https://www2.ed.gov/policy/highered/reg/hearulemaking/2023/index.html.

Summary of Proposed Changes

    These proposed regulations would add Sec.  30.91 specifying the 
Secretary's authority to waive some or all of the outstanding balance 
of a loan owed to the Department when the Secretary determines that a 
borrower has experienced or is experiencing hardship related to the 
loan such that the hardship is likely to impair the borrower's ability 
to fully repay the Federal government or the costs of enforcing the 
full amount of the debt are not justified by the expected benefits of 
continued collection of the entire debt.
    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

[[Page 87137]]

applicable), the new proposed regulatory text, and the reasons why we 
proposed to add new regulatory text or revise the existing regulatory 
text.

Sec.  30.91(a) Standard for Waiver Due to Hardship

    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. 
Section 468(2) of the HEA endows the Secretary with similarly broad and 
flexible powers with respect to loans arising under the Perkins 
program.\20\
---------------------------------------------------------------------------

    \20\ See 20 U.S.C. 1087hh(2).
---------------------------------------------------------------------------

    Current Regulations: None.
    Proposed Regulations: Under proposed Sec.  30.91(a), the Secretary 
may waive up to the outstanding balance of a Federal student loan owed 
to the Department when the Secretary determines that the borrower has 
experienced or is experiencing hardship related to that Federal student 
loan such that the hardship is likely to impair the borrower's ability 
to fully repay the Federal government, or the Secretary has determined 
that the costs of enforcing the full amount of the debt are not 
justified by the expected benefits of continued collection of the 
entire debt.
    Reasons: Proposed Sec.  30.91(a) sets forth the purpose of proposed 
Sec.  30.91. It clarifies both the types of Federal loans that could be 
considered for waiver under proposed Sec.  30.91 as well as the 
proposed standard that the Department would apply to determine if a 
borrower has faced, or is facing, hardship in a manner and extent that 
makes the borrower eligible for relief.
    The Department proposes to include all types of Federal student 
loans held by the Department in Sec.  30.91 because, among loans held 
by the Department, no programmatic differences exist between the loan 
types that would justify waiver of some of a borrower's loans and not 
others.
    The Department proposes to consider waiver in situations in which a 
borrower ``has experienced'' or ``is experiencing'' hardship, because, 
in addition to current hardship that may raise immediate concerns, 
there could be situations where the Department has clear indicators of 
hardship, but such indicators may not be current. The Department 
believes that in certain situations, it would be appropriate and 
reasonable for the Department to infer that the past observed hardship 
has continued. For example, if the Department has evidence from two 
years ago that a borrower has an incurable and chronic condition, then 
it would be reasonable to infer that situation has continued. It is 
also likely that, because reviewing information submitted by a borrower 
would involve significant Department staff time, the Department could 
make reasonable assumptions and inferences about facts that might have 
changed during the intervening time. The Department would retain the 
ability to request updated information if necessary to reach a 
determination.
    Acknowledging past hardship also recognizes that previous periods 
of hardship may have current and future consequences for a borrower. 
For example, a borrower who struggled to repay their loans may have 
seen their balance increase in size such that full repayment of that 
greater amount is no longer feasible.
    In all cases, the Secretary would only consider waiver of loans 
that are outstanding. The Department would not consider waivers of 
loans that are paid off or otherwise satisfied because, once repaid, a 
borrower's debt no longer exists. Moreover, a borrower could not be 
experiencing hardship that meets the proposed standard on a Federal 
loan that has been repaid. For the same reason, the Department would 
also not consider reimbursement of payments made on loans that are 
outstanding.
    As noted above, the Department's proposed standard for assessing 
whether a borrower's hardship circumstances warrant relief involves 
determining whether such circumstances are likely to impair the 
borrower's ability to fully repay the Federal government or the costs 
of enforcing the full amount of the debt are not justified by the 
expected benefits of continued collection of the entire debt.
    The Department proposes to evaluate whether a hardship is likely to 
impair the borrower's ability to fully repay the Federal government for 
several reasons. Whether a borrower can fully repay the debt aligns 
with general Federal principles of debt collection that guide agencies 
on the appropriateness of discharging all or part of a debt when the 
borrower is unlikely to fully repay their debt within a reasonable 
period or the agency is unlikely to collect the debt in full within a 
reasonable period. See, e.g., 31 CFR 902.2(a)(1) and (2).
    Considering situations where the borrower's hardship is ``likely'' 
to impair the ability to fully repay a loan allows the Department to 
make a reasonable, informed predictive determination regarding the 
impact of a borrower's hardship, based upon factors that, from the 
Department's experience with student aid programs, are strongly 
correlated with an inability to fully repay student loan obligations. 
The Department would assess these factors to predict which borrowers 
face or have faced hardship likely to cause continued impairment of 
their ability to repay a loan without jeopardizing their financial 
security. For example, lengthy time in repayment, in conjunction with 
other factors such as repayment history, may predict that a borrower 
may be unable to pay the loan without jeopardizing basic needs, such as 
housing, food, medication, and other essentials. Use of predictive 
measures would permit the Secretary to address hardships before 
borrowers suffer the most significant consequences associated with 
student loan struggles, such as delinquency and default and their 
follow-on effects.
    In addition to the impairment of a borrower's ability to repay, the 
Department proposes an additional standard for evaluating eligibility 
for relief where a borrower's hardship causes the cost of collection to 
exceed the expected benefits to the Federal government of continued 
collection. Such an approach acknowledges circumstances where it no 
longer advances the financial, operational, or programmatic goals of 
the Department to continue attempting to collect on a loan. In deciding 
whether collection advances such goals, the Department would consider a 
range of possible costs flowing from collection action. This might 
include financial and non-financial costs to the Department directly 
related to loan collection, such as compensating student loan servicers 
or debt collectors, and, because the Department's resources are 
limited, operational and administrative costs associated with outreach 
to high-risk borrowers unlikely to repay loans, rather than more 
beneficial outreach to other borrowers who may be more likely to be 
able to fully repay.
    In assessing the costs of collection, the Department may also 
consider whether collection advances the principles of the title IV 
programs. For example, a key purpose of the title IV programs is to 
enable borrowers who pursue postsecondary education to improve their 
future economic outcomes,\21\ and it may be contrary to

[[Page 87138]]

this purpose to seek collection from borrowers who, due to labor market 
changes or family health challenges, are unable to participate fully in 
the market and repay their loans.
---------------------------------------------------------------------------

    \21\ In enacting the HEA, Congress emphasized a central purpose 
was to ``extend the benefits of college education to increasing 
numbers of students . . . drawing upon the unique and invaluable 
resources of . . . universities to deal with national problems of 
poverty and community development.'' H.R. Rep. 80-561 (1965) at 2-3. 
Title IV was intended to increase student access to a ``highly 
skilled professional [and] technical'' workplace evolving in the 
United States. Id. at 20. Further, after signing the HEA into law, 
President Lyndon Johnson remarked that, among other purposes, the 
Act intended to provide ``a way to deeper personal fulfillment, 
greater personal productivity, and increased personal reward.'' See 
Public Papers of the Presidents, Johnson 1965 book 2, at 1103-04.
---------------------------------------------------------------------------

    Proposed Sec.  30.91(a) would permit the Secretary to waive all or 
part of an outstanding loan balance. Waiving part, but not all, of the 
amount owed could alleviate a borrower's inability to repay the 
remaining debt or alter the Department's cost-benefit equation 
associated with collecting the loan. The proposed regulation would 
preserve the Secretary's discretion to determine when it would be 
appropriate to provide such a partial waiver.
    The language in proposed Sec.  30.91(a) should be understood in the 
context of the standards for relief described in the discussion of 
proposed Sec.  30.91(c) and Sec.  30.91(d). If the Secretary determined 
that a borrower is eligible for relief under proposed Sec.  30.91(a), 
the Secretary would next need to determine the amount of the 
outstanding balance to waive. To do so, the Secretary would assess the 
borrower's hardship factors to determine whether it is likely that 
those hardship issues could be addressed by only waiving part of the 
balance rather than the full amount. Generally, the Department would 
adopt a rebuttable presumption that the full amount would be eligible 
for waiver where the borrower meets the criteria in this proposed 
section. Such a presumption could, however, be rebutted if the 
Secretary concludes that the effect of the hardship on the borrower 
would be ameliorated by less than a full waiver.
    The Department is proposing to use a presumption of a full waiver 
because we believe that full relief would be warranted in the majority 
of circumstances in which a waiver is granted under this standard, and 
because doing so would produce the most consistent decision-making. We 
reach this conclusion based upon past challenges in establishing 
methodologies for partial relief in other types of student loan 
forgiveness. For instance, the Department has struggled to address the 
issue of partial relief for years in the context of approved borrower 
defense to repayment discharges. Multiple borrower defense regulations 
have contemplated the award of partial discharges for borrowers.\22\ In 
those situations, the amount of relief was based upon the determined 
amount of financial harm faced by the borrower. The Department 
attempted to capture this through formulas that took into account 
typical borrower earnings compared to earnings at other comparable 
types of institutions and programs but encountered legal and 
methodological challenges with such approaches. In using such 
approaches, the Department struggled to make sure that the comparisons 
being drawn included the earnings of the borrower whose relief was 
being contemplated (for example, methodologies used the earnings of 
borrowers who graduated but there could be approved claims from non-
graduates). The Department also could not determine that the 
experiences of the typical borrower matched those of the borrower in 
question. Ultimately, the Department adopted a rebuttable presumption 
of full relief for these discharges.
---------------------------------------------------------------------------

    \22\ See, e.g., 81 FR 75926 (Nov. 1, 2016) and 84 FR 49788 
(Sept. 23, 2019).
---------------------------------------------------------------------------

    Though the Department has not previously implemented the hardship 
waivers proposed in this NPRM, we believe such a process would result 
in similar issues were we to not use a rebuttable presumption of a full 
waiver. Similar to calculating financial harm for approved borrower 
defense claims, we would need to calculate an amount that would allow 
the borrower to repay the debt in full in a reasonable period or 
justify the government's cost of collection based upon the expected 
benefits. Although a de minimis amount of debt might be predictably 
repaid, we have not been able to identify an implementable principle 
that would lead to consistent results for partial relief.
    Moreover, the Department would need to make these decisions 
consistently. We do not anticipate that waivers would be granted across 
a common group of borrowers who attended the same school and program 
the way they typically are for borrower defense claims. That means the 
approaches attempted in borrower defense, which draw comparisons to 
similar educational programs, would not work here. The Department would 
therefore need to use a fully individualized process to determine 
relief. That has risks of inconsistency, especially in situations where 
waivers are granted as part of an application approach in which there 
is a holistic assessment of the factors. Borrowers approved under such 
a process could have very different characteristics from each other, 
making it challenging to determine how such characteristics should be 
weighted for consistent waiver amount determinations.
    Overall, then, we believe a rebuttable presumption of a full waiver 
would facilitate the greatest consistency in decision-making. Here, a 
rebuttable presumption means that if the presumption of full relief 
were rebutted, only then would the Department conduct a more involved 
determination. And doing so in more isolated cases would allow the 
Department's determinations to be more consistent and accurate.
    The committee reached consensus on this section.

Sec.  30.91(b) Factors That Substantiate Hardship

    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. 
Section 468(2) of the HEA endows the Secretary with similarly broad and 
flexible powers with respect to loans arising under the Perkins 
program.\23\
---------------------------------------------------------------------------

    \23\ See 20 U.S.C. 1087hh(2).
---------------------------------------------------------------------------

    Current Regulations: None.
    Proposed Regulations: Proposed Sec.  30.91(b) provides a non-
exhaustive list of factors related to the borrower that the Secretary 
may consider in determining whether a borrower meets the hardship 
standard for relief under these regulations. These factors are:
    <bullet> Household income;
    <bullet> Assets;
    <bullet> Type of loans and total debt balances owed for loans 
described in proposed 30.91(a), including those not owed to the 
Department;
    <bullet> Current repayment status and other repayment history 
information;
    <bullet> Student loan total debt balances and required payments, 
relative to household income;
    <bullet> Total debt balances and required payments, relative to 
household income;
    <bullet> Receipt of a Pell Grant and other information from the 
Free Application for Federal Student Aid (FAFSA) form;
    <bullet> Type and level of institution attended;
    <bullet> Typical student outcomes associated with a program or 
programs attended;
    <bullet> Whether the borrower has completed any postsecondary 
certificate or degree program for which the borrower received title IV, 
HEA financial assistance;

[[Page 87139]]

    <bullet> Age;
    <bullet> Disability;
    <bullet> Age of the borrower's loan based upon first disbursement, 
or the disbursement of loans repaid by a consolidation loan;
    <bullet> Receipt of means-tested public benefits;
    <bullet> High-cost burdens for essential expenses, such as 
healthcare, caretaking, and housing;
    <bullet> The extent to which hardship is likely to persist; and
    <bullet> Any other indicators of hardship identified by the 
Secretary.
    Reasons: The Department proposes this non-exhaustive list in 
proposed Sec.  30.91(b)(1) through (16) to identify the data likely to 
best substantiate whether a borrower would be eligible for relief. The 
Department proposes that the list be non-exhaustive, and further 
proposes a ``catch-all'' provision in Sec.  30.91(b)(17), to preserve 
the Department's flexibility to address unanticipated factors that 
affect specific borrowers. Although the list in proposed Sec.  30.91(b) 
is not exhaustive, we believe that providing this extensive list of the 
factors that would be most relevant to the Secretary's determination 
provides appropriate notice and guidance as to what the Secretary would 
consider.
    We do not anticipate that the Secretary would need to evaluate 
every factor in proposed Sec.  30.91(b) for a given borrower. Rather, 
these factors identify different items that could be considered, either 
individually or in concert with other factors in proposed Sec.  
30.91(b), to make determinations of whether the borrower is eligible 
for relief. There are some factors that, might be sufficient with only 
limited additional evidence to determine a borrower is eligible for 
relief. By contrast, there are other factors that are likely to serve 
as contributing factors, but that would likely require several more 
factors to sufficiently demonstrate that the borrower is eligible for 
relief.
    In an assessment of the borrower's factors indicating hardship, 
whether under proposed Sec.  30.91(c) or Sec.  30.91(d), the Department 
anticipates that determining that a borrower is eligible for relief 
would be the result of considering multiple factors identified in 
proposed Sec.  30.91(b) and the interplay between those factors, 
including looking at a combination of the borrower's current financial 
circumstances and the history of their loan, to make the required 
determination of whether a borrower is eligible for relief.
    The factors listed in proposed Sec.  30.91(b) fall into several 
different groups, which in turn would inform how the factor could help 
demonstrate hardship. Below we discuss these groupings and how they 
could inform the Secretary's determination of whether the borrower has 
experienced, or is experiencing, hardship that would qualify for 
relief.
    We note that the term ``factors'' is used in the title of proposed 
Sec.  30.91(b) and ``indicators'' is used in the regulatory text of 
proposed Sec.  30.91(b). The term ``indicators'' was intended to refer 
to factors that may indicate hardship. To avoid confusion with the use 
of the term ``indicators'' in statistical terminology, we use 
``factors'' where possible.
    Borrower's current and past finances (factors 1, 2, 3, 5, 6, 7, 14, 
and 15). One category of proposed factors relates to borrowers' current 
finances. These are listed below with their corresponding number in 
proposed Sec.  30.91(b):
    1. Household income;
    2. Assets;
    3. Type of loans and total debt balances owed for Federal student 
loans, including those not owed to the Department;
    5. Student loan total debt balances and required payments, relative 
to household income;
    6. Total debt balances and required payments, relative to household 
income;
    7. Receipt of a Pell Grant and other information from the Free 
Application for Federal Student Aid (FAFSA) form;
    14. Receipt of means-tested public benefits; and
    15. High-cost burdens for essential expenses, such as healthcare, 
caretaking, and housing.
    The Department proposes these factors because they would provide 
important information about a borrower's financial situation. 
Information about household income and assets would help the Secretary 
understand the level of resources a borrower might have available to 
put toward their loans.
    The borrower's household income also could be a relevant factor for 
evaluating their likelihood of default. Research has found a borrower's 
earnings to be correlated with their likelihood of default,\24\ and a 
2021 Pew survey indicated that borrowers who reported relatively low 
incomes or volatile incomes also reported substantially higher student 
loan default rates, as compared to borrowers who reported higher 
incomes or who reported stable earnings.\25\
---------------------------------------------------------------------------

    \24\ Looney, Adam and Constantine Yannelis. ``A crisis in 
student loans?: How changes in the characteristics of borrowers and 
in the institutions they attended contributed to rising loan 
defaults.'' Brookings Papers on Economic Activity 2015, no. 2 
(2015): 1-89. Gross, Jacob PK, Osman Cekic, Don Hossler, and Nick 
Hillman. ``What Matters in Student Loan Default: A Review of the 
Research Literature.'' Journal of Student Financial Aid 39, no. 1 
(2009): 19-29.
    \25\ Takti-Laryea, Ama and Phillip Oliff. ``Who Experiences 
Default?'' Pew Charitable Trusts. March 1, 2024. https://www.pewtrusts.org/en/research-and-analysis/data-visualizations/2024/who-experiences-default.
---------------------------------------------------------------------------

    Assets would be relevant to determine whether a borrower's ability 
to repay a loan is impaired, because they are a component of a 
borrower's finances that might be liquidated to allow repayment. They 
also might provide a financial cushion that would allow a borrower to 
avoid default in the event of a job loss or a large unplanned expense, 
such as medical expenses.\26\ Homeownership, for example--whether by 
the borrower or the borrower's parents--appears to be correlated with 
lower likelihood of default.\27\ Homeowners can potentially obtain 
liquidity by borrowing against their home in times of need, and 
homeownership also correlates with other measures of creditworthiness 
and financial advantage. Because assets--particularly more liquid 
assets that can be tapped quickly in times of financial distress--might 
provide a valuable cushion against default, information on a borrower's 
assets, such as savings and investments, would be relevant to the 
determination of whether the hardship standard in proposed Sec.  
30.91(a) is met.
---------------------------------------------------------------------------

    \26\ Ibid.
    \27\ Scott-Clayton, Judith. ``What accounts for gaps in student 
loan default, and what happens after.'' (2018). Brookings. Mueller, 
Holger M. and Constantine Yannelis. ``The rise in student loan 
defaults.'' Journal of Financial Economics 131, no. 1 (2019): 1-19. 
Mezza, Alvaro A. and Kamila Sommer. '' ``A Trillion-Dollar Question: 
What Predicts Student Loan Delinquencies?.'' Journal of Student 
Financial Aid 46, no. 3 (2016): 16-54.
---------------------------------------------------------------------------

    Similarly, the proposed factor related to receipt of means-tested 
public benefits could inform the Secretary if other government entities 
have determined that a borrower meets the qualifications for public 
assistance, which would streamline the Secretary's evaluation process.
    Those data also could indicate hardship overall. Receipt of means-
tested public benefits, such as through the Supplemental Nutrition 
Assistance Program (SNAP), Supplemental Security Income (SSI), or 
Temporary Assistance for Needy Families (TANF), indicates an individual 
or family is likely living at or near the Federal Poverty Level. 
Demonstrated eligibility for these programs could indicate that a 
borrower lacks additional funds to put toward repaying their student 
loan debt. Additionally, survey data indicate that borrowers who 
received public benefits were more likely to report not making

[[Page 87140]]

payments on their loans or having defaulted on a debt.\28\
---------------------------------------------------------------------------

    \28\ Blagg, Kristin. ``The Demographics of Income-Driven Student 
Loan Repayment.'' February 26, 2018. Urban Institute. https://www.urban.org/urban-wire/demographics-income-driven-student-loan-repayment. Takti-Laryea, Ama and Phillip Oliff. ``Who Experiences 
Default?'' Pew Charitable Trusts. March 1, 2024. https://www.pewtrusts.org/en/research-and-analysis/data-visualizations/2024/who-experiences-default.
---------------------------------------------------------------------------

    Federal Pell Grants are awarded to students who demonstrate 
financial need. Information about Pell Grant receipt and other data 
from the FAFSA could provide helpful information about a borrower's 
economic circumstances at the time they went to college, as well as 
their trajectory over the course of their enrollment in higher 
education, which could help give the Secretary a perspective on the 
duration of hardship that some borrowers face, and help the Secretary 
determine the likelihood that the hardship would continue.
    Researchers have found that receipt of a Pell Grant and the average 
amount of the Pell Grant (which is determined by a number of factors 
related to the borrower's enrollment, expenses, and financial capacity) 
is correlated with difficulties repaying loans.\29\ Other evidence 
indicates that a borrower's expected family contribution (EFC)--an 
index number that until recent legislative changes was used to 
determine eligibility for Federal student aid including Pell Grants 
using data on students' income, assets, and other FAFSA inputs--is 
correlated with default on student loans within 12 years.\30\
---------------------------------------------------------------------------

    \29\ Mezza, Alvaro A. and Kamila Sommer. ``A trillion dollar 
question: What predicts student loan delinquencies?'' Finance and 
Economics Discussion Series 2015-098 (2015). Washington: Board of 
Governors of the Federal Reserve System. Looney, Adam and 
Constantine Yannelis. ``A crisis in student loans?: How changes in 
the characteristics of borrowers and in the institutions they 
attended contributed to rising loan defaults.'' Brookings Papers on 
Economic Activity 2015, no. 2 (2015): 1-89.
    \30\ Scott-Clayton, Judith. ``What accounts for gaps in student 
loan default, and what happens after.'' (2018). Brookings. The EFC 
is no longer being used in financial aid calculations, starting with 
the 2024-2025 FAFSA form. Instead, there is a new index called the 
Student Aid Index (SAI) that will be used. While the EFC and SAI use 
different calculations, we expect the general evidence about EFC 
(e.g., that is correlated with default) to also be true for SAI.
---------------------------------------------------------------------------

    Other borrower experiences that are reflected in data reported on 
the FAFSA also can be associated with future student loan default, 
including parental education, borrower age, and dependency status.\31\
---------------------------------------------------------------------------

    \31\ Ibid. Steiner, Matt and Natali Teszler. ``Multivariate 
Analysis of Student Loan Defaulters at Texas A&M University.'' 
(2005) Texas Guaranteed Student Loan Corporation. Looney, Adam, and 
Constantine Yannelis. ``A crisis in student loans?: How changes in 
the characteristics of borrowers and in the institutions they 
attended contributed to rising loan defaults.'' Brookings Papers on 
Economic Activity 2015, no. 2 (2015): 1-89. Specifically, higher age 
at time of repayment is negatively associated with default, as is 
being a dependent. Borrowers who report a family income of under 
$25,000 on their first FAFSA are more likely to default.
---------------------------------------------------------------------------

    The other proposed factors in this group (paragraphs 3 through 6) 
would provide important context about the extent to which financial 
resources available to the borrower must be put toward other critical 
expenses. For instance, information about a borrower's other debt 
obligations would give the Secretary a more in-depth picture of a 
borrower's financial situation that would account for other debts, 
including non-Federal student loans, that are not otherwise known to 
the Department. That helps in understanding total debt burden and how 
much of a borrower's income goes to debt repayment.
    The type of student debt that borrowers hold, and the amount of 
that debt, can be predictive of the likelihood of being in default. For 
example, to receive a Grad PLUS or Parent PLUS loan, a borrower must 
not have an adverse credit history. This check for adverse credit 
history, along with likely differences among parents, graduate 
students, and undergraduate students, is likely to generate a pool of 
borrowers with different characteristics than borrowers who receive 
other types of Federal loans. Parent PLUS and Grad PLUS borrowers 
typically borrow at older ages, at which point many will have more 
established careers. Parent PLUS loans have lower rates of default than 
Federal loans issued directly to students. For example, in fiscal year 
2015, among borrowers aged 50 to 64 who hold Parent PLUS loans, 10 
percent were in default, while borrowers in the same age group who held 
Federal loans for their own education had a default rate of 35 
percent.\32\ Many older borrowers who take out Federal loans for their 
own education, however, have held their loans for a long time and are 
likely to have experienced repayment struggles.\33\ An examination of 
data about those who borrowed FFEL loans to attend institutions of all 
types in Texas and who entered repayment between 2004 and 2010 
indicates that Parent PLUS borrowers had higher repayment rates than 
student borrowers during this period, although Parent PLUS borrowers 
who borrowed for their children to attend Minority-Serving Institutions 
(MSIs) paid down less debt and were more likely to default than 
borrowers for children who attended other institutions.\34\
---------------------------------------------------------------------------

    \32\ U.S. Government Accountability Office. ``Social Security 
Offsets: Improvements to Program Design Could Better Assist Older 
Student Borrowers with Obtaining Permitted Relief.'' December 2016.
    \33\ Blagg, Kristin and Victoria Lee. ``The complexity of 
education debt among older Americans.'' November 2017. Urban 
Institute.
    \34\ Di, Wenhua, Carla Fletcher, and Jeff Webster. ``A Rescue or 
a Trap? An Analysis of Parent PLUS Student Loans.'' (2022). Federal 
Reserve Bank of Dallas.
---------------------------------------------------------------------------

    Total student loan balance has been shown to correlate with 
default, though the link between total student loan balances and 
default can vary across borrowers.\35\ A borrower's outstanding 
balance, and the type of loans for which they were eligible, can be 
broadly correlated with other factors that could affect a borrower's 
ability to repay, such as level of education, whether the borrower 
completed education, and the borrower's dependency status. Federal 
student loan borrowers with higher balances tend to be less likely to 
enter default; more than half of borrowers in default as of 2015 owed 
less than $10,000.\36\ This may be because many borrowers with 
relatively high balances used loans to attend graduate school, which 
can often lead to higher earnings. Others could be parents who are 
borrowing to help pay for a child's education.\37\ Because both balance 
amount and debt type may be correlated with a borrower's potential for 
experiencing default, these factors would be relevant for the Secretary 
to consider in determining whether a borrower is eligible for relief.
---------------------------------------------------------------------------

    \35\ See, for example, Scott-Clayton 2018, Appendix Table A2, 
where amount borrowed is associated parabolically with likelihood of 
default.
    \36\ Looney, Adam, and Constantine Yannelis. ``How useful are 
default rates? Borrowers with large balances and student loan 
repayment.'' Economics of Education Review 71 (2019): 135-145. 
Dynarski, Susan M. ``An economist's perspective on student loans in 
the United States.'' Human Capital Policy (2021): 84-102. Edward 
Elgar Publishing.
    \37\ Ibid.
---------------------------------------------------------------------------

    In addition to debt by itself, payments and the amount of debt 
relative to a borrower's income, such as their required monthly 
payments relative to monthly income, are correlated with an increased 
likelihood of default. For example, among a cohort of borrowers who 
first entered post-secondary education in 2003-04, higher debt-to-
income ratios were associated with higher rates of default.\38\ Other 
data show that among bachelor's degree recipients who left school in 
1993, those with a monthly payment that was more than 12 percent of 
their monthly income were more likely to default by 2003 than those 
with debt payments that were a

[[Page 87141]]

lower share of income.\39\ It is possible that these trends may be 
different in recent years due to the growth in usage of IDR plans. 
However, because analyses like this rely on surveys that follow the 
repayment histories of borrowers over a long-time horizon, these 
currently represent the best evidence available to the Department about 
longer-term repayment experiences.
---------------------------------------------------------------------------

    \38\ Scott-Clayton, Judith. ``What accounts for gaps in student 
loan default, and what happens after.'' (2018). Brookings.
    \39\ Choy, Susan P. and Xiaojie Li. ``Dealing with Debt: 1992-93 
Bachelor's Degree Recipients 10 Years Later. Postsecondary Education 
Descriptive Analysis Report.'' (2006) NCES 2006-156.
---------------------------------------------------------------------------

    A borrower's debt obligations beyond student loan debt can affect 
financial stability, with research and data from a variety of settings 
indicating that the types of debts that borrowers hold, their payments, 
and the ratio of total debt to income, may be predictive of 
default.\40\ In addition, in the presence of financial distress, 
debtors may need to prioritize other payments instead of their student 
loans in an effort to preserve liquidity or avoid losing the home or 
auto that serves as collateral on other debt.\41\
---------------------------------------------------------------------------

    \40\ Mezza, Alvaro A. and Kamila Sommer. ``A trillion dollar 
question: What predicts student loan delinquencies?'' Finance and 
Economics Discussion Series 2015-098 (2015). Washington: Board of 
Governors of the Federal Reserve System. Blagg, Kristin. 
``Underwater on Student Debt: Understanding Consumer Credit and 
Student Loan Default.'' (2018). Urban Institute. Fuster, Andreas and 
Paul S. Willen. ``Payment size, negative equity, and mortgage 
default.'' American Economic Journal: Economic Policy 9, no. 4 
(2017): 167-191.
    \41\ For example, see Li, Wenli. ``The economics of student loan 
borrowing and repayment.'' Business Review Q3 (2013): 1-10. Federal 
Reserve Bank of Philadelphia. Ionescu, Felicia and Marius Ionsecu. 
``The Interplay Between Student Loans and Credit Card Debt: 
Implications for Default in the Great Recession.'' Federal Reserve 
Bank Finance and Economics Discussion Series: 2014-14 (2014).
---------------------------------------------------------------------------

    The proposed factor in Sec.  30.91(b)(15), related to high costs of 
other essential expenses, also captures a key concept that is not 
directly considered in other Department forms of repayment assistance. 
Formulas for income-driven repayment plans, for example, only focus on 
household size, income, and an amount of income protected based upon a 
multiplier of the Federal Poverty Level. The Department continues to 
believe that is the best approach for administering income-driven 
repayment obligations, as it is a simpler way to determine a payment 
obligation. However, that approach does not account for situations 
where borrowers face exceptionally high costs that are not otherwise 
factored in. During negotiated rulemaking, the Department heard from a 
borrower who is expending significant resources caring for a sick 
relative. In cases where the borrower is the only individual able to 
bear those costs on behalf of the relative, those costs may reduce the 
amount of income available for making payments on Federal student loans 
and are an expense that could not reasonably be adjusted or anticipated 
by the borrower. Agencies engaged in collection activity often consider 
the borrower's overall expenses and whether such expenses are necessary 
or excessive.\42\ Specifying that the Secretary may consider high-cost 
burdens for essential expenses in the hardship determination would 
allow the Secretary to address particularly concerning situations that 
could impair the borrower's ability to fully repay their loan or 
heighten the costs of enforcing the full debt to a point that such 
enforcement is not justified.
---------------------------------------------------------------------------

    \42\ See, e.g., 31 CFR 902.2(g).
---------------------------------------------------------------------------

    Among those who experienced student loan default, the time and 
financial burden of caring for young or medically needy family members 
is mentioned as a reason for missing student loan payments.\43\ Among 
borrowers who pursued discharge of their student debt through 
bankruptcy proceedings, those who were a caretaker for family members 
who have health or medical conditions were more likely to be successful 
than borrowers who pursued bankruptcy proceedings, but who did not have 
that same family need.\44\ Evidence also suggests that having medical 
collections is associated with student loan repayment struggles.\45\
---------------------------------------------------------------------------

    \43\ Pew Charitable Trusts. ``Borrowers Discuss the Challenges 
of Student Loan Repayment.'' (2020).
    \44\ Iuliano, Jason. ``An Empirical Assessment of Student Loan 
Discharges and the Undue Hardship Standard,'' American Bankruptcy 
Law Journal 86, no. 3 (Summer 2012): 495-526.
    \45\ Cohn, Jason. ``Student Loan Default Patterns: What 
Different Paths through Default Can Tell Us about Equitably 
Supporting Borrowers.'' (November 2022). Urban Institute.
---------------------------------------------------------------------------

    For some borrowers, student loan payments make up a large portion 
of a household's overall budget. As payments restarted in October 2023 
following the end of the payment pause, borrowers--particularly those 
with non-$0 scheduled payments--anticipated making changes to their 
household budget, such as reducing discretionary spending or 
savings.\46\ Therefore, essential expenses and duties would be relevant 
to the Secretary's determination of whether a borrower meets the 
hardship standard in proposed Sec.  30.91(a).
---------------------------------------------------------------------------

    \46\ Monarrez, Tom[aacute]s, and Dubravka Ritter. ``Resetting 
Wallets: Survey Evidence on Household Budget Adjustments with 
Student Loan Payments Resumption.'' (2024): 1-19.
---------------------------------------------------------------------------

    Experience repaying student loans (factors 4 and 13). Another 
category of proposed factors relates to information about the 
borrower's experience repaying student loans. These factors are:
    4. Current repayment status and other repayment history 
information; and
    13. Age of the borrower's loan based upon first disbursement, or 
the disbursement of loans repaid by a consolidation loan.
    The Department proposes considering these two factors because they 
provide information about what is already known about the ability of 
the borrower to repay their debt. Repayment history could indicate if 
the borrower has previously experienced struggles repaying their 
debt.\47\ Similarly, the age of loans would provide information about 
how long a borrower has held these debts. The longer a loan is 
outstanding without being repaid, the greater the concern about its 
eventual repayment. This is particularly true for loans that are well 
past the 10-year repayment period that is part of the Standard 
Repayment Plan.\48\ For example, in a sample of students who first 
entered postsecondary education in 1995-1996 and have not borrowed 
since the 1999-2000 school year, the average borrower who had debt 20 
years after entering school still owed 95 percent of what they 
initially borrowed, and the median borrower owed 69 percent.\49\
---------------------------------------------------------------------------

    \47\ The Department recognizes that a borrower's documented 
repayment history could also be affected by servicer recordkeeping, 
access to complete payment history, right to alternative payment 
arrangement, loan forgiveness, cancellation, or discharge. Separate 
and apart from these proposed regulations, the Department has taken 
steps to address these issues such as through the payment count 
adjustment. Moreover, even with these possible limitations, the 
Department believes that it is still useful to include this factor 
because repayment history can still provide valuable information 
about a borrower's hardship.
    \48\ Federal Student Aid, U.S. Department of Education. 
``Standard Repayment Plan.'' https://studentaid.gov/manage-loans/repayment/plans/standard.
    \49\ U.S. Department of Education, National Center for Education 
Statistics, Beginning Postsecondary Students: 1996/2001 (BPS). 
https://nces.ed.gov/datalab/powerstats/table/nsqptw.
---------------------------------------------------------------------------

    The Department has detailed information on the repayment histories 
of borrowers who first entered repayment on their student loans prior 
to the pandemic-related pause on student loan repayment. For borrowers 
who newly entered repayment when student loan payments restarted in 
October 2023, the Department will have at least six months of repayment 
history. In the Department's experience, repayment status and other 
information relevant to a borrower's loan history, including the 
borrower's ability to access payment options under Title IV of the HEA, 
can be a strong predictor of student loan default. Borrowers who 
default often stay in default for a long

[[Page 87142]]

time and those who have a history of delinquency or previous defaults 
may be more likely to default again.
    Whether a borrower postpones payments through deferment or 
forbearance could also be predictive of student loan default, though 
the diverse bases for these postponement periods means that their 
predictive power is context-dependent. For example, some borrowers use 
a deferment for additional school enrollment or military service, while 
others may seek a deferment due to economic hardship. In one study, the 
median defaulter among those who first entered postsecondary education 
in 2003-04 and experienced default within 12 years used two 
forbearances.\50\ However, in another study, roughly 43 percent of a 
cohort of borrowers who entered repayment in fiscal year 2011 and 
attended community colleges in one State did not make a payment, or 
postpone their payments using deferment or forbearance, before their 
loans entered default.\51\
---------------------------------------------------------------------------

    \50\ Miller, Ben. ``Who Are Student Loan Defaulters?'' (2017). 
Center for American Progress.
    \51\ Campbell, Colleen, and Nicholas Hillman. ``A Closer Look at 
the Trillion: Borrowing, Repayment, and Default at Iowa's Community 
Colleges.'' Association of Community College Trustees (2015).
---------------------------------------------------------------------------

    The Department acknowledges that the inclusion of factors related 
to a borrower's repayment history could create a perception that 
borrowers could intentionally change their repayment behavior to 
improve their chances of receiving a waiver. However, as described 
below, the Department believes that the plan for considering waivers 
would not encourage large numbers of borrowers to act in such a 
strategic manner. With respect to the relief under proposed Sec.  
30.91(c), the Department proposes using the publication date of the 
NPRM as the start of the two-year period in which a borrower may be 
predicted to default. This would prevent borrowers from trying to 
artificially establish hardship through strategic nonpayment; likewise, 
it prevents granting relief to any such borrowers. Failure to pay 
carries substantial risks to borrowers. Since there is no guarantee 
that they would receive any relief under this proposed rule, failure to 
pay would negatively impact credit scores, and risk wage garnishment or 
the loss of loan benefits. Overall, we believe using data from the 
publication date of the NPRM would negate the ability for borrowers to 
game the hardship model.
    With respect to the relief proposed under Sec.  30.91(d), the 
Department would also take measures that prevent strategic maneuvers to 
qualify for waiver. First, as part of the holistic assessment, the 
Department would consider a multitude of factors that interact with 
each other. Therefore, borrower attempts to adjust behavior and qualify 
under that provision could result in a borrower hurting themselves 
through delinquency or default with no guarantee of a waiver. Second, 
solely being in delinquency or default is no guarantee that a 
borrower's application would be approved. Third, as part of the 
holistic assessment, the Department would consider anomalous changes in 
repayment behavior--such as a borrower suddenly showing signs of 
struggle when other borrower conditions appear favorable for repayment. 
Overall, we believe the negative borrower consequences of delinquency 
and default, combined with a multi-factor eligibility assessment that 
is not limited to such status, would discourage intentional 
nonrepayment of loans.
    Borrower's personal attributes (factors 11 and 12). Another 
category of factors relates to additional information about a 
borrower's personal attributes. These are:
    11. Age; and
    12. Disability.
    The Department proposes including these factors because they can 
provide additional information about the ability of the borrower to 
repay their loans, the likely amount the Department might be able to 
collect from a borrower, and the associated costs of enforced 
collections. Considering a borrower's age can help inform the 
likelihood that their financial position is going to improve, 
deteriorate, or stay the same. This is especially true when used in 
concert with other factors. For instance, elderly borrowers are highly 
unlikely to see their income increase and are instead more likely to 
see their income diminish as they stop working. Relatedly, information 
on a borrower's disability could indicate whether their earnings are 
affected, which could help the Secretary understand the resources they 
may or may not have available to repay their loans. Disability 
information may also indicate that the borrower faces additional 
expenses that subtract from what a borrower could pay on their loans. 
For many people, earnings grow as they age and gain more experience; 
however, many older borrowers have held their loans for a long time and 
may have experienced repayment struggles.\52\ Older borrowers may also 
be more likely to have financial commitments (such as expenses for 
children or caring for others) that can result in difficulty making 
student loan payments.\53\ Earnings also tend to peak for workers in 
their mid-fifties, and so borrowers who hold loans until and beyond 
this age may see their ability to pay plateau or erode if their 
expenses are consistent but their income declines.\54\
---------------------------------------------------------------------------

    \52\ Gross, Jacob PK, Osman Cekic, Don Hossler, and Nick 
Hillman. ``What Matters in Student Loan Default: A Review of the 
Research Literature.'' Journal of Student Financial Aid 39, no. 1 
(2009): 19-29.
    \53\ Ibid.
    \54\ Tamborini, Christopher R., ChangHwan Kim, and Arthur 
Sakamoto. ``Education and lifetime earnings in the United States.'' 
Demography 52, no. 4 (2015): 1383-1407.
---------------------------------------------------------------------------

    Borrowers are eligible for a discharge of their student loans if 
they qualify for a total and permanent disability (TPD) discharge.\55\ 
To qualify for a TPD discharge, the Secretary must determine that a 
borrower is ``unable to engage in any substantial gainful activity by 
reason of any medically determinable physical or mental impairment that 
can be expected to result in death, has lasted for a continuous period 
of not less than 60 months, or can be expected to last for a continuous 
period of not less than 60 months.'' \56\ With the proposed hardship 
waivers, the Secretary would be looking at situations where a 
borrower's disability may impair the extent to which they can work 
without rising to the level that would justify a TPD discharge. For 
example, the Department may consider, as one of several factors, 
whether a disability that limits a borrower's ability to work full-time 
for a sustained period, but does not completely preclude part-time 
work, increases the likelihood of default, and indicates hardship 
impairing the likely ability to fully repay the loan, even if that 
borrower would not qualify for a TPD discharge. Although employment 
rates for people with disabilities have increased since the COVID-19 
pandemic, working-age individuals with disabilities have employment 
rates that are roughly half of their counterparts without 
disabilities.\57\ Moreover, the medical costs that may be associated 
with treatment for a substantial disability or disabilities may make it 
more difficult to make student loan payments. Among borrowers who have 
successfully been granted a student loan discharge in bankruptcy and 
have a medical problem or a dependent medical problem, a work-limiting

[[Page 87143]]

medical condition was relatively common.\58\
---------------------------------------------------------------------------

    \55\ See, e.g., 20 U.S.C. 1087(a)(1) (authorizing the Department 
to cancel or discharge FFEL loans due to total and permanent 
disability), 20 U.S.C. 1087a(b)(2) (Direct loans), and 20 U.S.C. 
1087dd(c)(1)(F)(ii) (Perkins loans).
    \56\ 20 U.S.C. 1087(a)(1).
    \57\ Andara, Kennedy, Anona Neal, and Rose Khattar. ``Disabled 
Workers Saw Record Employment Gains in 2023, But Gaps Remain.'' 
(2024). Center for American Progress.
    \58\ Iuliano, Jason. ``An Empirical Assessment of Student Loan 
Discharges and the Undue Hardship Standard,'' American Bankruptcy 
Law Journal 86, no. 3 (Summer 2012): 495-526.
---------------------------------------------------------------------------

    Data and surveys indicate that borrowers with a disability tend to 
have a higher probability of default, with variation across 
conditions.\59\ Half of borrowers who reported a disability in a 2021 
Pew survey were in default, compared to a third of those without a 
disability.\60\
---------------------------------------------------------------------------

    \59\ Campbell, Colleen. ``The Forgotten Faces of Student Loan 
Default.'' (2018). Center for American Progress. Specifically, 60 
percent of borrowers with emotional or psychiatric condition, 40 
percent of those with orthopedic or mobility impairment, and 37 
percent of those with a health impairment or problem experienced a 
default within 12 years, relative to 28 percent of those without a 
disability.
    \60\ Takti-Laryea, Ama and Phillip Oliff. ``Who Experiences 
Default?'' Pew Charitable Trusts. March 1, 2024. https://www.pewtrusts.org/en/research-and-analysis/data-visualizations/2024/who-experiences-default.
---------------------------------------------------------------------------

    Borrower's postsecondary experiences (factors 8, 9, and 10). The 
final group of factors are those related to a borrower's postsecondary 
educational experience. Those factors are:
    8. Type and level of institution attended;
    9. Typical student outcomes associated with a program or programs 
attended; and
    10. Whether the borrower has completed any postsecondary 
certificate or degree program for which the borrower received title IV, 
HEA financial assistance.
    The Department proposes to include these factors because there are 
clear connections between student outcomes and the type of institution 
attended.\61\ Similarly, there are very strong correlations between 
non-completion of a certificate or degree program and struggles 
repaying student loans, as described further below. This information 
could be particularly helpful for determining whether a borrower may be 
at heightened risk of default, which might indicate that the borrower 
satisfies the hardship standard in proposed Sec.  30.91(a).
---------------------------------------------------------------------------

    \61\ See, for example, Black, Dan A. & Smith, Jeffrey A. (2006). 
Estimating the Returns to College Quality with Multiple Proxies for 
Quality. Journal of labor Economics 24.3: 701-728. Cohodes, Sarah R. 
& Goodman, Joshua S. (2014). Merit Aid, College Quality, and College 
Completion: Massachusetts' Adams Scholarship as an In-Kind Subsidy. 
American Economic Journal: Applied Economics 6.4: 251-285. Andrews, 
Rodney J., Li, Jing & Lovenheim, Michael F. (2016). Quantile 
treatment effects of college quality on earnings. Journal of Human 
Resources 51.1: 200-238. Dillon, Eleanor Wiske & Smith, Jeffrey 
Andrew (2020). The Consequences of Academic Match Between Students 
and Colleges. Journal of Human Resources 55.3: 767-808. Further 
discussion is included in Federal Register Vol. 88, No. 194.
---------------------------------------------------------------------------

    The level of education pursued, and the type of institution 
attended, can have a substantial impact on a student's earning 
trajectory and on their propensity to default and propensity to 
experience hardship as defined in proposed Sec.  30.91(a). Across 
multiple studies and datasets, the sector and level of education 
provided by the institution correlate with propensity to default. In 
particular, students who attended for-profit institutions are more 
likely to default.\62\ For example, among a cohort of borrowers who 
first entered undergraduate education in 2003-04, borrowers who entered 
a for-profit institution were 10 percentage points more likely to 
default than those who enrolled at other types of institutions.\63\ 
Further, students enrolled in two-year schools, or vocational schools, 
were more likely to default relative to students enrolled in four-year 
institutions.\64\ And students who enroll in non-selective four-year 
institutions were more likely to default than those who enroll in 
selective four-year institutions.\65\
---------------------------------------------------------------------------

    \62\ Mezza, Alvaro A. and Kamila Sommer. ``A trillion dollar 
question: What predicts student loan delinquencies?.'' Finance and 
Economics Discussion Series 2015-098 (2015). Washington: Board of 
Governors of the Federal Reserve System.; Looney, Adam and 
Constantine Yannelis. ``A crisis in student loans?: How changes in 
the characteristics of borrowers and in the institutions they 
attended contributed to rising loan defaults.'' Brookings Papers on 
Economic Activity 2015, no. 2 (2015): 1-89.; Armona, Luis, Rajashri 
Chakrabarti, and Michael F. Lovenheim. ``Student debt and default: 
The role of for-profit colleges.'' Journal of Financial Economics 
144, no. 1 (2022): 67-92.; Deming, David J., Claudia Goldin, and 
Lawrence F. Katz. ``The for-profit postsecondary school sector: 
Nimble critters or agile predators?.'' Journal of Economic 
Perspectives 26, no. 1 (2012): 139-164.
    \63\ Scott-Clayton, Judith. ``What accounts for gaps in student 
loan default, and what happens after.'' (2018). Brookings.
    \64\ Mezza, Alvaro A. and Kamila Sommer. ``A trillion dollar 
question: What predicts student loan delinquencies?'' Finance and 
Economics Discussion Series 2015-098 (2015). Washington: Board of 
Governors of the Federal Reserve System.; Looney, Adam and 
Constantine Yannelis. ``A crisis in student loans?: How changes in 
the characteristics of borrowers and in the institutions they 
attended contributed to rising loan defaults.'' Brookings Papers on 
Economic Activity 2015, no. 2 (2015): 1-89.
    \65\ Looney, Adam and Constantine Yannelis. ``A crisis in 
student loans?: How changes in the characteristics of borrowers and 
in the institutions they attended contributed to rising loan 
defaults.'' Brookings Papers on Economic Activity 2015, no. 2 
(2015): 1-89.
---------------------------------------------------------------------------

    The Department has long used a CDR measure to assess an 
institution's continued participation in title IV aid programs. An 
institution's CDR is highly predictive of future student loan 
delinquency.\66\
---------------------------------------------------------------------------

    \66\ Mezza, Alvaro A. and Kamila Sommer. ``A trillion dollar 
question: What predicts student loan delinquencies?'' Finance and 
Economics Discussion Series 2015-098 (2015). Washington: Board of 
Governors of the Federal Reserve System.
---------------------------------------------------------------------------

    Research also has shown that there can be differential financial 
returns to programs of study.\67\ Certain programs are also more likely 
to produce graduates with high amounts of debt, relative to typical 
earnings, which may affect loan repayment outcomes.\68\ While the 
prevalence of loan default among borrowers who attended a particular 
institution or program is not a direct measure of academic quality, it 
can provide insight into whether the financial returns provided by a 
program or institution are sufficient for borrowers.
---------------------------------------------------------------------------

    \67\ Webber, Douglas A. ``The lifetime earnings premia of 
different majors: Correcting for selection based on cognitive, 
noncognitive, and unobserved factors.'' Labour economics 28 (2014): 
14-23.; Andrews, Rodney J., Scott A. Imberman, Michael F. Lovenheim, 
and Kevin M. Stange. ``The returns to college major choice: Average 
and distributional effects, career trajectories, and earnings 
variability.'' No. w30331. National Bureau of Economic Research, 
2022.
    \68\ Cellini, Stephanie Riegg, and Nicholas Turner. ``Gainfully 
employed? Assessing the employment and earnings of for-profit 
college students using administrative data.'' Journal of Human 
Resources, 59(3) (2019): 342-371.; Christensen, Cody and Lesley J. 
Turner. ``Student Outcomes at Community Colleges: What Factors 
Explain Variation in Loan Repayment and Earnings?'' Brookings 
Institution (2021).
---------------------------------------------------------------------------

    While not independently determinative of hardship, whether a 
borrower has completed their program of study generally correlates with 
student loan delinquency and default.\69\ Borrowers who leave school 
without the credential they were pursuing have debt but lack the 
additional earnings premium that can come with attaining a degree or 
certificate. Students who leave school without completing their degree 
are less likely to report financial well-being and are more likely to 
express a desire to have done things differently in their higher 
education experience.\70\ These factors are relevant

[[Page 87144]]

to the Secretary's determination of whether the borrower is 
experiencing or has experienced hardship that meets the eligibility 
requirements.
---------------------------------------------------------------------------

    \69\ Gross, Jacob PK, Osman Cekic, Don Hossler, and Nick 
Hillman. ``What Matters in Student Loan Default: A Review of the 
Research Literature.'' Journal of Student Financial Aid 39, no. 1 
(2009): 19-29.; Mezza, Alvaro A. and Kamila Sommer. ``A trillion 
dollar question: What predicts student loan delinquencies?'' Finance 
and Economics Discussion Series 2015-098 (2015). Washington: Board 
of Governors of the Federal Reserve System.; Looney, Adam and 
Constantine Yannelis. ``A crisis in student loans?: How changes in 
the characteristics of borrowers and in the institutions they 
attended contributed to rising loan defaults.'' Brookings Papers on 
Economic Activity 2015, no. 2 (2015): 1-89. Scott-Clayton, Judith. 
``What accounts for gaps in student loan default, and what happens 
after.'' (2018). Brookings.
    \70\ Lockwood, Jacob and Webber, Douglas, Non-Completion, 
Student Debt, and Financial Well-Being: Evidence from the Survey of 
Household Economics and Decisionmaking (August, 2023). FEDS Notes 
No. 2023-08-21.
---------------------------------------------------------------------------

    Other factors (factors 16 and 17). In addition to the proposed 
factors discussed above, the Department proposes to include Sec.  
30.91(b)(16) to capture whether a borrower's hardship is likely to 
persist. This information could help inform decisions about the amount 
of a potential waiver, as hardships that are likely to persist would 
counsel in favor of either larger or complete waivers. In addition, and 
as described more fully below, under proposed Sec.  30.91(d), the 
Department's holistic assessment would consider the persistence of the 
borrower's hardship as part of the determination whether the borrower 
met the eligibility requirements of showing a high likelihood to be in 
default or experience similarly severe negative and persistent 
circumstances, and other options for payment relief would not 
sufficiently address the borrower's persistent hardship.
    Finally, proposed Sec.  30.91(b)(17) would be a catch-all 
provision. As already noted, it would be important to acknowledge that 
rare unanticipated circumstances may cause a borrower to experience 
hardship that satisfies the standard for relief.
    The Secretary's consideration of factors indicating hardship. Using 
the factors in proposed Sec.  30.91(b), under both a predictive 
assessment of the factors (under proposed Sec.  30.91(c)) and a 
holistic assessment of the factors (under proposed Sec.  30.91(d)), the 
Secretary would engage in a fact-specific analysis of individual 
borrowers to determine whether the facts indicate that a borrower is 
facing hardship that meets the eligibility requirements.
    The committee reached consensus on this section.

Sec.  30.91(c) Immediate Relief for Borrowers Likely To Default

    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. 
Section 468(2) of the HEA endows the Secretary with similarly broad and 
flexible powers with respect to loans arising under the Perkins 
program.\71\
---------------------------------------------------------------------------

    \71\ See 20 U.S.C. 1087hh(2).
---------------------------------------------------------------------------

    Current Regulations: None.
    Proposed Regulations: Proposed Sec.  30.91(c) would specify the 
Secretary's discretionary authority to provide for immediate, one-time 
relief to borrowers who are likely to default on their student loan 
obligations. Specifically, should the Secretary choose to exercise such 
discretion, the Secretary would be able to consider the factors in 
proposed Sec.  30.91(b) to waive all or part of the federally held 
student loans of borrowers who the Secretary determines, based on data 
in the Secretary's possession, have experienced or are experiencing 
hardship such that their loans are at least 80 percent likely to be in 
default in the next two years after these proposed regulations are 
published.
    Reasons: Proposed Sec.  30.91(c) provides that the Secretary may 
discharge loans for borrowers who would likely be in default within two 
years of the publication date of this proposed regulation. The 
Department proposes specifying the Secretary's authority to grant 
relief for borrowers at a high risk of defaulting because we are 
concerned about borrower hardship caused by default and its effects. 
The Department proposes a statistical model, discussed in more detail 
below, that describes the weighting of the factors in proposed Sec.  
30.91(b) that would predict which borrowers are likely to be in default 
within the two-year period and therefore meet the hardship standard in 
proposed Sec.  30.91(a).
    As previously described, a borrower's default status can be 
indicative of the borrower's hardship repaying the loan.\72\ Department 
data show that borrowers who default on their student loans tend to be 
individuals who are lower income, are the first in their families to 
attend college, have lower amounts of loan debt and yet still struggle 
with repayment, and did not complete their postsecondary programs.
---------------------------------------------------------------------------

    \72\ Li, Wenli. ``The economics of student loan borrowing and 
repayment.'' 2013. Business Review, Federal Reserve Bank of 
Philadelphia, issue Q3, pages 1-10. Takti-Laryea, Ama and Phillip 
Oliff. ``Who Experiences Default?'' Pew Charitable Trusts. March 1, 
2024. https://www.pewtrusts.org/en/research-and-analysis/data-visualizations/2024/who-experiences-default.
---------------------------------------------------------------------------

    Importantly, using likelihood of being in default as an indicator 
of hardship draws an explicit connection between a borrower's financial 
circumstances and their ability to repay the loan. Default indicates 
that a borrower has already faced hardship impairing their ability to 
fully repay the loan, and default itself typically creates cascading 
consequences that would further impair the ability to pay.\73\ When a 
borrower defaults, their entire loan balance is accelerated, 
potentially leading to wage garnishment and offset of Federal tax 
refunds and benefits such as Social Security.\74\ Default is also 
reported to consumer reporting agencies, likely reducing borrowers' 
credit scores, and impeding them from obtaining credit or securing 
employment. Injury to borrowers' credit history and scores from default 
may also affect borrowers' ability to obtain housing, often 
disqualifying them from mortgages and affecting the ability to rent 
property. Finally, default may render borrowers ineligible for 
additional title IV, HEA assistance, which may be needed to complete an 
unfinished education. Therefore, defaults can compound the burdens of 
existing loans by preventing the economic boost of a completed 
education necessary to repay the debt. For all the reasons described 
above, the relief under proposed Sec.  30.91(c) is consistent with the 
exacting definition of ``hardship,'' \75\ because default is typically 
a result of significant economic privation (such as income insufficient 
to meet expenses, resulting in an inability to meet basic needs) and is 
a cause of further privation.
---------------------------------------------------------------------------

    \73\ Federal Student Aid, U.S. Department of Education. '' 
Student Loan Delinquency and Default.'' https://studentaid.gov/manage-loans/default.
    \74\ Although the Secretary would consider the risk of default 
as a circumstance indicating the borrower is likely suffering 
hardship in repaying the loan, the statutory consequences of default 
remain unaffected by the regulation. Borrowers who enter default 
would remain subject to these consequences, while other borrowers 
may demonstrate a high risk of default indicating hardship, and 
therefore justifying a waiver, regardless of whether they have ever 
entered default on their loans.
    \75\ ``Hardship'' is defined as ``Privation; suffering or 
adversity.'' Black's Law Dictionary (12th ed. 2024).
---------------------------------------------------------------------------

    Using a predictive assessment of the factors in proposed Sec.  
30.91(b) to grant immediate relief to borrowers likely to be in default 
also would serve important practical purposes. This approach would 
allow the Department to assess likely default based on information it 
already has, without soliciting additional information from borrowers 
or other sources. The Department would be able to assess borrower data 
that correlate with student loan default, and therefore predict which 
borrowers are likely to experience default within the two-year period. 
This includes the factors in proposed Sec.  30.91(b) that correlate 
with default rates, such as borrowers' current repayment status and 
other repayment history, non-completion of a postsecondary program, 
low-income levels shown on a FAFSA, receipt of a Pell Grant, and 
attendance at a particular type and level of institution.

[[Page 87145]]

    If the Secretary exercises discretion under proposed Sec.  
30.91(c), the Secretary's grant of waivers under proposed Sec.  
30.91(c) would be a one-time action. The Department anticipates that 
shortly after finalizing and implementing these regulations, the 
Department could identify borrowers who would be eligible for waivers 
under proposed Sec.  30.91(c) based on data as of the publication of 
the NPRM, and then would expeditiously choose whether to exercise 
discretion to provide such relief as part of a one-time action.
    The waivers under proposed Sec.  30.91(c) would be one-time actions 
for two reasons. The Department has taken significant steps to reduce 
the likelihood of default in the future, such as giving borrowers a 
pathway to return defaulted loans to repayment status through the Fresh 
Start program.\76\ Therefore, the Department anticipates that in the 
future fewer borrowers will be likely to default. Second, the relief 
available through proposed Sec.  30.91(d), by submitting an application 
that would be reviewed on a holistic basis, would provide a pathway to 
relief going forward for borrowers who continue to experience hardship 
even with the measures described above. However, the proposed one-time 
relief in proposed Sec.  30.91(c) would remain necessary to many 
borrowers who have had loans for years without access to such benefits. 
These borrowers may already have struggled with delinquency and default 
and may be more likely to have already experienced challenges with 
application processes in the past.\77\ Providing relief to such 
borrowers, without requiring them to take additional steps, reduces the 
cost to borrowers to gain access to eligible relief, and potentially 
reduces the administrative costs to government.
---------------------------------------------------------------------------

    \76\ See https://studentaid.gov/announcements-events/default-fresh-start.
    \77\ See for example, Ganong, Peter and Jeffrey B. Liebman. 
``The decline, rebound, and further rise in SNAP enrollment: 
Disentangling business cycle fluctuations and policy changes.'' 
American Economic Journal: Economic Policy 10 (4) (2018): 153-176.
---------------------------------------------------------------------------

    The Department proposes to limit this waiver provision to borrowers 
who are highly likely to be in default in the near term. Therefore, 
proposed Sec.  30.91(c) would provide a waiver only to borrowers who 
the Secretary determines have an ``80 percent'' or higher likelihood of 
being in default within two years after these proposed regulations are 
published. In determining the proper threshold to propose for this 
provision, the Department believes it is important to propose a 
likelihood of being in default greater than 50 percent. A number lower 
than 50 percent would not be appropriate because it would imply that a 
borrower was more likely to not be in default than they were to be in 
default, and therefore materially less likely to be experiencing 
hardship that would impair their ability to fully repay their loans. We 
ultimately decided to propose an 80 percent threshold to distinguish a 
pool of borrowers with a distinctly higher risk of default, as measured 
by the factors in proposed Sec.  30.91(b). Our goal in choosing a 
proposed threshold for this provision is to identify clusters of 
borrowers in the probability distribution who are highly likely to be 
in default within two years. Under the Department's proposed modeling 
of the likelihood that a borrower is in default within the next two 
years, which is described below, there is a significant group of 
borrowers with minimal predicted risk of being in default and another 
significant group of borrowers with a relatively high predicted risk of 
being in default. The difference between the number of borrowers who 
are 80 percent likely to be in default and those with somewhat lower 
likelihood of being in default, such as 60 percent or 70 percent, is 
minimal, but the Department nonetheless proposes 80 percent because it 
reasonably identifies borrowers who are most at risk for default. 
However, as the Department continues to obtain newly available 
repayment data through the publication of this NPRM--and particularly 
data after the payment pause ended--the Department would continue to 
incorporate such data into the model. As such, we seek feedback from 
the public about whether the Department should adjust the proposed 80 
percent threshold, as well as feedback on whether there are other 
reasons to adjust the 80 percent threshold and the related 
justification.
    Because we have taken steps to address default going forward, the 
Department proposes using the likelihood of being in default within two 
years of the publication date of the NPRM, as the Department is intent 
on providing relief to borrowers who are likely to experience hardship 
in the near term. We believe two years would be reasonable, since it is 
a relatively short time period that would also reflect the possible 
time it might take for a borrower to default if they began repayment or 
were current at the start of the observation window. Generally, a 
borrower is not treated as being in default on their loan until they 
are 270 days late on payments, with additional days added for the 
transfer of the loan to the Debt Management and Collections System 
(DMCS). Were the Department to consider borrowers who are likely to be 
in default within a shorter period, many borrowers experiencing 
hardship would be excluded because they could not be in default within 
that timeframe. For example, were we to only consider borrowers likely 
to be in default within 12 months, then any borrower with fewer than 
two missed payments could not default within that window. A two-year 
observation window also would allow us to capture borrowers who may be 
using deferment or forbearance to postpone loan repayment due to 
economic hardship. For example, a borrower who used a 12-month 
postponement at the start of the observation window may still default 
within the second year. We believe using the proposed statistical model 
described below to identify borrowers who are highly likely to default 
within two years would be reasonable because these are borrowers who 
the Department can reasonably predict have experienced or are 
experiencing hardship that impairs their ability to fully repay their 
loans.
    As noted above, we recognize that a model designed to predict the 
likelihood of being in default in the future might lead some to argue 
that borrowers would be able to qualify for a waiver by intentionally 
not repaying their loans, thereby increasing their risk of being in 
default. However, we believe this risk is minimal in this instance. 
First and foremost, as noted above, we are proposing that at the time 
of the final rule, we would use data as of the publication of these 
proposed rules. Since these regulations would identify borrowers 
eligible for relief using data as of the NPRM's publication to predict 
future outcomes, and since we anticipate that the Secretary's 
discretionary grant of waivers under proposed Sec.  30.91(c) would be a 
one-time action, borrowers would have limited opportunity to change 
their likelihood of relief by strategically not paying and would have 
no opportunity after this NPRM is published. Even if a later date were 
chosen, trying to avoid payment to artificially indicate repayment 
struggles would be a significant risk on the part of borrowers because 
the issuance of any particular waiver is discretionary and is based on 
the consideration of multiple factors. Therefore, any borrower who 
intentionally fails to repay loans to try to qualify for a waiver may 
end up harming their credit and facing the consequences of delinquency 
or default with no guarantee of receiving a waiver. Second, the 
Department's analysis considers the experience of

[[Page 87146]]

borrowers across the entire student loan portfolio. As such, even if an 
individual borrower exhibits signs of delinquency, that borrower may 
still not be identified as sufficiently likely to be in default if most 
similarly situated borrowers are not predicted to be in default.
    To assess the proposed hardship standard in Sec.  30.91(a) when 
granting relief under proposed Sec.  30.91(c), the Department proposes 
to use a statistical model that would predict likelihood of being in 
default within two years. The model would guide how the Secretary would 
consider and weigh data associated with the factors identified in 
proposed Sec.  30.91(b) that are accessible to the Secretary without 
the need for additional data collection.
    This proposed model would be designed to predict default on a 
Federal student loan in any quarter for two years from the date these 
proposed regulations are published. Student loan default would be 
estimated by a series of ``predictors,'' a term that we use to refer to 
the data elements that serve as inputs into the model, which would 
correspond to the 17 factors identified in proposed Sec.  30.91(b). In 
Table 1 below, we include a list of the explanatory predictors that we 
propose to consider based on data currently available to the 
Department. We describe the proposed process for designing and refining 
the prediction model that incorporates the factors from proposed Sec.  
30.91(b) in further detail below.
    As noted, the Department would derive these predictors from several 
data sources available to the Department. Some of the data would come 
from individual records available in the National Student Loan Data 
System (NSLDS), such as repayment histories and loan debt outstanding. 
Other data would be derived from information provided on the borrower's 
FAFSA, such as Adjusted Gross Income or parental education. Some data 
would be compiled based on multiple sources held within the Department, 
such as data on the programs for which students borrowed and data that 
are reported on the College Scorecard or in cohort default rate reports 
that indicate typical student outcomes associated with a program or 
programs attended.

             Table 1--Proposed Model Inputs (``Predictors'')
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Past and Present Repayment Statuses.
Total amount of debt outstanding.
Past and present types of loans held, and amounts borrowed.
Year of loan disbursement.
Ratio of current loan balance to balances from 4 months prior.
Repayment plans in which borrower currently participates.
Payments made on student loans.
Scheduled payments on student loans.
Interest rate on loans.
Years in repayment.
Pell Grant receipt.
Adjusted Gross Income from the borrowers' first FAFSA.
Expected Family Contribution calculated from inputs on the FAFSA.
Parent education level reported on the FAFSA.
Dependent/independent status.
Borrower age.
Highest academic level reported for the borrower's loans.
Highest degree the borrower ever reported pursuing.
Graduation indicator.
Year of graduation, for those graduated.
Predominant degree of the school the student last attended or from which
 they last graduated.
Ownership type of the school the student last attended or from which
 they last graduated.
Cohort default rates of the school the student last attended or from
 which they last graduated.
Earnings and debt information from College Scorecard of the school the
 student last attended or from which they last graduated.
------------------------------------------------------------------------
Note: The Department proposes to use loan repayment statuses that
  reflect the benefits provided by On Ramp and Fresh Start policies.

    The proposed process for designing and refining the statistical 
model to determine which borrowers meet the hardship standard in 
proposed Sec.  30.91(a) based on 80 percent likelihood of being in 
default (as described in proposed Sec.  30.91(c)) within two years 
would be as follows. First, the Department would develop and validate 
the model using multiple two-year random samples of data on Department-
held loans with data ranging from 2017 to February 2020. The Department 
proposes to use samples from this time period because it contains the 
most recent period of at least two years of uninterrupted repayment 
before the COVID-19 payment pause, and therefore should provide the 
most up to date predictions about the relationship between the 
predictors described above and observed default over a two-year period. 
We would use these data to estimate the extent to which the previously 
described explanatory predictors (displayed in Table 1) would predict 
whether a borrower was likely to be in default on a student loan in any 
quarter within two years and therefore would meet the hardship standard 
in proposed Sec.  30.91(a).
    The Department would then evaluate a variety of methods to include 
the ``predictors'' in the proposed model to create the most accurate 
predictions of likelihood of being in default. There are generally two 
forms that predictors can take in the source data. The first form is 
continuous, which means that the predictor can be any value within a 
range. For example, the amount of outstanding debt that a borrower has 
could take on dollar values from greater than 0 to the maximum amount 
of outstanding debt in our data. The second form is categorical, which 
are predictors that have a finite number of distinct groups (e.g., type 
of higher education institution). We propose to scale continuous 
predictors by their means and standard deviations, but would also 
consider those same predictors without scaling, and as categorical 
variables defined with different types of cutoff values to create those 
categories. The Department would also consider additional statistical 
model specifications such as those that include interactions among 
individual predictors, the use of higher order polynomials, and those 
that generate estimates using different subgroups of the model. Among 
these approaches to including variables in the model, the Department 
would estimate the model using logistic regression as well as machine 
learning approaches, such as gradient boosted trees.\78\
---------------------------------------------------------------------------

    \78\ Gradient boosted trees are a machine learning approach 
commonly used for prediction based on decision trees. Decision trees 
use a ``tree-like'' hierarchical structure to split the data at 
various points in the distribution of predictor variable values, 
with the goal of predicting the value of the target variable (in 
this application, default within two years). Boosted trees typically 
perform better than single decision trees or random forest methods 
by sequentially learning from many decision trees. See Hastie, 
Tibshirani, and Friedman (2009), The Elements of Statistical 
Learning: Data Mining, Inference, and Prediction. 2nd Edition.
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    Next, to select the proposed model from among various potential 
specifications and options, we would evaluate the performance of the 
model using a distinct random hold out test sample of Department-held 
loans from the same time period as the training sample. In this step, 
to evaluate the performance of the model, we would calculate commonly 
used metrics, including measures of model fit, confusion matrices with 
a variety of threshold levels, standard metrics derived from the 
confusion matrices, and other performance metrics.\79\

[[Page 87147]]

Generally, these measures provide different ways of comparing observed 
outcomes to outcomes predicted by the model, and a model would be 
considered to perform better if it more accurately classified borrowers 
into those who will be in default and those who will not be in default.
---------------------------------------------------------------------------

    \79\ See for example, Albanesi, Stefania and Domonkos F. 
Vamossy. ``Predicting Consumer Default: A Deeper Learning 
Approach.'' NBER Working Paper 26165 (2019). Khandani, Amir E., 
Adlar J. Kim, and Andrew W. Lo. ``Consumer Credit-Risk Models Via 
Machine-Learning Algorithms.'' Journal of Banking and Finance, 
34(2010): 2767-2787. Hastie, Trevor, Robert Tibshirani, and Jerome 
Friedman. The Elements of Statistical Learning: Data Mining, 
Inference, and Prediction. 2nd Edition (2009).
---------------------------------------------------------------------------

    The proposed assessment based on this model would produce a score 
for each borrower that accumulates the prediction related to the 
predictors included in the model for likelihood of being in default 
within two years. The scores would range from 0 percent to 100 percent. 
This score could be interpreted as an estimate of the probability that 
a borrower is in default within the next two years. We would use the 
score from the model to assist with identifying borrowers who were at 
least 80 percent likely to be in default on a student loan in any 
quarter within two years of the proposed regulations' publication date.
    Once the regulations are finalized and implemented, this model 
would be used to conduct an individualized determination of whether 
each borrower fits within the hardship standard in proposed Sec.  
30.91(a) and therefore qualifies for a waiver under proposed Sec.  
30.91(c).
    For purposes of this NPRM, we estimated which borrowers would have 
an 80 percent likelihood of being in default within the applicable two-
year period using a 5 percent sample of Department-held loans as of 
April 2024. At the time of the publication of the NPRM, however, the 
Department will have access to additional data that could be used to 
refine the model. For example, in the data used for modeling in this 
NPRM, the Department has recent borrower repayment history only for 
about five months since the end of the payment pause. At the time of 
the publication of the NPRM, however, the Department will be able to 
observe recent repayment and engagement experiences over a longer time 
horizon through the date of the NPRM.
    The Department proposes to measure this two-year window as of the 
publication date of the NPRM to preclude strategic behavior to increase 
the likelihood of receiving hardship relief by defaulting on loans. The 
reason for measuring the two-year window as of the publication date of 
the NPRM is because we are intent on providing relief as soon as 
possible once the NPRM is finalized, and because we are concerned that 
a longer period between finalizing the regulations and measuring the 
two-year window could create incentives for borrowers to attempt to 
strategically adjust their repayment behavior to be more likely to 
obtain a waiver.
    The committee reached consensus on this regulatory provision.

Sec.  30.91(d) Process for Additional Relief

    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. 
Section 468(2) of the HEA endows the Secretary with similarly broad and 
flexible powers with respect to loans arising under the Perkins 
program.\80\
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    \80\ See 20 U.S.C. 1087hh(2).
---------------------------------------------------------------------------

    Current Regulations: None.
    Proposed Regulations: Proposed Sec.  30.91(d) provides that the 
Secretary may rely on data in the Secretary's possession that may have 
been acquired through an application or any other means to provide 
relief, including automated relief, based on criteria demonstrating 
that the borrower has experienced or is experiencing hardship.
    Reasons: Proposed Sec.  30.91(d) would clarify the procedures the 
Department could use to provide relief if the Secretary were to 
exercise the discretion under this section to issue waivers.
    The pathway for discretionary relief under proposed Sec.  30.91(d) 
is for the Secretary to assess a borrower's circumstances in a holistic 
manner, which may be based in part on an application submitted by the 
borrower, to determine if the borrower is experiencing or has 
experienced hardship. Proposed Sec.  30.91(d) operates fully 
independently and separately from proposed Sec.  30.91(c) and would 
therefore be fully severable.
    The Department intends the ``hardship'' necessary to trigger relief 
under proposed Sec.  30.91(d) to be a substantial harm. The Department 
interprets the hardship required for relief under proposed Sec.  
30.91(d) as: the borrower must be highly likely to be in default or 
experience similarly severe negative and persistent circumstances, and 
other options for payment relief would not sufficiently address the 
borrower's persistent hardship. The requirement that other payment 
relief options would not sufficiently address a borrower's persistent 
hardship would apply both to borrowers who meet the standard because 
the Department finds they are highly likely to be in default and to 
borrowers who meet the standard because the Department finds they are 
highly likely to experience similarly severe negative and persistent 
circumstances.
    Default is one of the strongest indications that a borrower has not 
been able to use options available to avoid hardship in repaying their 
student loans, so the Department would use a standard related to 
default as one part of the hardship test for individual applicants 
under proposed Sec.  30.91(d).
    In addition, the Department would also have to determine that other 
options for payment relief under the HEA, including IDR plans and other 
forgiveness opportunities, are not sufficient for the borrower to avoid 
a high likelihood of being in default or similarly severe and 
persistent negative circumstances.\81\ To determine whether the 
borrower faces a persistent hardship, the Department would consider the 
factors described in proposed Sec.  30.91(b).
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    \81\ The Department recognizes that the relief in proposed Sec.  
30.91(d) would include a determination that other payment relief 
options are not sufficient, but the relief under proposed Sec.  
30.91(c) would not include such a determination. The Department does 
not think such a determination is necessary for the relief under 
proposed Sec.  30.91(c) because eligible borrowers under that 
provision may have spent years or decades without access to other 
IDR plans, such as PAYE and REPAYE, and did not benefit from 
strengthened loan servicer accountability under the new USDS 
contracts. This determination also would not be needed under 
proposed Sec.  30.91(c) because borrowers would have little to no 
ability to influence the results under proposed Sec.  30.91(c) with 
strategic non-payment.
---------------------------------------------------------------------------

    The Department makes student loans to students with the expectation 
that they will be repaid according to the terms provided under the HEA 
and laid out in the Master Promissory note. The Department understands 
that many borrowers experience difficulty repaying their loans at some 
point in their repayment experience that necessitates relief from 
monthly payments calculated under the standard 10-year repayment plan. 
As discussed above, there are many options under the HEA available to 
borrowers who may experience difficulty repaying their loans. Relief 
options include the short-term use of deferment or forbearance options. 
These proposed regulations are not designed to supplant any of the 
options available to borrowers. Rather, these proposed regulations are 
designed as a safety valve for those borrowers who cannot receive 
sufficient relief to avoid hardship via payment relief options already 
in existence under the

[[Page 87148]]

HEA. For the purposes of proposed Sec.  30.91(d), the Department would 
consider the availability of the following payment relief options \82\ 
to determine whether such options could sufficiently address the 
borrower's hardship: deferment or forbearance; forgiveness 
opportunities such as borrower defense discharge and TPD discharge, and 
income-driven repayment (IDR) plans.
---------------------------------------------------------------------------

    \82\ A payment relief option would only be available to a 
borrower if they satisfied the applicable statutory and regulatory 
requirements.
---------------------------------------------------------------------------

    A payment relief option would not be sufficient if it would not 
prevent the borrower from still experiencing a hardship related to the 
loan that makes them highly likely to be in default or experience 
similarly severe negative and persistent circumstances that 
substantially impairs their ability to fully repay the loan. For 
example, a borrower that is on an IDR plan with a $0 monthly payment 
might still be eligible for a waiver if the borrower would still be 
highly likely to experience similarly severe negative and persistent 
circumstances because they have a persistent hardship and lack the 
disposable income needed to fully repay the loan without jeopardizing 
their basic financial security over an extended period of time. In 
other words, the Department could determine that a payment relief 
option was not sufficient if it only temporarily delayed--but did not 
eliminate--the need to discharge some or all of the borrower's loans to 
sufficiently address the hardship.
    The Department seeks to provide relief for individuals who are 
experiencing hardship without creating incentives for borrowers to 
strategically choose to cease making payments in order to qualify for 
relief. Proposed Sec.  30.91(c) would prevent this strategic behavior 
by specifying the Secretary's discretion to provide one-time immediate 
relief based on a predictive assessment that would use the publication 
date of this NPRM as the beginning of the two-year period. There would 
be no future opportunity to change behavior and to obtain relief under 
proposed Sec.  30.91(c).
    For proposed Sec.  30.91(d), the Department would address the risk 
of strategic behavior with a two-fold requirement that the borrower 
must be highly likely to be in default, or experience similarly severe 
negative and persistent circumstances, and that other options for 
payment relief would not sufficiently address the borrower's persistent 
hardship, including IDR plans, for those eligible. As a result, a 
borrower who is experiencing a high likelihood of being in default that 
they could avoid by enrolling in an IDR plan but has chosen not to 
enroll as an attempt at strategic behavior, would be extremely unlikely 
to receive relief under proposed Sec.  30.91(d). In cases where a 
borrower who could find sufficient relief from hardship through an IDR 
plan applies for relief under proposed Sec.  30.91(d), the Department 
would encourage that borrower to enroll in IDR, and that borrower would 
be unlikely to be eligible for a waiver under proposed Sec.  30.91(d). 
Nor would a borrower who faces default simply because they have chosen 
not to make payments, without any evidence of experiencing hardship, 
receive relief under proposed Sec.  30.91(d). These requirements would 
advance the goal of the proposed regulations and apply the standard of 
proposed Sec.  30.91(a), providing relief in cases of genuine hardship.
    Moreover, should the Secretary choose to exercise authority under 
these regulations, proposed Sec.  30.91(c) would provide relief to the 
millions of borrowers who are experiencing hardship already, and in 
many cases who have lacked access to the full range of repayment 
options that will now be fully available going forward. Relief would 
only be available to individuals under proposed Sec.  30.91(d) who 
experience hardship that is not sufficiently addressed by other options 
for payment relief and have a high likelihood of being in default or 
experiencing similarly severe negative and persistent circumstances.
    One type of borrower eligible for relief under proposed Sec.  
30.91(d) would be a borrower who is already enrolled in an IDR plan but 
who is highly likely to default or experience similarly severe negative 
and persistent circumstances even with an IDR plan's payment 
protections. Although IDR plans take into account income and household 
size, there are borrowers who would still experience hardship related 
to their loans that could not be remedied through other means. 
Consistent with the factors described in Sec.  30.91(b), the Secretary 
could consider, for example, whether an individual has unusually high 
expenses (such as nondiscretionary medical or housing expenses) such 
that they are highly likely to be in default, or to experience 
similarly severe negative and persistent circumstances.
    In general, to determine whether an individual has such high 
expenses, the Department would look to established benchmarks, such as 
the Department of Housing and Urban Development measures of a ``rent 
burdened'' or ``severely rent burdened'' household that pays rent m 30 
or 50 percent of household income, respectively, or the Internal 
Revenue Code standard allowing for deduction of health expenses in 
excess of 7.5 percent of Adjusted Gross Income. The Department would 
consider these expenses in the context of the borrower's overall 
financial resources, including income, assets, and debt.
    As an example, consider an individual who is earning $80,000 a 
year, has $35,000 in loans, few assets, three dependents, and a monthly 
payment obligation of approximately $277 a month under an income-based 
repayment plan. That obligation would not ordinarily lead to hardship. 
However, in this example, the individual lives in a high-rent area and 
pays the typical rent of $2,300 for a one-bedroom apartment (more than 
30 percent of their income or ``rent burdened'' under the HUD standard) 
and has a dependent that requires medication and treatment for a 
chronic health condition that costs $1,600 per month (well in excess of 
7.5 percent of AGI). In order to pay for these expenses in addition to 
other essentials, like food and transportation, the borrower is in 
default or is on the verge of being in default after missing seven 
months of payments. If this borrower demonstrated that they did not 
have the assets to avoid being in default, and that their circumstances 
were unlikely to improve within a period of time, then they could 
potentially receive relief under this provision.
    There may also be cases where an individual can demonstrate 
hardship even in the absence of a payment burden (such as when a 
borrower has a $0 IDR payment). For example, a borrower may be able to 
show that they meet the standard for hardship described above if they 
can show that, even with a $0 IDR payment, the existence of the debt 
itself causes the required hardship. As stated above, a borrower on an 
IDR plan with a $0 monthly payment may also be able to show that they 
are still highly likely to experience similarly severe negative and 
persistent circumstances because they have a persistent hardship and 
lack the disposable income needed to fully repay the loan without 
jeopardizing their basic financial security over an extended period of 
time. The Department has also included a directed question regarding 
the circumstances in which this might occur.
    Relief under proposed Sec.  30.91(d), whether based on data 
``acquired through an application or by any other means'' would be 
assessed on a holistic basis to determine whether the standard 
described above for proposed Sec.  30.91(d)

[[Page 87149]]

is met.\83\ The Department interprets the word ``automated'' as used in 
proposed Sec.  30.91(d) to mean relief that the Secretary may grant 
based on information already in the Department's possession rather than 
acquired through an application. The Department anticipates that the 
number of borrowers for whom the Department would possess sufficient 
information to conduct the holistic review without data acquired from 
an application would be small. The Secretary would not be able to use a 
default risk model such as a model similar to the one described in 
Sec.  30.91(c) in order to provide relief under proposed Sec.  
30.91(d). A borrower could only receive a waiver without an application 
under proposed Sec.  30.91(d) if the Department's holistic review of 
the borrower's data satisfied the same stringent standard that the 
Department would apply for application-based relief. Such cases would 
be considered rare since the data that the Department possesses would 
have to sufficiently establish eligibility including that other options 
for payment relief would not sufficiently address the borrower's 
persistent hardship and would also need to sufficiently distinguish 
such borrowers from otherwise similar borrowers who would not be deemed 
to qualify for relief.
---------------------------------------------------------------------------

    \83\ The Department recognizes that determining eligibility for 
relief under proposed Sec.  30.91(c) relies on data already in the 
Department's possession. However, as explained elsewhere, proposed 
Sec.  30.91(c) and proposed Sec.  30.91(d) are designed to address 
different challenges and accordingly have different eligibility 
criteria as described in this NPRM. Proposed Sec.  30.91(c) is 
designed to provide, at the Secretary's discretion, immediate relief 
on a one-time basis to address the hardship of borrowers who may 
have spent years or decades without access to other IDR plans, such 
as PAYE and REPAYE, and did not benefit from strengthened loan 
servicer accountability under the new USDS contracts. By contrast, 
proposed Sec.  30.91(d) is meant to provide ongoing relief to 
borrowers on a going-forward basis even after the Department has 
implemented various improvements to assist with student loan 
repayment, such as the implementation of IDR plans and updated 
servicer contracts. The Department believes that in most instances, 
additional information would be necessary for the Department to 
conduct a holistic assessment to determine whether the borrower 
meets the specific standard for relief under proposed Sec.  
30.91(d).
---------------------------------------------------------------------------

    The Department recognizes that to meet this stringent standard, the 
Department would need data that would allow the Secretary to determine 
whether a borrower meets proposed Sec.  30.91(d)'s standard. The 
Department notes that the Secretary would need to expand or refine data 
elements in the future to provide relief to borrowers under proposed 
Sec.  30.91(d) without an application because, at the time of preparing 
this NPRM, the Department does not currently have sufficient data 
available to determine whether a borrower meets the eligibility 
standard. We seek feedback from the public about the type of data that 
could be used for relief without an application under proposed Sec.  
30.91(d), and how those data could be obtained.
    As discussed throughout this NPRM including in the Regulatory 
Impact Analysis, the proposed process under Sec.  30.91(d) would likely 
involve detailed reviews of applications submitted by borrowers or 
other data already in the Department's possession. We anticipate that 
the processes under Sec.  30.91(d) would take time to implement 
following the publication of a final rule, including developing an 
application, producing clarifying guidance, and hiring and training 
staff. Given the administrative costs associated with this process, we 
also anticipate that the volume of applications the Department would be 
able to process would be low at first and would be dependent on the 
amount of funding received by FSA through the annual appropriations 
process. Therefore, depending on the number of applications, it would 
take time for the Department to make waiver determinations on a 
borrower's individual application, and the Department would not be in 
position to guarantee a response within a specific period. As a result, 
borrowers should anticipate continuing to make payments while their 
application is pending.
    The committee reached consensus on this section.

Regulatory Impact Analysis

Executive Orders 12866 (as Modified by 14094) and 13563

    Under Executive Order 12866, the Office of Management and Budget 
(OMB) must determine whether this regulatory action is ``significant'' 
and, therefore, subject to the requirements of the Executive Order and 
subject to review by OMB. Section 3(f) of Executive Order 12866, as 
amended by Executive Order 14094, defines a ``significant regulatory 
action'' as an action likely to result in a rule that may--
    (1) Have an annual effect on the economy of $200 million or more 
(adjusted every 3 years by the Administrator of OIRA for changes in 
gross domestic product), or adversely affect in a material way the 
economy, a sector of the economy, productivity, competition, jobs, the 
environment, public health or safety, or State, local, territorial, or 
Tribal governments or communities;
    (2) Create a serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impacts of entitlements, grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or
    (4) Raise legal or policy issues for which centralized review would 
meaningfully further the President's priorities, or the principles 
stated in the Executive Order, as specifically authorized in a timely 
manner by the Administrator of OIRA in each case.
    This proposed regulatory action would have an annual effect on the 
economy of $200 million or more. Table 4.1 in this regulatory impact 
analysis (RIA) provides an estimate of the net budget effects of each 
provision of these proposed regulations. We also provide estimates of 
the administrative costs for these provisions. Because the net budget 
effect is larger than $200 million a year, this proposed regulatory 
action is subject to review by OMB under section 3(f) of Executive 
Order 12866 (as amended by Executive Order 14094). Notwithstanding this 
determination, we have assessed the potential costs and benefits, both 
quantitative and qualitative, of this proposed regulatory action and 
have determined that the benefits would justify the costs.
    We have also reviewed these regulations under Executive Order 
13563, which supplements and explicitly reaffirms the principles, 
structures, and definitions governing regulatory review established in 
Executive Order 12866. To the extent permitted by law, Executive Order 
13563 requires that an agency--
    (1) Propose or adopt regulations only on a reasoned determination 
that their benefits justify their costs (recognizing that some benefits 
and costs are difficult to quantify);
    (2) Tailor its regulations to impose the least burden on society, 
consistent with obtaining regulatory objectives and considering--among 
other things and to the extent practicable--the costs of cumulative 
regulations;
    (3) In choosing among alternative regulatory approaches, select 
those approaches that maximize net benefits (including potential 
economic, environmental, public health and safety, and other 
advantages; distributive impacts; and equity);
    (4) To the extent feasible, specify performance objectives, rather 
than the behavior or manner of compliance a regulated entity must 
adopt; and
    (5) Identify and assess available alternatives to direct 
regulation, including economic incentives--such as user fees or 
marketable permits--to

[[Page 87150]]

encourage the desired behavior, or provide information that enables the 
public to make choices.
    Executive Order 13563 also requires an agency ``to use the best 
available techniques to quantify anticipated present and future 
benefits and costs as accurately as possible.'' The Office of 
Information and Regulatory Affairs of OMB has emphasized that these 
techniques may include ``identifying changing future compliance costs 
that might result from technological innovation or anticipated 
behavioral changes.''
    We are issuing these proposed regulations upon on a reasoned 
determination that their benefits would justify their costs. In 
choosing among alternative regulatory approaches, we selected those 
approaches that, in the Department's estimation, best balance the size 
of the estimated transfer and qualitative benefits and costs. Based on 
the analysis that follows, the Department believes that these proposed 
regulations are consistent with the principles in Executive Order 
13563.
    We have also determined that this regulatory action would not 
unduly interfere with State, local, territorial, and Tribal governments 
in the exercise of their governmental functions.
    As described in OMB Circular A-4, we compare the proposed 
regulations to the current regulations. In this regulatory impact 
analysis, we discuss the need for regulatory action, the summary of key 
proposed provisions, potential costs and benefits, net budget impacts, 
and the regulatory alternatives we considered.
    Elsewhere in this section under the Paperwork Reduction Act of 
1995, we identify and explain burdens specifically associated with 
information collection requirements.
1. Congressional Review Act Designation
    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), 
the Office of Information and Regulatory Affairs designated that these 
regulations are covered under 5 U.S.C. 804(2) and (3).
2. Need for Regulatory Action
    These proposed regulations describe circumstances in which the 
Secretary might exercise the longstanding discretionary waiver 
authority under sections 432(a)(6) and 468(2) of the HEA to waive all 
or part of a Federal student loan held by the Department to provide 
relief to a borrower who has experienced or is experiencing hardship.
    Addressing the issue of hardship is critical in building a strong 
student loan program. While the Department currently offers a number of 
options for payment relief, including IDR plans and forgiveness 
opportunities, the complexity of borrowers' lives may lead to hardships 
that are not sufficiently addressed by these existing options such that 
these hardships are likely to impair their ability to repay a Federal 
loan in full or cause the anticipated costs of collecting the loan to 
exceed the likely benefits of continued collection of the entire debt. 
The Department frequently hears from borrowers about a range of these 
situations, such as borrowers facing significant unexpected expenses 
caring for loved ones with chronic illnesses, living with disabilities 
that limit but do not eliminate work opportunities, dealing with 
financially burdensome medical bills, or fearing that they will 
struggle to repay loans as they prepare to exit the workforce by 
retiring.
    Sections 432(a)(6) and 468(2) of the HEA provide the Secretary with 
discretion to address these situations. Issuing a clear regulatory 
framework to address hardship would better inform the public about how 
the Secretary might exercise this waiver authority by considering a set 
of factors and standards that would allow for the consistent treatment 
of similarly situated borrowers, while also recognizing the inherent 
variability of each borrower's particular situation.
    As further explained in the preamble, these proposed regulations 
specify two different pathways by which the Secretary may exercise 
discretion to grant relief to borrowers experiencing hardship: a 
pathway for immediate relief using a ``predictive assessment'' 
(proposed Sec.  30.91(c)) and a separate pathway for additional relief 
based on a ``holistic assessment'' of information submitted by the 
borrower through an application or acquired by any other means 
(proposed Sec.  30.91(d)).
    For the immediate relief described in proposed Sec.  30.91(c), the 
Secretary proposes to assess whether the borrower meets the hardship 
standard by determining whether a borrower has at least an 80 percent 
chance of being in default within two years, using a predictive 
assessment based on data already in the Department's possession to 
analyze the hardship factors in proposed Sec.  30.91(b). The use of a 
predictive assessment would allow the Department to recognize 
situations in which similarly situated borrowers face comparable 
challenges likely to impair their ability to fully repay the loan, or 
that would cause the costs of collecting the loan to outweigh the 
benefits.
    Further, this predictive assessment under proposed Sec.  30.91(c) 
would be based on data in the Department's possession and therefore 
would promote efficiency and reduce administrative costs. For example, 
the predictive assessment would promote efficiency because it would 
eliminate the need for individual borrowers to complete applications 
and for the Department to process those applications. Furthermore, 
using this predictive assessment would also avoid the risk that many 
borrowers in need of relief would miss out on the opportunity for 
relief because they are unaware of the need to apply or be unable to 
overcome the administrative challenges of applying.
    While the predictive assessment described in proposed Sec.  
30.91(c) would reduce administrative burden for both borrowers and the 
Department and could be implemented quickly because it would rely on 
data the Department already has, it would not be able to capture all 
borrowers who are experiencing hardship that satisfies the proposed 
standard for waiver. One reason is that the Department currently does 
not have data on several of the factors described in proposed Sec.  
30.91(b), such as information on debts not owed to the Department or a 
borrower's expenses for caretaking, housing, and other factors, which 
could be burdensome for some borrowers.
    Therefore, the Department would also need the discretionary option 
of receiving additional information from borrowers through an 
application process so that the Department could conduct a holistic 
assessment of the borrower's circumstances to determine whether the 
borrower meets the applicable standard for hardship under proposed 
Sec.  30.91(d). As described in the preamble, under this process, the 
Department would determine whether: (i) the borrower is highly likely 
to be in default or experience similarly severe and persistent negative 
circumstances, and (ii) other options for payment relief would not 
sufficiently address the borrower's persistent hardship. The Department 
could also make this determination based on information already in the 
Department's possession, or a combination of information already in the 
Department's possession or received through an application. This 
application-based pathway would be important to give borrowers the 
opportunity to provide additional information and data that might not 
be captured in existing data systems to which the Department has 
access, or to describe any additional relevant circumstances.

[[Page 87151]]

    Overall, the relief contemplated in these proposed regulations 
would provide important support in situations where a borrower's 
investment in postsecondary education fails to yield the potential 
benefits from completing such an education. Generally, postsecondary 
education provides significant individual and societal benefits. 
Earning a postsecondary credential typically provides individuals with 
a range of personal benefits in the labor market, including higher 
income and lower unemployment risk.\84\ In addition to individual 
benefits related to earnings and employment, additional education can 
provide a host of individual benefits, including greater access to 
health insurance, increased job satisfaction, and overall 
happiness.\85\ Increasing levels of postsecondary attainment also have 
spillover benefits for communities and society, including benefits to 
those who never attended or completed postsecondary education. For 
example, researchers have documented that wages of non-college 
graduates rise when the supply of college graduates increases.\86\ 
Increases in education are also linked to higher civic participation, 
reduced crime, and improved health of future generations.\87\
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    \84\ Barrow, Lisa and Ofer Malamud. ``Is College a Worthwhile 
Investment?'' Annual Review of Economics 7 no. 1 (2015): 519-555. 
Card, David. ``The Causal Effect of Education on Earnings.'' 
Handbook of Labor Economics 3 (1999): 1801-1863.
    \85\ Oreopoulos, Philip and Kjell G. Salvanes. ``Priceless: The 
Nonpecuniary Benefits of Schooling.'' Journal of Economic 
Perspectives 25 no. 1 (2011):159-184.
    \86\ Moretti, Enrico. ``Estimating the social return to higher 
education: evidence from longitudinal and repeated cross-sectional 
data.'' Journal of econometrics 121, no. 1-2 (2004): 175-212.
    \87\ Currie, Janet, and Enrico Moretti. ``Mother's education and 
the intergenerational transmission of human capital: Evidence from 
college openings.'' The Quarterly journal of economics 118, no. 4 
(2003): 1495-1532; Lochner, Lance, ``Nonproduction Benefits of 
Education: Crime, Health, and Good Citizenship,'' in E. Hanushek, S. 
Machin, and L. Woessmann (eds.), Handbook of the Economics of 
Education, Vol. 4, Ch. 2, Amsterdam: Elsevier Science (2011); Ma, 
Jennifer, and Matea Pender. Education Pays 2023: The Benefits of 
Higher Education for Individuals and Society. Washington, DC: 
College Board. Milligan, Kevin, Enrico Moretti, and Philip 
Oreopoulos. ``Does education improve citizenship? Evidence from the 
United States and the United Kingdom.'' Journal of public Economics 
88, no. 9-10 (2004): 1667-1695.; Lochner, Lance, and Enrico Moretti. 
``The effect of education on crime: Evidence from prison inmates, 
arrests, and self-reports.'' American economic review 94, no. 1 
(2004): 155-189.
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    For some borrowers, financing an education does not lead to 
individual net benefits. Loans taken out for postsecondary education 
commonly take a decade or more to repay, and borrowers may never reach 
sustained periods of income security necessary to afford and manage 
their loans. This could be because they never complete their program 
and therefore never receive a meaningful earnings return, or they may 
lose the income security attendant to an education when they face 
unexpected and significant life events outside their control, such as 
the need to care for sick dependents, expensive medical problems, or 
the onset of disabilities that limit work opportunities.
    These proposed regulations would establish a framework for the 
Secretary to exercise the discretionary waiver authority in a 
consistent and transparent manner. This framework would fill existing 
gaps in relief that are otherwise available from the Department to 
assist borrowers with managing repayment of their loans. The 
Department's existing avenues for payment relief, for example, may be 
insufficient to assist older borrowers with high student loan debt 
burdens at increased risk of default and resulting financial 
insecurity, or those with significant obligations expenses for child or 
dependent care. Therefore, these proposed regulations would specify the 
Secretary's authority to grant relief where the Secretary determines 
the borrower's hardship impairs the borrower's ability to fully repay 
loans or makes collecting the loans unjustifiably costly.
Summary of Proposed Key Provisions
    Table 2.1 below summarizes the proposed provisions in the NPRM.

                Table 2.1--Summary of Proposed Provisions
------------------------------------------------------------------------
                                   Regulatory    Description of proposed
           Provision                 section            provision
------------------------------------------------------------------------
Standard for waiver due to                 Sec.  Provides that the
 likely impairment of borrower         30.91(a)   Secretary may waive up
 ability to fully repay or                        to the outstanding
 undue costs of collection.                       balance of a Federal
                                                  student loan held by
                                                  the Department if the
                                                  Secretary determines
                                                  that the borrower has
                                                  experienced or is
                                                  experiencing hardship
                                                  related to such a loan
                                                  such that the hardship
                                                  is likely to impair
                                                  the borrower's ability
                                                  to fully repay the
                                                  Federal government or
                                                  the costs of enforcing
                                                  the full amount of the
                                                  debt are not justified
                                                  by the expected
                                                  benefits of continued
                                                  collection of the
                                                  entire debt.
Factors that substantiate                  Sec.  Provides a non-
 hardship.                             30.91(b)   exclusive list of
                                                  factors the Secretary
                                                  could consider in
                                                  determining whether a
                                                  borrower meets the
                                                  standard for waiver
                                                  based on hardship.
Immediate relief for borrowers             Sec.  Provides that the
 likely to default.                    30.91(c)   Secretary may consider
                                                  the borrower's factors
                                                  indicating hardship
                                                  described in proposed
                                                  Sec.   30.91(b) to
                                                  exercise discretion to
                                                  waive all or some of
                                                  outstanding loans held
                                                  by borrowers who the
                                                  Secretary determines
                                                  have experienced or
                                                  are experiencing
                                                  hardship such that
                                                  their loans are at
                                                  least 80 percent
                                                  likely to be in
                                                  default in the two
                                                  years after the
                                                  publication of the
                                                  proposed regulations.
Process for additional relief..            Sec.  Provides that the
                                       30.91(d)   Secretary may rely on
                                                  data obtained from an
                                                  application or by any
                                                  other means, or
                                                  potentially a
                                                  combination or both,
                                                  to provide relief for
                                                  borrowers who are
                                                  highly likely to be in
                                                  default or to
                                                  experience similarly
                                                  severe and persistent
                                                  negative
                                                  circumstances, and
                                                  other payment relief
                                                  options do not
                                                  sufficiently address
                                                  the borrower's
                                                  persistent hardship.
------------------------------------------------------------------------

3. Discussion of Costs, Benefits and Transfers
    Overall, waivers that the Secretary grants under the proposed 
regulations would result in costs in the form of transfers from the 
Federal Government to student loan borrowers. The size of these 
transfers would vary based upon the number of borrowers who the 
Secretary determines are at least 80 percent likely to be in default 
and, therefore, eligible for waiver under proposed Sec.  30.91(c). It 
would also depend on the number of borrowers who are approved for 
waivers under proposed Sec.  30.91(d). The Department believes that 
these transfers would

[[Page 87152]]

provide significant benefits to borrowers in the form of waiving their 
obligation to repay some or all of their Federal student loan debt. The 
Department would also see benefits from waivers granted on loans that 
are unlikely to be repaid in a reasonable period, which would prevent 
or reduce costly collection efforts.
    The transfers to borrowers in the form of waivers could result in 
costs to the Federal Government and in turn taxpayers, to the extent 
that borrowers receiving waivers might otherwise have repaid the loan 
in part or whole, or the financial costs of collecting the loan might 
have proved less than the benefits of collection. The proposed rules 
would also result in administrative expenses for the Department to 
implement these provisions. When considering all these factors, the 
Department believes that the benefits from these proposed regulations 
would outweigh the costs.
    What follows is a description of the data used to create estimates 
in this RIA, followed by a discussion of the costs, benefits, and 
transfers for each of the distinct regulatory provisions.

Data Used in This RIA

    This section describes the data used in the RIA. To generate 
information about the expected number of borrowers who would be 
eligible to receive relief under these proposed regulations, the 
Department relied upon non-public records contained in the 
administrative data the Department uses to administer the title IV, HEA 
programs.
    The primary data used in the RIA to estimate the number of 
borrowers who could potentially qualify for a waiver under proposed 
Sec.  30.91(c) is a 5 percent random sample of the Federal Department-
held student loan portfolio with at least one open title IV, HEA 
student loan as of April 30, 2024. We are using a random sample 
including over 2 million borrowers, but we present all estimates in the 
analyses below in terms of the full Department-held student loan 
portfolio. The data we use for modeling in the RIA are stored in the 
National Student Loan Data System (NSLDS), maintained by the 
Department's Office of Federal Student Aid. The Department determined 
that a sample of this size was appropriate to provide reasonable 
estimates of the impact of the proposed regulation. A sample of this 
size is similar to what the Department uses in other modeling, such as 
for the annual President's budget and for the net budget impact 
modeling in this RIA.

Analysis of Costs, Benefits, and Transfers for Each Proposed Regulatory 
Section

    The sections that follow contain a discussion of the costs, 
benefits, and transfers for the different proposed regulatory 
provisions if the Secretary chooses to grant waivers under such 
provisions. We separately discuss the relief potentially provided under 
proposed Sec.  30.91(c)'s pathway for ``immediate relief'' and proposed 
Sec.  30.91(d)'s pathway for ``additional relief'' based on an 
application or information already in the Secretary's possession, or 
both, because those provisions would represent different pathways for 
the Secretary to exercise discretion to grant a waiver for a borrower. 
Implementation of each of these provisions would include administrative 
costs for the Department. Because these administrative costs generally 
would represent baseline implementation expenses, we provide a separate 
discussion of administrative costs at the end of this part of the RIA.
    We do not include a discussion of proposed Sec.  30.91(a) or (b), 
which would establish the standard for hardship and the indicators to 
be considered in determining if a borrower is facing hardship, because 
these provisions do not describe discretionary pathways for relief that 
may result in costs, benefits, and transfers.

Sec.  30.91(c) Immediate Relief for Borrowers Likely To Be in Default

    Should the Secretary choose to grant waivers under proposed Sec.  
30.91(c), the proposed regulations would result in costs in the form of 
transfers from the Department to borrowers through waiver of 
outstanding debt to the Department. Waiving these amounts would 
eliminate future payments by these borrowers to the Department, which 
is a cost to the Federal Government and, by extension, to taxpayers. 
The extent of transfers and their associated cost would vary depending 
on the eligible borrower's amount of outstanding debt, loan type(s), 
age of the loan, likelihood of repayment, and other factors. The 
proposed regulations would also result in administrative expenses for 
the Department to implement these provisions. When considering all 
these factors, the Department believes that the benefits from these 
proposed regulations would outweigh the costs.
    Borrowers who are in default are likely to have repeated instances 
of default or be in default for a protracted time. Department data show 
that almost all of those who were likely to be in default in the next 
two years had struggles with loan repayment in the past, as evidenced 
by instances of current or prior default, or of payment delinquency. 
Acknowledging past hardship recognizes that previous periods of 
hardship may have current and future consequences for a borrower. For 
example, a borrower who struggled to repay their loans may have seen 
their balance increase in size such that full repayment of that greater 
amount is no longer feasible. The likelihood of prior or persistent 
repayment struggles observed in Department data is similar to that 
found in other data. A Federal Reserve Bank of Philadelphia survey of 
borrowers demonstrated that most of the individuals who anticipated 
difficulties making loan payments after the payment pause ended also 
reported making no or partial payments prior to the pandemic 
forbearance.\88\ These data also suggest that there is greater 
prevalence of longer-term or repeated defaults among communities with 
greater shares of Black and Hispanic residents, and that student loan 
default commonly co-occurs with delinquency and collections on other 
types of debt, such as medical debts and utilities.\89\ These 
distributional effects reflect underlying differences in income, 
completion status, and other factors that correlate with student loan 
struggles.\90\
---------------------------------------------------------------------------

    \88\ Akana, T., & Ritter, D. (2022). Expectations of Student 
Loan Repayment, Forbearance, and Cancellation: Insights from Recent 
Survey Data. Federal Reserve Bank of Philadelphia.
    \89\ Cohn, Jason. ``Student Loan Default Patterns: What 
Different Paths through Default Can Tell Us about Equitably 
Supporting Borrowers.'' (November 2022). Urban Institute. See also 
LaVoice, J., & Vamossy, D. F. (2024). Racial disparities in debt 
collection. Journal of Banking & Finance, 164, 107208.
    \90\ The Department provides this information for showing 
proposed Sec.  30.91(c)'s likely effects rather than an underlying 
reason for proposing such a waiver.
---------------------------------------------------------------------------

    In addition, many of the borrowers who might receive a waiver under 
proposed Sec.  30.91(c) have been in repayment for an extended time. 
For instance, based on analysis of Department data, in 2022, more than 
1 million borrowers held loans that had been in default for at least 20 
years. These borrowers could have been subject to negative credit 
reporting, wage garnishment, tax refund offset, and even litigation. If 
these loans are still outstanding after all this time, notwithstanding 
the availability of those powerful collection tools, the odds that they 
would be fully repaid in a reasonable period are unlikely.
    Older loans are also likely to be held by older borrowers. Analysis 
of Department data indicates that almost a

[[Page 87153]]

quarter of borrowers who would receive a waiver are over 55 years old. 
The older the borrower, the greater the likelihood that they will stop 
working prior to successful repayment. Forty-one percent of non-Parent 
PLUS borrowers 62 years of age and older with an open loan have held 
their student loans for more than 20 years, and 30 percent of borrowers 
62 years of age and older with an open loan have held their student 
loans for more than 25 years.\91\ Waiving such loans would not create 
significant costs for the Government in the form of transfers because 
the Department is unlikely to receive significant additional payments 
from a retired borrower.
---------------------------------------------------------------------------

    \91\ U.S. Department of Education. Negotiated Rulemaking for 
Higher Education 2023-2024 Materials for Student Loan Debt Relief 
Session 2 (November 6-7, 2023): Data on Older Borrowers and Parents. 
https://www2.ed.gov/policy/highered/reg/hearulemaking/2023/data-on-older-borrowers-and-parents-session-2.pdf.
---------------------------------------------------------------------------

    About two-thirds of borrowers who may receive a waiver received a 
Pell Grant in our data, but this number is likely an underestimate 
because Pell Grant status is unavailable for most borrowers who entered 
repayment on their last loan before 1999.
    Borrowers would receive significant benefits from no longer having 
to repay loans, and the Federal Government would also see benefits from 
conserved administrative costs through discontinued servicing or 
collecting on loans that the Department does not expect to be repaid in 
full.
    As noted above, these transfers would create some costs for the 
Federal government and, by extension, taxpayers. However, as discussed 
above, these waivers would generally affect loans with lower expected 
repayment rates (therefore have a low likelihood of generating funds 
for the Federal government), and any limited lost revenue from waiving 
some of the Department's worst-performing loans would likely be 
outweighed by significant individual and social economic benefits to 
the borrower. Specifically, the waivers proposed here would provide 
borrowers facing hardship with a greater ability to avoid financial 
distress, and potentially lower delinquency rates on other types of 
debt, promote consumption (which can benefit the economic wellbeing of 
their communities), improve access to credit, and may reduce reliance 
on other forms of the Federal safety net.\92\
---------------------------------------------------------------------------

    \92\ See, for example, The Economics of Administration Action on 
Student Debt, available at https://www.whitehouse.gov/cea/written-materials/2024/04/08/the-economics-of-administration-action-on-student-debt/.
    Di Maggio, M., Kalda, A., & Yao, V. (2019). Second chance: Life 
without student debt (No. w25810). National Bureau of Economic 
Research.
---------------------------------------------------------------------------

    To estimate the number of borrowers we would expect to be eligible 
for relief under proposed Sec.  30.91(c), we followed the process 
described for implementing proposed Sec.  30.91(c) above, where we used 
predictors that correspond to the 17 factors described in proposed 
Sec.  30.91(b) to predict whether borrowers were at least 80 percent 
likely to be in default on a student loan in any quarter for the 
subsequent two years after the NPRM's publication. For the purposes of 
the NPRM, we used a 5 percent sample of Department-held loans as of 
April 2024.
    Should the Secretary choose to exercise authority under these 
regulations, we estimate that approximately 6.0 million borrowers would 
be eligible to receive relief under proposed Sec.  30.91(c). This 
estimate is based on output of the proposed model developed to estimate 
the likelihood that a borrower would have been in default within two 
years.
    The estimate of borrowers who may receive waivers under this 
provision uses data as of April 30, 2024, and calculates the two-year 
measurement window as of April 30, 2024. The Department chose April 30, 
2024, because it was the most recent comprehensive dataset available to 
the Department at the time that the Department was developing the 
proposed model for this NPRM. The borrower portfolio may change between 
April 2024 and the publication of the NPRM, both in terms of its 
composition (i.e., which borrowers are in the portfolio) and in the 
borrowers' circumstances (e.g., the loans held by borrowers and 
outstanding debt amount may change between April 30, 2024 and the 
publication of the NPRM). It is not clear what the substantive effects 
of such changes would be, as they could drive the model's outcomes in 
different directions. Estimates presented in the NPRM also do not 
include potential overlap with relief that would be provided by any 
proposed rules that are not yet final as of the publication of this 
NPRM, or of waivers through other provisions that were not yet 
implemented as of April 30, 2024.

Sec.  30.91(d) Process for Additional Relief

    Borrowers would benefit from any waivers granted by the Secretary 
under proposed Sec.  30.91(d)'s pathway for additional relief based 
upon a holistic assessment of information already in the Secretary's 
possession or submitted by the borrower through an application process, 
or both in conjunction, to determine whether: (i) the borrower is 
highly likely to be in default or to experience similarly severe and 
persistent negative circumstances, and (ii) other payment relief 
options would not sufficiently address the borrower's persistent 
hardship. As further described in this NPRM's preamble, such waivers 
would address challenges that these borrowers face while trying to 
repay their loans. While this approach would provide overall financial 
benefits, the specific benefits for borrowers who receive a waiver 
would vary depending on the nature of their qualifying hardship. 
Waivers granted under proposed Sec.  30.91(d) would also create 
administrative costs for the Department to implement, which are 
discussed at the end of this subsection of the RIA.
    Consider several examples of borrowers who may receive waivers 
based on a holistic assessment of the factors in proposed Sec.  
30.91(b). For example, a borrower whose qualifying hardship is a result 
of advanced age, having an old loan, and no longer working would 
benefit from no longer having to manage a loan payment in their final 
years of life. If they were in default, they could also potentially see 
an increase in the total amount of Social Security benefits they could 
retain since they would not be at risk of having amounts offset. By 
comparison, a borrower who is facing hardship due to having extensive 
expenses caring for an elderly relative could also accrue benefits, but 
in a different form, such as being able to better afford necessary care 
for that individual, including potentially paying for better services 
for that relative. Since the precise facts that support waiver under 
proposed Sec.  30.91(d) would vary across individual borrowers' 
circumstances based on a holistic assessment of their factors in 
proposed Sec.  30.91(b), the specific benefits of waiver would vary. 
But in general, to the extent that the hardship results in the borrower 
being overburdened by necessary expenses, the waiver would help a 
borrower better afford those expenses while maintaining basic financial 
security and also greatly reduce or eliminate their risk of 
experiencing the substantial harms of default, or other similarly 
severe negative and persistent circumstances.
    Waivers granted under proposed Sec.  30.91(d) would create costs to 
the government in the form of transfers to student loan borrowers. 
These costs would also accrue to taxpayers. However, we believe the 
benefits would exceed these costs. As discussed, the Secretary may 
provide a waiver under

[[Page 87154]]

proposed Sec.  30.91(d) only after determining: (i) the borrower has 
experienced, or is experiencing, hardship such that the borrower is 
highly likely to be in default or to experience similarly severe and 
persistent negative circumstances, and (ii) other payment relief 
options do not sufficiently address the borrower's persistent hardship. 
Therefore, borrowers who may receive waivers are those with lower-than-
expected repayments who are highly likely to struggle with repaying 
their loans. By contrast, as described above, the benefits to borrowers 
could be significant. And such waivers could provide benefits to the 
government as well. The Department would no longer pay to collect on or 
service loans that are highly unlikely to be repaid. And to the extent 
borrowers are facing hardship while receiving other Federal benefits, 
such as Social Security, no longer having those amounts at risk of 
being offset would allow broader Federal benefits to better achieve 
their intended purposes, such as keeping senior citizens out of 
poverty.
    Estimating the number of borrowers who could, at the Secretary's 
discretion, be approved for relief under proposed Sec.  30.91(d) 
depends on assumptions about: (1) the number of borrowers who have 
characteristics that are likely to make them eligible for relief based 
on the Department's holistic assessment of their circumstances, and (2) 
the share of borrowers who are potentially eligible who would actually 
apply. At the end of this section, to inform the estimates of 
administrative costs, we discuss further assumptions about the number 
of borrowers who would apply, but who we would expect would not be 
approved for discretionary relief. In the sections below, we describe 
the information the Department considered to reach estimates used in 
this NPRM. Recognizing data limitations and that there are no perfect 
historical analogs that could inform estimates with perfect precision, 
we included a directed question that solicits feedback and input from 
the public about other data or information that could be used to 
improve and refine estimates.
    First, we consulted available Department data on borrowers and 
national survey data related to student debt holders to inform the 
number of borrowers who have characteristics that are likely to make 
them eligible for relief based on the Department's holistic assessment 
of their circumstances. These borrowers would need to have indicators 
that show they are highly likely to be in default or experience 
similarly severe negative and persistent circumstances, that would not 
be sufficiently addressed by other options for payment relief. In 
addition, the Department anticipates that proposed Sec.  30.91(c) 
would, at the Secretary's discretion, be implemented first and that 
such relief would likely be sufficient to address the hardship of a 
borrower who receives such relief. Therefore, because we do not want to 
double count borrowers, the estimate for proposed Sec.  30.91(d) 
discussed below does not include borrowers who would be expected to 
receive full relief under proposed Sec.  30.91(c).
    As a starting point the Department consulted economic studies of 
individuals experiencing poverty. We believe estimates of persistent 
poverty provide an important perspective on borrowers who may have 
enduring negative economic conditions, even if it is not the perfect 
comparison. Poverty by itself may not lead to relief under proposed 
Sec.  30.91(d), but people in poverty often face challenges such as not 
being able to afford necessary expenses. In addition, other available 
payment relief options might address episodic spells of poverty. As 
described earlier, the Department expects that a borrower would need to 
have indicators showing a high likelihood of persistent hardship rather 
than a short-term hardship to receive relief under this provision. On 
the other hand, it is also possible that borrowers could be facing 
persistent hardship and receive relief, even if they are not considered 
in poverty. Even acknowledging these limitations, we believe estimates 
of persistent poverty are a reasonable consideration for estimates 
under proposed Sec.  30.91(d).
    Studies suggest that a meaningful, but small, share of the 
population experience persistent poverty, defined in many studies as 
having an income below the Federal Poverty Level. For example, 
longitudinal studies of families experiencing poverty, using the Panel 
Study of Income Dynamics suggest that between about 3 to 5 percent of 
adults are exposed to instances of poverty that last five years or more 
across their adult lifetimes.\93\ Therefore, if we applied the 
persistent poverty rate of 3 percent to 5 percent to the number of ED-
managed borrowers in the current portfolio, we might expect somewhere 
between 1 and 2 million borrowers in the current portfolio to 
experience persistent economic hardship at some point in their 
adulthood that would meet the eligibility requirements under Sec.  
30.91(d).
---------------------------------------------------------------------------

    \93\ Other estimates suggest a rate of 10 to 15 percent over 
three years, and that rates can vary by education level, age, and 
other characteristics. See, for a review, Cellini, S.R., McKernan, 
S.M., & Ratcliffe, C. (2008). The dynamics of poverty in the United 
States: A review of data, methods, and findings. Journal of Policy 
Analysis and Management: The Journal of the Association for Public 
Policy Analysis and Management, 27(3), 577-605, as well as evidence 
from Sandoval, D.A., Rank, M.R., & Hirschl, T.A. (2009). The 
increasing risk of poverty across the American life course. 
Demography, 46, 717-737. and from Hoynes, H.W., Page, M.E., & 
Stevens, A.H. (2006). Poverty in America: Trends and Explanations. 
The Journal of Economic Perspectives, 20(1), 47-68. http://www.jstor.org/stable/30033633.
---------------------------------------------------------------------------

    This range of 1 to 2 million borrowers from the current portfolio 
is corroborated through other data sources. In Department data, as of 
December 2023, there were about 9 million borrowers who were recorded 
as past due in their payments.\94\ Solely being behind on student loan 
payments would not lead to eligibility for a waiver under Sec.  
30.91(d). Therefore, the Department also reviewed information that was 
reported in the Federal Reserve Board's Survey of Household Economics 
and Decisionmaking (SHED).\95\ The SHED provides information about 
borrowers and their personal finances, and indicates whether borrowers 
who were behind on student loan payments also reported some other 
condition that could indicate hardship, such as being unemployed or 
underemployed due to a health or medical limitation or a disability or 
living with parents or adult children to provide help with child or 
medical care.\96\ Those data indicate that about 13 to 25 percent of 
borrowers who are behind on student loan payments also reported one of 
these other indicators. Applying those percentages to the current 
portfolio of borrowers implies that between 1 to 2 million borrowers 
may be experiencing some

[[Page 87155]]

substantial economic hardship and report being behind on payments. We 
would expect that borrowers reporting a greater number of economic 
challenges in survey data might be more indicative of the type of 
hardship that would qualify for a waiver under Sec.  30.91(d). In the 
SHED data, about 40 percent of the student loan borrowers who are 
behind on payments experience both conditions described above, which 
would imply an estimate of the number of borrowers in the current 
portfolio in the range of 0.4 to 0.8 million borrowers. These ranges 
are based on a single point in time. Under Sec.  30.91(d), borrowers 
would need to face hardship consistently in order qualify for a waiver, 
so estimates based on an isolated observation likely overestimates the 
number of borrowers who are facing persistent challenges on these 
factors. On the other hand, a point in time observation would not count 
borrowers who may experience struggles in the future, even if not 
showing such markers at the time of the survey.
---------------------------------------------------------------------------

    \94\ https://blog.ed.gov/2024/04/an-update-on-the-first-months-of-the-return-to-repayment/. This does not include borrowers in 
default. This figure is likely to be a high-water mark, given the 
challenges and policy context of returning to repayment after the 
pandemic, and would be expected to decline in the future.
    \95\ For the analyses of SHED data, we stacked five years of 
SHED surveys (2018 to 2022) and used survey weights. We include data 
only for those who report student debt but are not currently 
enrolled in school. The SHED data likely undercounts borrowers who 
only hold Parent PLUS loans, and the survey does not distinguish 
between Federal student loans specifically and other types of 
student loans.
    \96\ In the SHED survey, roughly 18 percent of those with 
education debt indicated being behind on payments. Among all 
borrowers who are behind on student payments, about 25 percent of 
borrowers report being unemployed or underemployed due to a health 
or medical limitation or a disability, and 13 percent of borrowers 
live with parents or adult children to provide help with child or 
medical care. These forms of hardship are indicative of the types of 
circumstances that may make borrowers eligible to apply for a waiver 
under Sec.  30.91(d).
---------------------------------------------------------------------------

    For our base assumptions, we take the high end of the range 
suggested by available evidence and assume that about 2 million 
borrowers from the current portfolio would potentially have 
characteristics that might make them highly likely to be in default or 
experience similarly severe negative and persistent circumstances at 
some point in their remaining repayment. As we discuss later, other 
payment relief options might sufficiently address the hardship for some 
of these borrowers, not all borrowers who might be eligible will apply 
for relief, and most borrowers will not have sufficient data already in 
the Department's possession that would be necessary for any non-
application-based relief.
    We assume a take up rate of 75 percent among the 2 million 
borrowers from the current portfolio that we estimate would be 
potentially eligible for relief. This take up rate is blended across 
borrowers who might meet the standard for relief under proposed Sec.  
30.91(d), described above, based on the Department conducting holistic 
assessments that may either rely on data already in the Secretary's 
possession, data submitted by the borrower through an application, or a 
combination of both. This borrower estimate assumes that, as noted 
above, the Department would need to expand or refine data elements in 
the future to provide relief to borrowers under proposed Sec.  30.91(d) 
without an application because, at the time of preparing this NPRM, the 
Department does not have sufficient data available to determine whether 
a borrower meets the eligibility standard. Borrowers for whom the 
Department possesses sufficient information to conduct the holistic 
review without data acquired from an application would not need to 
apply (implying a take up rate of 100 percent), but the Department 
anticipates that the number of such borrowers based on future data 
matches or data collections would be small. Ample evidence suggests 
that borrowers do not always apply for benefits for which they are 
eligible for many reasons, including because of the burden associated 
with application and lack of knowledge about the benefits. Evidence 
from other settings--none being perfect analogies--including from SNAP, 
the Earned Income Tax Credit (EITC), and Unemployment Insurance, 
suggest a range of take-up rates that differ across benefit amounts, 
salience, and eligible populations.\97\ Many of the programs with high 
take-up rates, such as SNAP and EITC, which have take-up rates at or 
above 80 percent, are well known and have been around for a long time, 
and some programs have infrastructures that help beneficiaries apply. 
Other researchers have reported take up of Unemployment Insurance of 42 
percent to 55 percent.\98\ There are reasons to believe that the take-
up rate for forgiveness proposed under Sec.  30.91(d) could be lower 
than those for SNAP or EITC, since this would be a new program, 
benefits would be uncertain, and many borrowers do not engage with 
student loan programs that can be beneficial to them. In sensitivity 
analyses below, we assume a lower take-up rate.
---------------------------------------------------------------------------

    \97\ See, e.g., U.S. Government Accountability Office. College 
Closures: Many Impacted Borrowers Struggled Despite Being 
Financially Eligible for Loan Discharges. (September 2021). Accessed 
at https://www.gao.gov/products/gao-21-105373. See the review in Ko 
& Moffit (2022). Take-up of Social Benefits. NBER Working Paper 
30148. Also see various articles in ``Administrative Burdens and 
Inequality in Policy Implementation'' Part I and Part II in RSF: The 
Russell Sage Foundation Journal of the Social Sciences, volume 9, 
issues 4 and 5, 2023 and Currie, Janet (2006). The Take-up of Social 
Benefits. In Public Policy and the Income Distribution. Russell Sage 
Foundation. Herd & Moynihan (2018). Administrative Burdens.
    \98\ Kuka and Stuart (2022). Racial Inequality in Unemployment 
Insurance Receipt and Take Up. NBER Working Paper 29595.
---------------------------------------------------------------------------

    We also assume that about one-third of these remaining borrowers 
would benefit from other payment relief options that could sufficiently 
address their hardship. Some estimates suggest that payment relief 
options available from the Department can benefit large swaths of 
borrowers; \99\ however, not all borrowers who benefit from existing 
payment relief options will have their hardship sufficiently addressed.
---------------------------------------------------------------------------

    \99\ For example, see https://budgetmodel.wharton.upenn.edu/issues/2023/7/17/income-driven-repayment-modeling-take-up-rates.
---------------------------------------------------------------------------

    This leads to an estimate of 1 million borrowers, or about 2.5 
percent of the current portfolio, who we expect could, at the 
Secretary's discretion, be approved for relief under proposed Sec.  
30.91(d) in the period after this regulation is implemented and 
throughout the remainder of the borrowers' repayment periods. We also 
estimate that an additional 1 million borrowers who could, at the 
Secretary's discretion, be approved among the next 10 cohorts of 
borrowers. To arrive at estimates of borrowers who would be affected in 
the next ten future cohorts, we assume that 5 percent of each cohort 
could, at the Secretary's discretion, be approved for a waiver under 
proposed Sec.  30.91(d) at some point in their repayment. This is 
double the share of borrowers estimated in the current portfolio 
because borrowers in the current portfolio would receive waivers on a 
one-time basis under proposed Sec.  30.91(c), whereas borrowers in 
future cohorts would not. Using an assumption of roughly 2 million new 
borrowers each year for the next ten years, this leads to an estimate 
of roughly 100,000 borrowers per cohort, and 1 million borrowers over 
these cohorts.
    In addition to our primary estimate, we include low and high 
estimates to bound the range of reasonable possible waivers under 
proposed Sec.  30.91(d). Our low estimate assumes that the take-up of 
application-based relief is 50 percent (instead of 75 percent), but 
still assumes that one-third of eligible borrowers benefit from other 
payment relief options. This results in a total of 1.33 million 
borrowers who could, at the Secretary's discretion, be approved for 
relief, 0.67 million among the current portfolio, and 0.67 million from 
future borrower cohorts. In our high estimate, we assume a larger share 
of borrowers would qualify for relief. Specifically, we assume that 10 
percent of borrowers in the current portfolio could be approved for a 
waiver under proposed Sec.  30.91(d). This larger share aligns with 
estimates from research suggesting that 10 percent of adults experience 
spells of poverty that last at least three years, whereas the 5 percent 
in our base estimate was based on five-year spells.\100\ Similar to our

[[Page 87156]]

base case, we assume a take-up rate of 75 percent and that \1/3\ of 
borrowers get relief through another option. In this high scenario, we 
estimate that 2 million borrowers in the current portfolio, and 2 
million borrowers in future cohorts would qualify. We note that overall 
estimates could be reduced once they account for other, anticipated 
regulatory actions that provide relief to borrowers with education 
debt.
---------------------------------------------------------------------------

    \100\ Rates can vary by education level, age, and other 
characteristics. See, for a review, Cellini, S.R., McKernan, S.M., & 
Ratcliffe, C. (2008). The dynamics of poverty in the United States: 
A review of data, methods, and findings. Journal of Policy Analysis 
and Management: The Journal of the Association for Public Policy 
Analysis and Management, 27(3), 577-605, as well as evidence from 
Sandoval, D.A., Rank, M.R., & Hirschl, T.A. (2009). The increasing 
risk of poverty across the American life course. Demography, 46, 
717-737. and from Hoynes, H.W., Page, M.E., & Stevens, A.H. (2006). 
Poverty in America: Trends and Explanations. The Journal of Economic 
Perspectives, 20(1), 47-68. http://www.jstor.org/stable/30033633.
---------------------------------------------------------------------------

    We also consider the possibility that the Department could 
potentially use data aligned with the factors listed in Sec.  30.91(b) 
that was not obtained through an application (e.g. from additional or 
refined data to which the Department has access in the future). In such 
potential cases, a borrower could receive a waiver if the Department's 
holistic review of the borrower's data satisfied the same stringent 
standard that the Department would apply for application-based relief 
under proposed Sec.  30.91(d) (e.g., the borrower must be highly likely 
to be in default or experience similarly severe and persistent negative 
circumstances, and other payment relief options would not sufficiently 
address the borrower's persistent hardship). Such cases would be 
considered rare since the data that the Department may possess would 
have to sufficiently establish eligibility, sufficiently show that 
other options for payment relief did not address the borrower's 
hardship, and sufficiently distinguish such borrowers from otherwise 
similar borrowers who would not be deemed to qualify for relief.
    We interpret the potential for such waivers to occur on the margin 
of the take-up rate that we have built into our overall estimates. 
Changes to the assumptions about the total number of borrowers who 
could be approved because of the potential for non-application waivers 
would not be due to differences in the applicable eligibility standard, 
but rather assumptions about the precision with which various data 
sources could identify borrowers who were experiencing hardship that 
could qualify under the standard for relief in proposed Sec.  30.91(d). 
Our base case assumption includes a 75 percent take-up rate, and we 
believe this already generously incorporates a high implied take-up 
rate for a small share of borrowers who might receive waivers under 
proposed Sec.  30.91(d) without an application. However, we consider 
the possibility that there could be a higher take-up rate, for example, 
80 percent. We also consider that a greater number of borrowers could 
potentially be approved. Assuming that 5 percent more borrowers could 
be approved, and a take-up rate of 80 percent, our primary estimates of 
who would receive relief under proposed Sec.  30.91(d) would increase 
from 1 million borrowers in the current portfolio to about 1.1 million. 
We do not formally run a new budget scenario below with these different 
assumptions, as we believe those estimates would be below the high 
scenario already discussed above.
    The Department also considered how to estimate how many 
applications it would receive, and the rate at which an application for 
waiver would be likely to be approved at the Secretary's discretion. As 
with the discussion above, there is no perfect comparison on which to 
rely. However, considering that some borrowers who are ineligible will 
apply, and that for other borrowers, other options for payment relief 
would sufficiently address the borrower's hardship, we assume that for 
every borrower who is approved at the Secretary's discretion, there 
would be one that is rejected, i.e., we assume an approval rate of 50 
percent.
    For estimating the potential application rates, the Department 
considered situations that might be closely analogous to the 
application-based approach contemplated by proposed Sec.  30.91(d), 
whereby the Secretary would conduct a holistic assessment of the 
borrower's factors indicating hardship to determine if the borrower met 
the standard for waiver described in proposed Sec.  30.91(d). We 
identified few comparative situations. Applications similar to the ones 
for IDR, Public Service Loan Forgiveness, or the prior pandemic-related 
student debt relief plan under the HEROES Act were not closely relevant 
for this estimation, because they generally only involve completing 
straightforward background questions and checking certain boxes, and 
there is no meaningful open response required from the borrower. By 
contrast, the Department expects that the application for relief under 
proposed Sec.  30.91(d) would solicit a range of qualitative and 
quantitative information from the borrower to inform the Department's 
determination of whether the borrower satisfies the hardship standard.
    We also considered using the rate of approvals when borrowers 
submit applications to use a different payment amount when seeking to 
rehabilitate their loans, but that information is not readily tracked 
by the Department's contractor. Even if an approval rate were 
available, that form may still not be an appropriate comparison, since 
it only affects borrowers in default and those borrowers have 
particular characteristics in terms of postsecondary completion, type 
of institution, and debt balance that might be different than the 
broader population of borrowers. Another approval rate we considered 
was borrower defense to repayment. Borrower defense also is not a 
perfect comparison because it tends to have disproportionate numbers of 
applications from borrowers who attended private for-profit colleges 
than might be expected to occur here, and there are significant 
differences between the factors that justify borrower defense to 
repayment and the waivers proposed here.
    Unless specified otherwise in the above discussion, estimates of 
borrowers who would be eligible for relief under proposed Sec.  
30.91(d) do not account for potential overlap with relief that may be 
provided by any other proposed regulations that are not yet final as of 
the publication of the NPRM, or of waivers through other provisions 
that were not yet implemented as of April 30, 2024.
    We invite feedback from the public about how to refine these 
estimates.

Administrative Costs

    The proposed regulations could result in significant administrative 
costs for the Department. These costs would be relatively small for 
immediate relief granted under proposed Sec.  30.91(c). For that type 
of relief, the Department would expend one-time resources on developing 
the predictive assessment contemplated in proposed Sec.  30.91(c) that 
would predict the likelihood that a borrower will be in default within 
two years after the publication of these proposed regulations. But the 
Department would not need to expend significant further resources to 
apply the predictive assessment to a borrower's information and would 
not need to expend any resources developing an application, 
disseminating the application, and reviewing and processing the 
application.
    For relief granted under the application-based pathway described in 
proposed Sec.  30.91(d), however, the Department would incur 
significant costs to create, disseminate, and process applications to 
complete a holistic assessment of the information submitted by the 
borrower related to hardship. The Department would need to either 
repurpose or hire additional staff for this purpose. This would create 
expenses for systems to accept and track the status of applications as 
well as call-

[[Page 87157]]

center staffing costs to address inquiries related to the application 
process. The degree of these costs would vary based upon the number of 
applications the Department has the capacity to process in a year. 
Increasing the Department's capacity to holistically assess 
applications would require hiring more staff, either directly or 
through subcontractors. Greater initial costs for staff could result in 
lower long-term costs, however, as we anticipate that most borrowers 
who are initially interested in the application-based process would do 
so soon after such process is available. We anticipate that future 
applications would come from newer borrowers or those with a 
significant change in their circumstances such that they have now 
decided to seek a hardship waiver.
    The Department has developed estimates of the administrative costs 
for the application-based pathway specified in proposed Sec.  30.91(d) 
by considering existing analogous administrative processes, 
particularly the costs related to reviewing applications for borrower 
defense to repayment. Those processes share some similarities, 
particularly that borrowers submit applications that may reveal 
information and evidence that is not otherwise available to the 
Department and must be reviewed. There are also some key differences. 
First, borrower defense requires conducting fact-finding related to an 
institution. That can be a significant upfront investment of time, but 
any findings from that work can then be applied to multiple 
applications. Second, the review of borrower defense applications is 
generally carried out by attorneys. This reflects the legal standards 
used for borrower defense approvals, which often include making 
determinations about the nature of misrepresentations and meeting 
certain evidentiary bars that are grounded in concepts similar to those 
used by States in their unfair and deceptive acts and practices (UDAP) 
laws.
    The proposed application-based approach for hardship waivers under 
proposed Sec.  30.91(d) would be different. First, we do not anticipate 
that the fact-finding related to institutional conduct would apply to 
the Department's review of applications under proposed Sec.  30.91(d). 
Second, we do not anticipate that the individuals reviewing hardship 
applications would need to be attorneys. That means the typical 
staffing cost could be lower than it is for borrower defense.
    Based upon these considerations, the Department modeled the 
possible administrative costs of the application-based pathway 
described in proposed Sec.  30.91(d) in the following manner. First, we 
assumed that the cost per hour to review was $50. This is based on the 
current hourly rate used by subcontractors for the Office of Federal 
Student Aid in the Department of Education, which is roughly half the 
hourly rate were Department staff hired for the same process. We then 
assumed that it would take each reviewer on average 30 minutes to 
review an application and render a recommended decision to the 
Secretary. The 30-minute estimate is similar to how long Department 
contractors typically take to review a form where borrowers submit 
detailed income and expense information when seeking to rehabilitate a 
defaulted loan (information collection 1845-0120). We expect that some 
applications would be faster while others that include significant 
additional information might take longer. The overall administrative 
cost would then depend on how many applications the Department 
anticipates receiving annually as well as how many we anticipate being 
able to review in a year. The number would also be higher or lower 
depending on the number of applications processed each year, the total 
number of anticipated applications, and the average time to review the 
application. If we expect a total of 4 million applications, at the 
current hourly rate and expected review time, the personnel costs for 
application review is estimated at about $100 million. We will continue 
to refine these estimates based upon comments received from the public.
    In addition to staffing costs, the Department also anticipates 
incurring some administrative costs for updating and maintaining data 
systems to process the intake of applications from borrowers seeking 
hardship waivers, staffing call centers for questions, and costs to 
train system users. We estimate this amount to be approximately $9 
million in the first year, and an additional $1.7 million each year 
thereafter.
4. Net Budget Impact
    Table 4.1 provides an estimate of the net Federal budget impact of 
these proposed regulations that are summarized in Table 2.1 of this 
RIA. This includes both costs of a modification to existing loan 
cohorts and costs for loan cohorts from 2025 to 2034. A cohort reflects 
all loans originated in a given fiscal year. Consistent with the 
requirements of the Federal Credit Reform Act of 1990 (FCRA), budget 
cost estimates for the student loan programs reflect the estimated net 
present value of all future non-administrative Federal costs associated 
with a cohort of loans. The baseline for estimating the cost of these 
final regulations is the President's Budget for 2025 (PB2025) as 
modified for changes to debt management policies. The baseline \101\ 
does not include any changes related to the student debt relief 
provisions described in the NPRM published April 17, 2024.\102\ Should 
such debt relief provisions be finalized as proposed in the April NPRM 
and should the Department provide waivers under such provisions, the 
Department expects that the estimated costs of these regulations would 
decrease.
---------------------------------------------------------------------------

    \101\ The Department notes that the baseline also includes the 
existence of the final regulations published in July 2023 that made 
various changes to the Department's pre-existing income contingent 
repayment plan (known as the Revised Pay As You Earn, or REPAYE, 
plan) and to the Department's other income contingent repayment 
plans. Those regulations also changed the name of the REPAYE plan to 
the Saving on a Valuable Education (SAVE) plan. See 88 FR 43820. 
Several states have challenged the SAVE regulations as part of 
ongoing litigation. See generally Missouri v. Biden, No. 24-2332 
(8th Cir.); Alaska v. Department of Education, Nos. 24-3089, 24-3094 
(10th Cir.). Because the SAVE regulations have not been permanently 
enjoined, it is appropriate to include them in the baseline. The 
Department recognizes that if the SAVE regulations are permanently 
enjoined, this could increase the estimated costs for these 
regulations because there may be more borrowers who are eligible for 
relief. For example, in the absence of provisions under SAVE or 
other ICR plans, the Department expects there would be more 
borrowers eligible for relief under proposed Sec.  30.91(d) since 
more borrowers would be likely to be in default or experience 
similarly severe negative and persistent circumstances, and existing 
payment relief options would not sufficiently address their 
persistent hardship. The Department notes that even if the estimated 
costs increased in such a manner, the Department believes the 
benefits of these proposed regulations would still outweigh the 
costs since the proposed regulations would authorize providing 
waivers to borrowers who are unlikely to fully repay their loans 
and, relatedly, the waivers would discharge debt that the Department 
is unlikely to fully collect in a reasonable period of time.
    \102\ 89 FR 27564 (April 17, 2024). As described above, see n.1, 
supra, a Federal district court has issued an injunction focused on 
these separate proposed rules published on April 17, 2024. See 
Missouri v. Biden, No. 24-cv-1316 (E.D. Mo.). As of the date of 
publishing this NPRM, that separate litigation focused on the April 
2024 NPRM remains pending with no final decision on the merits.

[[Page 87158]]



              Table 4.1--Estimated Net Budget Impact of the NPRM for Direct Loans and ED-Held Loans
                                                 [$ in millions]
----------------------------------------------------------------------------------------------------------------
                                                                  Modification     Outyear score   Total (1994-
               Section                      Description        score (1994-2024)    (2025-2034)        2034)
----------------------------------------------------------------------------------------------------------------
Sec.   30.91(c).....................  Immediate relief for                70,200  ..............          70,200
                                       borrowers likely to be
                                       in default.
Sec.   30.91(d).....................  Application-based                   29,600          12,100          41,700
                                       relief for borrowers
                                       experiencing hardship.
----------------------------------------------------------------------------------------------------------------

    It is possible that a borrower who is eligible for immediate relief 
under proposed Sec.  30.91(c) may also be inclined to apply for relief 
under proposed Sec.  30.91(d). For budgeting purposes, however, we 
assume that all relief would be full relief, and that if a borrower 
qualifies for and receives a waiver under proposed Sec.  30.91(c) then 
they would not also receive a waiver under proposed Sec.  30.91(d). 
Accordingly, the primary budget estimate stacks the scores in the order 
shown on the assumption that immediate relief under proposed Sec.  
30.91(c) would be provided to eligible borrowers prior to any 
additional relief under proposed Sec.  30.91(d) to different borrowers. 
The Department believes this stacked estimation is appropriate for the 
primary estimates of the proposed regulations.

Methodology for Budget Impact

    The Department estimated the budget impact of the proposed 
provisions in this NPRM through changes to the Department's Death, 
Disability, and Bankruptcy (DDB) assumption that handles a broad range 
of loan discharges or adjustments, the collections assumption to 
reflect balance changes on loans that ever defaulted, and the IDR 
assumption for effects on borrowers in those repayment plans. The DDB 
assumption is used in the Student Loan Model (SLM) to determine the 
rate and timing of loan discharges due to the death, disability, 
bankruptcy, or other discharge of the borrowers (this model is not the 
same as the predictive assessment that is described for determining 
whether a borrower may be eligible for a waiver under proposed Sec.  
30.91(c)). The SLM is designed to calculate cash flow estimates for the 
Department's Federal postsecondary student loan programs in compliance 
with the FCRA and all relevant Federal guidance. The SLM calculates 
student loan net cost estimates for loan cohorts where a cohort 
consists of the loans originated in a given budget (fiscal) year. The 
model operates with input data obtained from historical experience and 
other relevant data sources. The SLM cash flow components range from 
origination fees through scheduled principal and interest payments, 
defaults, collections, recoveries, and fees. The cash flow time period 
begins with the fiscal year of first disbursement and ends with the 
fiscal year of the events at the end of the life of the loan: 
repayment, discharge, or forgiveness.
    For each loan cohort, the SLM contains separate DDB rates by loan 
program, population (Non-Consolidated, Consolidated Not From Default, 
and Consolidated From Default), loan type, and budget risk group (Two-
Year Proprietary, Two-Year Public and Not-for-Profit, Four-Year 
Freshman and Sophomore of all institution types, Four-Year Junior and 
Senior of all institution types, and Graduate Student of all 
institution types). The DDB rate is the sum of several component rates 
that reflect underlying claims data and assumptions about the effect of 
policy changes and updated data on future claims activity. In general, 
DDB claims are aggregated as the numerator by fiscal year of 
origination and population, program, loan type, risk group, and years 
from origination until the DDB claims. Zeros are used for any missing 
categories in the numerator. Net loan amounts are aggregated as the 
denominator by fiscal year of origination and population, program loan 
type, and risk group. The DDB rate is simply the ratio of the numerator 
to the denominator. Because the SLM only allows for DDB rates to be 
specified up to 30 years from origination, DDB claims occurring more 
than 30 years after origination are included in the year 30 rate. DDB 
rates for future cohorts are forecasted using weighted averages of 
prior year rates and have a number of additions and adjustment factors 
built into them to capture policies or anticipated discharges that are 
not reflected in the processed discharge data yet, including 
adjustments for anticipated increased borrower defense and closed 
school activity.
    For estimates related to waivers granted to borrowers enrolled in 
IDR repayment plans, the Department has a borrower and loan type level 
submodel that generates representative cashflows for use in the SLM. 
This IDR submodel contains information about borrowers' time in 
repayment, the use of deferments and forbearances, estimated incomes 
and filing statuses, and annual balances. Therefore, we are able to 
identify or assign the borrowers in the IDR submodel who would be 
eligible for one of the waivers in proposed Sec.  30.91 and incorporate 
that effect by ending the payment cycle for borrowers who would be 
eligible to receive a waiver under proposed Sec.  30.91(c) or (d).
    The estimated cost of waivers under proposed Sec.  30.91(c) or (d) 
varies depending on whether the borrower is in IDR, as well as whether 
the waiver is a full or partial discharge of the loan. Partial waiver 
of balances for borrowers already modeled to be on an IDR plan could 
have three different effects depending upon whether the borrower was 
expected to get IDR forgiveness prior to these waivers, and whether the 
waiver changes that anticipated outcome. These potential effects would 
be:
    1. Before and after the waiver is applied, borrowers are expected 
to receive some IDR forgiveness at the end of their repayment term. For 
these borrowers, the waivers would affect the amount ultimately 
forgiven, but because payments are based upon income and the amount of 
time borrowers would be expected to repay is unchanged, there would be 
no effect on the amount of anticipated future payments.
    2. The borrower was expected to receive IDR forgiveness before the 
waiver's application, but afterward is now expected to pay off their 
balance before receiving IDR forgiveness. Because these borrowers would 
now be expected to repay in less time, there would be some reduction in 
the amount of anticipated future payments.
    3. Before applying the waiver, the borrower was expected to retire 
their loan balance prior to receiving IDR forgiveness, but as a result 
of the policy would now be expected to retire their balance sooner. 
Because these borrowers would now be expected to repay in less time, 
there would be some reduction in the amount of anticipated future 
payments.

[[Page 87159]]

    Generally, we project that most partial waivers for borrowers 
modeled to be on IDR would end up in the first group. Since these 
borrowers would not see a change in the amount they pay before 
receiving forgiveness, we do not assign a cost to the waivers for these 
borrowers. Any costs for waivers granted to borrowers who are modeled 
to be on IDR come from either full waivers or the minority of borrowers 
in the second and third groups, for whom the waivers would reduce the 
number of payments needed to fully repay their loan.
    For estimates related to the effects of the proposed waiver 
provisions on borrowers with loans not in IDR plans, the Department's 
approach would be to: (1) estimate the potential waiver amounts 
borrowers would be eligible for and aggregate them by loan cohort, loan 
type, and budget risk group used in the SLM; (2) add the waiver amounts 
for non-defaulted, non-IDR borrowers to the Department's baseline DDB 
assumption in FY 2025; and (3) remove the amounts associated with the 
waiver provisions from defaulted, non-IDR borrowers from the baseline 
collections assumption. The revised IDR, DDB and collections groups are 
run in a SLM scenario for each provision to generate the estimates in 
Table 4.1. To produce the potential waiver amounts in Step 1 of this 
process, the Department developed a loan-level file based on the FY2023 
sample of NSLDS information used for preparing budget estimates, with 
balance information supplemented by redrawing key loan information as 
of June 13, 2024, to account for the discharges and waivers that 
occurred in FY2024 and reduced borrower's balances to zero. Information 
from this file would allow the evaluation of times in repayment that 
would qualify for one of the provisions and anticipated future balances 
for use in calculating the amount that the Secretary might waive for 
borrowers who have experienced changes in balance.
    These estimates are all based on the same random sample of 
borrowers that the Department uses for all other budget estimation 
activity related to Federal student loans. Currently, the most recent 
sample available is from the end of FY2023, which is the best currently 
available data that maintains the Department's consistent scoring 
practices.
    The Department followed two different approaches for modeling the 
estimated cost of the provisions in proposed Sec.  30.91(c) and (d). 
For proposed Sec.  30.91(c), the Department considered the output of 
the model developed to project the likelihood that a borrower would be 
in default within two years. We used that model to estimate the number 
of borrowers by risk group as well as repayment status (e.g., in 
default or in repayment) and estimated the cost of forgiving those 
loans. For the outyear cohorts, we randomly assigned borrowers to 
default based on default rates by cohort, risk group and loan type 
assumed in the President's Budget for FY2025 baseline. This approach 
reflects that under proposed Sec.  30.91(c), the Secretary may identify 
borrowers eligible for relief based on a predictive assessment, without 
requiring any action by those borrowers.
    The Department took a different approach for proposed Sec.  
30.91(d). That proposed provision describes an application-based 
pathway for relief whereby the Secretary may conduct a holistic 
assessment of the borrower's factors indicating hardship based on 
information obtained through an application process in addition to 
potentially supplementing that data with information already in the 
Department's possession. To model this approach, the Department 
generated assumptions of the number of borrowers who would be eligible 
for a waiver. Of this number of assumed eligible applicants, we then 
calculated the distribution of borrowers across risk group (e.g., 2-
year proprietary, graduate borrowers, and 4-year nonprofit or public 
institutions), and by cohort year. We describe this process in greater 
detail below.
    First, as described earlier, the Department considered multiple 
potentially comparable situations it has dealt with in the past to 
estimate the number of applications from borrowers seeking proposed 
waivers related to hardship. We examined the volume associated with 
borrowers on IDR plans, those who applied for student debt relief under 
the HEROES Act, and those who applied for economic deferment or 
hardship from a period prior to the payment pause. With no perfect 
analog but based on the best available data, we use a base estimate 
that about 1 million borrowers in the current portfolio would be 
approved for relief. The estimate of borrowers who would be affected in 
future cohorts over the next ten years is 1 million.
    To reduce the possibility in the net budget impact estimate that 
borrowers who might be otherwise captured under proposed Sec.  30.91(c) 
and could potentially be double counted in both proposed Sec.  30.91(c) 
and proposed Sec.  30.91(d), we estimated the cost of the waivers 
proposed in proposed Sec.  30.91(d) after accounting for the cost of 
proposed Sec.  30.91(c) and only allowed borrowers to receive a waiver 
under one of the proposed provisions. The Department seeks feedback 
about the assumed number of borrowers who would be approved for a 
waiver under proposed Sec.  30.91(d), and we will continue to refine 
this estimate.
    Next, to estimate the distribution of approved applicants across 
risk group and cohort year, the Department consulted the closest past 
situations that might operate similarly to the proposed waivers. This 
included looking at the distribution of borrowers across risk group and 
cohort year who submitted applications for relief under the HEROES Act 
Plan that was announced in August 2022, borrowers who ever defaulted on 
loans based on Department data, and borrowers who had a qualifying 
economic hardship forbearance or deferment. While not exact 
corollaries, these data nonetheless provide useful information on which 
types of borrowers might choose to apply. We believe these are better 
comparisons for thinking about the distribution of approved borrowers 
than other types of existing information. For instance, we do not think 
closed school loan discharges would be a good comparison, because those 
borrowers only come from colleges that closed, which would largely 
exclude public institutions. We also chose not to use borrowers who 
documented income and expense information when seeking a loan 
rehabilitation, because these borrowers are disproportionately likely 
to have not finished their postsecondary programs, whereas the hardship 
applications could come from borrowers who graduated but who are 
struggling on their loans in ways beyond just being in default.
    Specifically, to estimate the distribution of approved applicants 
across cohort years, the Department equally weighted the distributions 
observed under submitted applications for relief under the HEROES Act 
Plan that was announced in August 2022 and borrowers who ever defaulted 
on loans based on Department data. To calculate the distribution of 
borrowers across risk groups, the Department equally weighted the 
distributions observed under submitted applications for relief under 
the HEROES Act Plan that was announced in August 2022 and borrowers who 
had a qualifying hardship forbearance or deferment. If a cell reached 
100 percent of sampling in current Department data, the excess approved 
applicants were distributed within the respective cohort range row by 
weight. The resulting estimated

[[Page 87160]]

distribution of approved applicants is shown in Table 4.2.

                                                  Table 4.2--Estimated Percentage Distribution of Approved Applicants by Cohort and Risk Group
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                       Total
                                                                       Non-        Consolidated    Consolidated  -------------------------------------------------------------------------------
                                                                   consolidated     non-default       default          2-Yr                         4-Yr PubPri     4-Yr PubPri
                                                                                                                    Proprietary     2-Yr Public        FrSo            JrSr            Grad
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1994-2004.......................................................             0.6             0.2             1.3             1.3             1.4             3.5             0.9             9.1
2005-2009.......................................................             0.7             0.7             2.1             3.2             1.6             2.5             0.6            11.5
2010-2014.......................................................             2.3             2.4             6.9            10.5             5.1             8.3             2.1            37.4
2015-2019.......................................................             1.8             1.8             5.2             7.9             3.8             6.3             0.9            27.6
2020-2024.......................................................             0.9             0.9             2.8             4.2             2.0             3.3             0.1            14.3
                                                                 -------------------------------------------------------------------------------------------------------------------------------
    Total.......................................................             6.3             6.0            18.2            27.1            13.8            23.9             4.6           100.0
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Next, we randomly identified non-defaulted, non-IDR borrowers 
within each risk group and cohort year cell, based on the percentages 
shown in Table 4.2, to be in the approved applicant pool. We then 
waived the assumed future balances in the sample to generate the 
estimated increase in DDB claims or reduction in collections associated 
with the hardship application provisions. To provide a maximally 
conservative budget estimate, we assumed all of these approvals would 
result in full relief. Lesser amounts of relief would reduce the 
estimated cost.
    Table 4.3 shows the outstanding loan balances by risk group for 
approved borrowers from existing cohorts that entered repayment by 
2024.

           Table 4.3--Outstanding Loan Balances by Risk Group
                              [$ Millions]
------------------------------------------------------------------------
                                                            Outstanding
                       Risk group                          loan balances
------------------------------------------------------------------------
2-Yr Proprietary........................................             835
2-Yr Public.............................................           1,103
4-Yr PubPri FrSo........................................           6,099
4-Yr PubPri JrSr........................................           5,680
Grad....................................................           5,034
Consol..................................................           7,523
                                                         ---------------
    Total...............................................          26,275
------------------------------------------------------------------------

    The sampling process described above generated the estimated 
forgiveness for borrowers from existing cohorts for loans that entered 
repayment by 2024. For future cohorts and loans that enter repayment in 
2025 and later from existing cohorts, we calculated the percent of net 
volume that was associated with borrowers that entered repayment by 
2024 assigned to receive forgiveness by origination cohort, 
consolidation status, budget risk group, and time to receiving hardship 
forgiveness from entering repayment (offset). We then took the average 
forgiveness percentage of volume across origination cohorts by risk 
group, consolidation status, and offset to estimate the percent of 
volume that will enter repayment from 2025 and out that we estimate 
will receive hardship forgiveness. As we expect it will take borrowers 
some years in repayment to demonstrate persistent hardship, we have 
distributed forgiveness in the outyears evenly from years 5 to 15 in 
repayment. This estimated forgiveness is then summarized by origination 
cohort, consolidation status, budget risk group, loan type, and offset 
and added to the baseline estimate for the discharge assumption to 
generate the cost of Sec.  30.91(d).
    The Department also considered how to estimate how many 
applications it would receive, and the rate at which an application for 
waiver would be likely to be approved.
    As described previously, we assume that for every two borrowers who 
are eligible, there is one that is rejected because their needs are met 
via other Department payment relief options, such as IDR plans. We also 
assume that there would be borrowers who apply but do not meet the 
standard. On net, we assume that for every eligible applicant, there is 
also one ineligible applicant, for an effective approval rate of 50 
percent. The Department seeks feedback about these assumed approval 
rates, and we will continue to refine this estimate.
5. Accounting Statement
    As discussed in OMB Circular A-4, we have prepared an accounting 
statement showing the classification of the expenditures associated 
with the provisions of these proposed regulations. Table 5.1 provides 
our best estimate of the changes in annual monetized transfers that may 
result from these proposed regulations.
    Expenditures are classified as transfers from the Federal 
government to affected student loan borrowers.

      Table 5.1--Accounting Statement: Classification of Estimated
                              Expenditures
                              [In millions]
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Reduction in loans that are unlikely to be repaid in
 full in a reasonable period............................
Increased ability for borrowers to repay loans on which
 they have or are experiencing hardship.................
Reduced administrative burden for Department due to
 reduced servicing, default, and collection costs.......
Category:
    Paperwork Reduction Act burden on borrowers to                $11.14
     complete applications..............................
    Administrative costs to Federal government to update            $2.5
     systems and contracts to implement the proposed
     regulations........................................
    Administrative costs of staff reviews...............           $12.1
    Reduced transfers from borrowers due to waivers:....              2%
    Based on high likelihood of being in default........          $7,657
    Based on applications...............................          $4,432
------------------------------------------------------------------------


[[Page 87161]]

6. Alternatives Considered
    The Department considered the option of not proposing these 
regulations, as the Secretary has existing waiver authority under 
sections 432(a)(6) and 468(2) of the HEA. However, we believe these 
regulations are important to inform the public about how the Secretary 
would exercise this longstanding discretionary waiver authority in a 
consistent and transparent manner. The Department believes that 
foregoing these proposed regulations would reduce transparency about 
the Secretary's discretionary use of waiver. For all the reasons 
detailed above, hardship waivers would produce substantial, critical 
benefits for borrowers and the Department. Overall, as discussed above 
in the context of the relevant Executive Orders, the Department's 
analysis suggests that the benefits of the proposed regulations will 
outweigh their costs.
    As part of the development of these proposed regulations, the 
Department engaged in a negotiated rulemaking process in which we 
received comments and proposals from non-Federal negotiators 
representing numerous impacted constituencies. These included higher 
education institutions, legal assistance organizations, consumer 
advocacy organizations, student loan borrowers, civil rights 
organizations, State officials, and State attorneys general. Non-
Federal negotiators submitted a variety of proposals relating to the 
issues under discussion. Information about these proposals is available 
on our negotiated rulemaking website at https://www2.ed.gov/policy/highered/reg/hearulemaking/2023/index.html.
    Because the negotiators reached consensus on the proposed 
regulations in this NPRM, the Department did not consider alternative 
regulations in the drafting of this NPRM. We did, however, consider 
some alternatives during the negotiated rulemaking process.
    The Department considered including the issue of borrowers affected 
by servicer errors as a potential sign of hardship. However, we decided 
not to explicitly include that as a factor under proposed Sec.  
30.91(b) because the Department has existing procedures to address 
administrative errors without needing these specific regulations for 
them.
    The Department also considered using an exclusive list of factors 
indicating hardship in proposed Sec.  30.91(b) but concluded that a 
non-exhaustive list would provide necessary flexibility to consider 
unanticipated factors indicating hardship and to incorporate new types 
of data as they become available.
    As noted above, the Committee reached consensus on the regulatory 
language proposed in this NPRM.
7. Regulatory Flexibility Act
    The Secretary certifies, under the Regulatory Flexibility Act (5 
U.S.C. 601 et seq.), that this final regulatory action would not have a 
significant economic impact on a substantial number of ``small 
entities.''
    These regulations will not have a significant impact on a 
substantial number of small entities because they are focused on 
arrangements between the borrower and the Department. They do not 
affect institutions of higher education in any way, and those entities 
are typically the focus on the Regulatory Flexibility Act analysis. As 
noted in the Paperwork Reduction Act section, burden related to the 
final regulations will be assessed in a separate information collection 
process and that burden is expected to involve individuals.
8. Paperwork Reduction Act
    As part of its continuing effort to reduce paperwork and respondent 
burden, the Department provides the general public and Federal agencies 
with an opportunity to comment on proposed and continuing collections 
of information in accordance with the Paperwork Reduction Act of 1995 
(PRA) (44 U.S.C. 3506(c)(2)(A)). This helps make certain that the 
public understands the Department's collection instructions, 
respondents can provide the requested data in the desired format, 
reporting burden (time and financial resources) is minimized, 
collection instruments are clearly understood, and the Department can 
properly assess the impact of collection requirements on respondents.
    Proposed Sec.  30.91 in this NPRM contains information collection 
requirements. Under the PRA, the Department would, at the required 
time, submit a copy of these sections and an Information Collections 
Request to the Office of Management and Budget (OMB) for its review.
    A Federal agency may not conduct or sponsor a collection of 
information unless OMB approves the collection under the PRA and the 
corresponding information collection instrument displays a currently 
valid OMB control number. Notwithstanding any other provision of law, 
no person is required to comply with, or is subject to penalty for 
failure to comply with, a collection of information if the collection 
instrument does not display a currently valid OMB control number. In 
the final regulations, we would display the control numbers assigned by 
OMB to any information collection requirements proposed in this NPRM 
and adopted in the final regulations.
    Section 30.91--Waiver due to likely impairment of borrower ability 
to repay or undue costs of collection.
    Requirements: The NPRM proposes to add a new Sec.  30.91 to 34 CFR 
part 30 in which the Secretary would consider granting a waiver for 
borrowers experiencing hardship. To implement proposed Sec.  30.91(d), 
the Department would use an ``additional relief'' process using a 
holistic assessment approach, where the Department would consider 
information provided by a borrower through an application, based on a 
non-exclusive list of factors in proposed Sec.  30.91(b), indicating 
that they are experiencing hardship. Information would include items 
such as a borrower's household income and assets, payments on debt 
relative to household income, and exceptional amounts of costs for 
caretaking.
    While some of the information in proposed Sec.  30.91(b) could be 
obtained from the Department's administrative data, other information 
must be obtained from the borrowers themselves through an application. 
The information collected on the application would be used to assess 
eligibility for a hardship determination. The Department expects that 
the application for relief under proposed Sec.  30.91(d) would solicit 
a range of qualitative and quantitative information from the borrower 
to inform the Department's determination of whether the borrower 
satisfies the hardship standard.
    Burden Calculations:
    Sec.  30.91 Waiver due to likely impairment of borrower ability to 
repay or undue costs of collection.
    The proposed regulatory changes would add burden to borrowers and 
would require a new information collection. As discussed in the net 
budget impact section, we estimate that between 2.67 million and 8 
million borrowers would submit hardship applications. The costs are 
estimated using the median hourly wage of $23.11 reported by the Bureau 
of Labor Statistics for all occupations.\103\ We estimated the number 
of hours needed to complete the proposed application based upon 
discussions with Department staff that have worked on similar processes 
in the past. Through those conversations, we estimate that it

[[Page 87162]]

would take a typical borrower 1 hour to complete the application form 
to indicate they want to pursue the application-based process. The 
Department's two closest analogous types of application forms are the 
one that borrowers submit when filing a borrower defense to repayment 
application and the one that borrowers fill out to document their 
income and expenses when seeking to rehabilitate a defaulted loan. For 
borrower defense forms, the Department estimates that it takes a 
borrower 30 minutes (0.5 hours) to complete, while the rehabilitation 
form takes an estimated 60 minutes (1 hour) per borrower. We anticipate 
that the application form for the proposed hardship waiver would likely 
take as long as the rehabilitation form to fill out. We came to this 
conclusion because borrowers who want to provide information about 
indicators of hardship from their finances or assets may need to 
provide supplemental financial information. Applicants may have to put 
together documentation related to high essential expenses, such as 
health care or dependent care costs. They may also need to provide 
information about how they are experiencing hardship as a result of the 
items identified and why it is likely to persist.
---------------------------------------------------------------------------

    \103\ https://www.bls.gov/oes/current/oes_nat.htm#00-0000.
---------------------------------------------------------------------------

    Because we do not want to double count borrowers who may qualify 
for and receive relief under proposed Sec.  30.91(c), the estimate for 
proposed Sec.  30.91(d) illustrated below does not include borrowers 
who would be expected to receive full relief under proposed Sec.  
30.91(c).
    These figures and considerations are the basis for the following 
estimations.

Sec.  30.91 Hardship Application--OMB Control Number 1845-NEW

----------------------------------------------------------------------------------------------------------------
                                                                                                    Cost $22.31
                         Affected entity                           Applications    Burden hours      per hour
----------------------------------------------------------------------------------------------------------------
Individual low scenario.........................................       2,667,000       2,667,000      59,500,770
Individual medium scenario......................................       4,000,000       4,000,000      89,240,000
Individual high scenario........................................       8,000,000       8,000,000     178,480,000
    Average Total...............................................       4,889,000       4,889,000     109,073,590
----------------------------------------------------------------------------------------------------------------

    Consistent with the discussions above, the following chart 
describes the sections of the proposed regulations involving 
information collections, the information being collected and the 
collections that the Department would submit to OMB for approval and 
public comment under the PRA, and the estimated costs associated with 
the information collections. The monetized net cost of the increased 
burden for borrowers using wage data was developed using Bureau of 
Labor Statistics (BLS) data. For individuals, we have used the median 
hourly wage for all occupations, $23.11 per hour according to BLS.\104\
---------------------------------------------------------------------------

    \104\ https://www.bls.gov/oes/current/oes_nat.htm#00-0000.

                                            Collection of Information
----------------------------------------------------------------------------------------------------------------
                                                                                                  Estimated cost
          Regulatory section                Information collection       OMB control number and     $23.11 per
                                                                            estimated burden           hour
----------------------------------------------------------------------------------------------------------------
Sec.   30.91..........................  Would allow the Secretary to    1845-NEW 4,889,000          $109,073,590
                                         receive applications that       average hours.
                                         provide information for the
                                         Secretary to conduct hardship
                                         determinations..
                                                                       -----------------------------------------
    Total.............................  ..............................  1845-NEW 4,889,000......     109,073,590
----------------------------------------------------------------------------------------------------------------

    If you wish to review and comment on the Information Collection 
Requests, please follow the instructions in the ADDRESSES section of 
this notification.
    Note: The Office of Information and Regulatory Affairs in OMB and 
the Department review all comments posted at www.regulations.gov.
    In preparing your comments, you may want to review the Information 
Collection Request, including the supporting materials, in 
www.regulations.gov by using the Docket ID number specified in this 
notification. This proposed collection is identified as proposed 
collection 1845-NEW.
    We consider your comments on these proposed collections of 
information in--
    <bullet> Deciding whether the proposed collections are necessary 
for the proper performance of our functions, including whether the 
information will have practical use.
    <bullet> Evaluating the accuracy of our estimate of the burden of 
the proposed collections, including the validity of our methodology and 
assumptions.
    <bullet> Enhancing the quality, usefulness, and clarity of the 
information we collect; and
    <bullet> Minimizing the burden on those who must respond.
    Consistent with 5 CFR 1320.8(d), the Department is soliciting 
comments on the information collection through this document. Between 
30 and 60 days after publication of this document in the Federal 
Register, OMB is required to make a decision concerning the collections 
of information contained in these proposed priorities, requirements, 
definitions, and selection criteria. Therefore, to make certain that 
OMB gives your comments full consideration, it is important that OMB 
receives your comments on these Information Collection Requests by 
December 2, 2024.
9. Intergovernmental Review
    This program is subject to Executive Order 12372 and the 
regulations in 34 CFR part 79. One of the objectives of the Executive 
Order is to foster an intergovernmental partnership and a strengthened 
Federalism. The Executive order relies on processes developed by State 
and local governments for coordination and review of proposed Federal 
financial assistance.

[[Page 87163]]

    This document provides early notification of our specific plans and 
actions for this program.
10. Assessment of Education Impact
    In accordance with section 411 of the General Education Provisions 
Act, 20 U.S.C. 1221e-4, the Secretary particularly requests comments on 
whether these final regulations would require transmission of 
information that any other agency or authority of the United States 
gathers or makes available.
11. Federalism
    Executive Order 13132 requires us to provide meaningful and timely 
input by State and local elected officials in the development of 
regulatory policies that have Federalism implications. ``Federalism 
implications'' means substantial direct effects on the States, on the 
relationship between the National Government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government. The proposed regulations do not have Federalism 
implications.
    Accessible Format: On request to the program contact person(s) 
listed under FOR FURTHER INFORMATION CONTACT, individuals with 
disabilities can obtain this document in an accessible format. The 
Department will provide the requestor with an accessible format that 
may include Rich Text Format (RTF) or text format (txt), a thumb drive, 
an MP3 file, braille, large print, audiotape, or compact disc, or 
another accessible format.
    Electronic Access to This Document: The official version of this 
document is the document published in the Federal Register. You may 
access the official edition of the Federal Register and the Code of 
Federal Regulations at www.govinfo.gov. At this site you can view this 
document, as well as all other documents of this Department published 
in the Federal Register, in text or Adobe Portable Document Format 
(PDF). To use PDF, you must have Adobe Acrobat Reader, which is 
available free at the site.
    You may also access documents of the Department published in the 
Federal Register by using the article search feature at 
www.federalregister.gov. Specifically, through the advanced search 
feature at this site, you can limit your search to documents published 
by the Department.

Miguel Cardona,
Secretary of Education.

    For the reasons discussed in the preamble, the Secretary of 
Education proposes to revise part 30 of title 34 of the Code of Federal 
Regulations as follows:

List of Subjects in 34 CFR Part 30

    Claims, Income taxes.

    For the reasons discussed in the preamble, the Department of 
Education proposes to amend 34 CFR part 30 to read as follows:

PART 30--DEBT COLLECTION

0
1. The authority citation for part 30 continues to read as follows:

    Authority: 20 U.S.C. 1221e-3(a)(1), and 1226a-1, 31 U.S.C. 
3711(e), 31 U.S.C. 3716(b) and 3720A, unless otherwise noted.

0
2. Add subpart G, consisting of Sec.  30.91 to read as follows:

Subpart G--Waiver of Federal Student Loan Debts


Sec.  30.91  Waiver due to likely impairment of borrower ability to 
repay or undue costs of collection.

    (a) Standard for waiver due to hardship. The Secretary may waive up 
to the outstanding balance of a loan owed to the Department arising 
under the Federal Family Education Loan Program authorized under title 
IV, part B, of the HEA, the William D. Ford Federal Direct Loan Program 
authorized under title IV, part D, of the HEA, the Federal Perkins Loan 
Program authorized under title IV, part E, of the HEA, and the Health 
Education Assistance Loan Program authorized by sections 701-720 of the 
Public Health Service Act, 42 U.S.C. 292-292o, when the Secretary 
determines that a borrower has experienced or is experiencing hardship 
related to such a loan such that the hardship is likely to impair the 
borrower's ability to fully repay the Federal government or the costs 
of enforcing the full amount of the debt are not justified by the 
expected benefits of continued collection of the entire debt.
    (b) Factors that substantiate hardship. In determining whether a 
borrower meets the conditions described in paragraph (a) of this 
section, the Secretary may consider any indicators of hardship related 
to the borrower, including but not limited to--
    (1) Household income;
    (2) Assets;
    (3) Type of loans and total debt balance owed for loans described 
in paragraph (a) of this section, including those not owed to the 
Department;
    (4) Current repayment status and other repayment history 
information;
    (5) Student loan total debt balances and required payments, 
relative to household income;
    (6) Total debt balances and required payments, relative to 
household income;
    (7) Receipt of a Pell Grant and other information from the FAFSA 
form;
    (8) Type and level of institution attended;
    (9) Typical student outcomes associated with a program or programs 
attended;
    (10) Whether the borrower has completed any postsecondary 
certificate or degree program for which they received title IV, HEA 
financial assistance;
    (11) Age;
    (12) Disability;
    (13) Age of the borrower's loan based upon first disbursement, or 
the disbursement of loans repaid by a consolidation loan;
    (14) Receipt of means-tested public benefits;
    (15) High-cost burdens for essential expenses, such as healthcare, 
caretaking, and housing;
    (16) The extent to which hardship is likely to persist; and
    (17) Any other indicators of hardship identified by the Secretary.
    (c) Immediate relief for borrowers likely to default. The Secretary 
may consider any indicators of hardship related to the borrower, 
including but not limited to the factors described in paragraph (b) of 
this section to waive all or part of the federally held student loans 
of borrowers who the Secretary determines based on data in the 
Secretary's possession have experienced or are experiencing hardship 
such that their loans are at least 80 percent likely to be in default 
in the next two years after October 31, 2024.
    (d) Process for additional relief. In exercising the authority 
described in paragraph (a) of this section, the Secretary may rely on 
data in the Secretary's possession that may have been acquired through 
an application or any other means to provide relief, including 
automated relief, based on criteria demonstrating the conditions 
described in paragraph (a) of this section.

[FR Doc. 2024-25067 Filed 10-30-24; 8:45 am]
BILLING CODE 4000-01-P


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