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# Education Department Releases Proposed Regulations to Expand and Improve Targeted Relief Programs

# Education Department Releases Proposed Regulations to Expand and Improve Targeted Relief Programs

July 6, 2022

**Contact:  **press@ed.gov

                                    -        
Today, the U.S. Department of Education  (Department) released proposed regulations that would expand and improve the  major student loan discharge programs authorized by the Higher Education Act.  The regulations propose to alleviate student loan debt burdens for borrowers  whose schools closed or lied to them, who are totally and permanently disabled,  and for public service workers who have met their commitments under the Public  Service Loan Forgiveness (PSLF) program. The regulations also propose stopping  many instances of interest capitalization, which occur when unpaid  interest is added to a borrower’s principal balance, increasing the total  amount they owe. Finally, the regulations propose to give borrowers their day  in court if they have disputes with their colleges. Today’s proposals build  upon the work the Biden-Harris Administration has already done to improve the  student loan program, make college more affordable, and deliver tens of  billions of dollars in relief to over one million student loan borrowers across  the country.

“We are committed  to fixing a broken system. If a borrower qualifies for student loan  relief, it shouldn’t take mountains of paperwork or a law degree to obtain it,”  said U.S. Secretary of Education Miguel Cardona. “Student loan benefits also  should not be so hard to get that  borrowers never actually benefit from them.  The Biden-Harris Administration is determined to build a more accessible, affordable, and  accountable student loan system. These proposed regulations will  protect borrowers and save them time, money, and frustration, and will hold  their colleges responsible for wrongdoing.”

  This regulatory  package is part of the Biden-Harris Administration’s continued  commitment to making student loan programs work, including delivering targeted  relief to eligible borrowers and ensuring they have an affordable and effective  path out of debt. The Administration’s efforts to date have resulted in the  approval of nearly $26 billion for more than 1.3 million federal student  loan borrowers, more than any other Administration in history. When finalized, these proposed regulations  would establish lasting improvements to federal  student loan programs that address concerns the Department has heard from  borrowers and experts throughout the regulatory process.

“We’ve heard from borrowers  who have faced roadblocks when attempting to pursue the loan relief they’ve  earned or are entitled to,” said James Kvaal, Under Secretary of Education.  “Whether it is for closed school discharges, borrower defense claims, PSLF, or  relief after a total and permanent disability, borrowers have had to navigate  narrow rules and a needlessly complicated system. What’s worse, borrowers whose  schools lied to them can’t pursue litigation because restrictive and unfair  arbitration requirements and class action bans were foisted on them by their  colleges. Borrowers should not have to jump through hoops to get the relief  they deserve. The regulations we’ve proposed today would remove many of those  barriers and help create a federal student loan system that works better for  borrowers.”

  The proposed  regulations will be published in the coming days and the public is invited  to comment on the proposed regulations for 30 days. The Department aims to  finalize these rules by November 1 of this year, meaning they will take effect  no later than July 1, 2023. The rules propose needed and critical  improvements to the student loan system including:

**Borrower  defense to repayment and arbitration**

  The proposed regulations would create a fair  path for borrowers to receive a discharge if their colleges lied to or took  advantage of them. This includes allowing for group claims, eliminating overly  strict limits on when borrowers can file a claim, expanding the type of  misconduct that can lead to an approved claim to include aggressive and  deceptive recruitment practices, and ensuring borrowers receive timely  decisions about their claims.

  To curb predatory behavior by colleges, the Department  proposes a strong process for recouping the costs of such discharges from the  college, running for at least six years following the borrower’s last date of  attendance at the school. The Department also proposes ensuring that borrowers  whose schools take advantage of them be allowed their day in court, by  prohibiting colleges from requiring borrowers to sign mandatory pre-dispute  arbitration agreements or class-action waivers. Additional transparency into arbitration  proceedings that do occur will help the Department investigate possible  wrongdoing.

**PSLF**

  The Department proposes to make it easier for borrowers  working in public service to gain progress toward forgiveness. Specifically,  the Department proposes allowing more payments to qualify for PSLF including  partial, lump sum, and late payments, and allowing certain kinds of deferments  and forbearances (such as those for Peace Corps and AmeriCorps service,  National Guard duty, and military service) to count toward PSLF. The Department  also proposes to ensure the rules work better for non-tenured instructors whose  colleges need to calculate their full-time employment. It also seeks comments  on how best to consider the eligibility for PSLF of doctors providing services  at nonprofit hospitals in states that prohibit their direct employment by that  hospital and employees of for-profit early education programs that are licensed  and regulated. The Department also proposes to create a formal reconsideration  process in the regulations for borrowers whose applications are denied.

These proposed regulatory changes would build on parts of  the limited PSLF waiver that  the Department announced in October 2021. That waiver allows borrowers to count  all their payments toward PSLF, provides for an automatic reconsideration  process for borrowers whose payments or applications were previously denied,  and provides for some automatic application of credit towards forgiveness. However,  not all of the limited PSLF waiver provisions are included in the proposed  regulations due to statutory restrictions. Borrowers seeking to count their  payments on Federal Family Education Loans toward forgiveness should apply for PSLF before  October 31, 2022.

**Interest  capitalization**

  The Department proposes to protect borrowers from seeing  their balances balloon by removing instances of interest capitalization  wherever it is not required by statute. Interest capitalization occurs when  accrued interest is added to the principal balance of the loan, so that future  interest accrues on a higher amount. The Department proposes to eliminate  capitalization when a borrower enters repayment, exits forbearance, defaults on  a student loan, and exits most of the income-driven repayment plans. These  changes will help borrowers who struggle to repay their loans.

**Total  and permanent disability discharges**

  The proposed regulations would help more borrowers who  are totally and permanently disabled receive and keep the discharge they are  entitled to under the law. The proposed regulations would allow for a broader  set of disability statuses recognized by the Social Security Administration  (SSA) to qualify for discharge, eliminate the three-year income-monitoring  period for borrowers who receive discharges based upon a determination by a  physician or SSA, and widen the types of documentation and signatures borrowers  may submit to demonstrate they are eligible for relief. The Department is  particularly concerned that the income monitoring requirements have caused far  too many borrowers to lose their discharges even though they still have low  incomes.

**Closed  school discharges**

  In recent years, the Department has seen a significant  number of college closures, and often these schools leave borrowers holding  debt but no degree. Many of those borrowers default on their loans after the  closure. The proposed regulations provide automatic discharges to any borrower  who was enrolled within 180 days prior to the closure and who didn’t complete  their education at the school or via an approved teach-out agreement at another  school within one year after the closure of their original school.

**False  certification**

  The Department proposes to streamline the rules for when  a college falsely certifies a borrower’s eligibility for student loans when, in  fact, the student was ineligible. These proposed rules would provide these  borrowers with an easier path to a discharge. These improvements include  expanding allowable documentation and clarifying the applicable dates for a  discharge. The Department also proposes to allow for group false certification  claims, so that similarly affected borrowers don’t need to individually apply  for relief when sufficient evidence exists.

**An  Equitable Agenda for an Education Beyond High School**

The proposed regulations released today are the latest  action in the Department’s ongoing agenda to support a stronger, more equitable  student aid system. The Department launched negotiations on affordability and  student loan issues with a series of public hearings in June 2021. The  negotiating committee, which was formed to develop proposed language, reached  consensus on three of the issues being announced today: interest  capitalization, total and permanent disability discharges, and false  certification discharges. The negotiating committee also reached agreement on  regulations governing a statutory change to make incarcerated individuals  eligible to receive Pell Grants. Those regulations and the income-driven  repayment changes negotiated by the committee will be released in a separate  notice this summer.

After negotiating on key issues to ensure a strong  student loan safety net, the Department also formed a committee and negotiated  critical issues related to ensuring accountability for colleges and programs  that receive federal aid. Proposed regulations for two of those issues, the  90/10 rule and rules governing changes in ownership for colleges, will be  released along with the rules surrounding Pell Grants for incarcerated  individuals and income-driven repayment.

The remainder of those issues, including the Department’s  landmark gainful employment regulations that would require career training  programs to meet minimum standards for their outcomes to retain eligibility for  federal aid, will be released in early 2023.

The proposed regulations released today are part of the  Administration’s ongoing efforts to address challenges in the student loan  system with long-term improvements. The Biden-Harris Administration has already  approved nearly $26 billion in targeted student loan relief for more than 1.3  million borrowers through executive action. This includes:
- Approximately $8 billion       through borrower defense;
- Nearly $9 billion to       borrowers who are totally and permanently disabled; 
- More than $8 billion to       public servants through the PSLF program; and
- Over $1 billion in       closed school discharges. 

The Department also recently announced steps  to remedy long-standing problems in the income-driven repayment plans that will  help tens of thousands of borrowers receive forgiveness through that program  and through PSLF.

  View unofficial copy of proposed regulations here and fact sheet with further information here.
   -  Tags: RegulationStudent Loan ProgramsPublic Service Loan Forgiveness (PSLF)Closed School Loan DischargesPress Releases
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