President Joe Biden is simplifying the rules for student loan cancellation.
Here’s what you need to know — and what it means for your student loans.
Inside Biden’s major proposal to make student loan cancellation easier for student loan borrowers are several rule changes related to borrower defense to repayment. This Obama-era rule helps student loan borrowers who were misled by their college or university or had their school closed to get their student loans canceled. Last month, Biden canceled $6 billion of student loans for 200,000 student loan borrowers through borrower defense to repayment. Here are 7 ways it could become easier to get student loan forgiveness through borrower defense to student loan repayment.
1. Easier process for student loan relief
Previously, student loan borrowers had to navigate different processes for student loan relief based on the year in which their student loans were disbursed. Now, the Biden administration will create a single, streamlined process for student loan borrowers to get student loan relief through borrower defense to repayment.
2. Expand the definition of misconduct by a college or university
The U.S. Department of Education will allow student loan borrowers to get a student loan discharge based on five categories of misconduct by a college or university: (a) substantial misrepresentations; (b) substantial omissions of fact; (c) breaches of contract; (d) aggressive and deceptive recruitment; or (e) state or federal judgments or final Department of Education actions that could give rise to a borrower defense claim.
3. Trust student loan borrowers
The Biden administration will presume that student loan borrowers reasonably relied upon any misrepresentations or omissions.
4. Better process to challenge any rejection of student loan forgiveness
If you got rejected for student loan forgiveness through borrower defense to repayment, the Biden administration wants to give you a second chance. For example, if you are not approved for a total discharge of your student loans, there will be a reconsideration process.
5. Easier way to get student loan forgiveness as a group
Previously, individual student loan borrowers had to present their case for student loan cancellation through borrower defense to repayment. Now, the Biden administration will make it easier for groups of student loan borrowers to file a claim for student loan forgiveness based on a common set of facts or circumstances.
6. Colleges will pay for student loan cancellation
The U.S. Department of Education says it will hold colleges and universities accountable for the cost of a student loan discharge. That said, the Education Department will ensure student loan borrowers get student loan relief faster and won’t make them wait for the college or university to pay for the discharge.
7. No more arbitration agreements to student loan cancellation
The Biden administration wants to stop colleges and universities from requiring student loan borrowers to agree to pre-dispute arbitration agreements or relinquishing their right to participate in a class action lawsuit. Instead, student loan borrowers can seek relief for a borrower defense to repayment claim in court.
Student loans: next steps
Expect these proposed rules for student loan forgiveness to become permanent ones. There is a 30-day public comment period during which you can provide feedback on these rules to the U.S. Department of Education. Following the public comment period, the Education Department will finalize the rules by November 1, 2022 and implement the changes no later than July 1, 2023. These changes to student loan forgiveness apply only to borrower defense to repayment and are separate from any potential wide-scale student loan cancellation. Biden has said he will announce a decision on broad student loan forgiveness in the coming weeks. Importantly, the student loan payment pause ends on August 31, 2022, when federal student loan payments will restart. Know all your options to pay off student loans, including these popular srategies to save money:
- Student loan refinancing (lower interest rate + lower payment)
- Income-driven repayment (lower payment)
- Student loan forgiveness (federal student loans)
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