The Education Department on Monday announced sweeping new changes to the federal student loan system, including additional consumer protections for borrowers and limits on the amount of interest that is able to accrue, CNBC reported.
According to the department’s release, the new regulations expand eligibility, remove barriers to relief, and encourage automatic discharges for borrowers who are eligible for loan relief because their school closed, they have a total and permanent disability, or their loan was falsely certified. They also establish a fairer process for borrowers to raise a defense to repayment, while preventing schools from forcing students to sign away their legal rights via mandatory arbitration agreements and class-action waivers.
“Today is a monumental step forward in the Biden-Harris team’s efforts to fix a broken student loan system and build one that’s simpler, fairer, and more accountable to borrowers,” Secretary of Education Miguel Cardona said in a statement.
“These transformational changes will protect students who’ve been cheated by their colleges from the bureaucratic nightmares of the past and ensure that all our targeted debt relief programs live up to the promises made by Congress in the Higher Education Act. We’re also protecting borrowers from higher costs by limiting the practice of tacking unpaid student loan interest onto their principal balances,” he continued.
As for the Biden administration’s student loan forgiveness plan, that remains on hold after a federal appeals court granted the request from six Republican-led states to freeze the policy while its legal challenge unfolds.
Late last week, President Joe Biden predicted that applicants would start receiving their checks within two weeks, according to a Bloomberg report. “We’re going to win that case,” he said in an interview with NewsNation. “I think in the next two weeks you’re going to see those checks going out.”
The Biden administration started taking student debt cancellation applications on October 14, and officials have said that it could take weeks to process and grant relief. The White House has said that twenty-two million Americans already have sent in their applications for the program.
Under the student-loan relief plan, those with federal student loans who make under $125,000 annually, or couples earning less than $250,000, qualify for up to $10,000 in forgiveness. But if a borrower received a Pell Grant to attend college, they could potentially get up to $20,000 in relief.
Ethen Kim Lieser is a Washington state-based Finance and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.