ED set an ambitious Fall agenda with plans to tackle several topics that are relevant to higher education institutions. We summarize below the topics on the negotiated rulemaking agenda, categorized in terms of topics that have direct implications for institutions and those that relate predominantly to student borrowers and Pell Grant recipients. Of particular note, ED proposes to consider modifications to the borrower defense to repayment regulations, which were first promulgated during the Obama Administration and then amended during the Trump Administration.
Based on the HEA Master Calendar, ED must promulgate a final rule by November 1 in any year in order for the rule to be effective July 1 the following year. Accordingly, July 1, 2023 is the earliest possible effective date for any regulations that are developed based on the negotiated rulemaking process.
Topics that have direct implications for institutions
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Closed school discharge (which applies to closures of entire schools as well as closure of locations)
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ED notes that several aspects of the current closed school discharge process limit the ability of borrowers to receive closed school discharges. Accordingly, ED proposes the following changes: (1) Reinstating automatic closed school discharges; (2) Establishing a consistent window of eligibility for students who withdrew from a school before it closed; (3) Defining “comparable program” for purposes of a closed school discharge; and (4) Expanding the list of examples of exceptional circumstances. This item warrants attention because institutions are held financially responsible for loan amounts discharged pursuant to the closed school discharge process.
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Borrower defense to repayment – adjudication process
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Borrower defense to repayment – post-adjudication
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ED proposes to address the post-adjudication treatment of borrower defense to repayment claims. ED specifically seeks to address situations where approved claims provide insufficient relief and the lack of a reconsideration process.
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ED proposes to adopt a presumption of full relief for approved borrower defense claims. This presumption could be rebutted with evidence illustrating that the harm to the borrower is less than what they would receive from a full discharge. ED also proposes to establish reconsideration procedures that borrowers may pursue if their borrower defense claim is denied or only granted partial relief.
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Borrower defense to repayment – recovery from institutions
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Pre-dispute arbitration
Topics that relate predominantly to recipients of Pell Grants and federal loans
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Total and permanent disability (TPD) discharge
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Creating a new income-driven repayment (IDR) plan
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To improve the IDR program, ED seeks feedback on several topics, such as lowering the discretionary income repayment rate on undergraduate loans to 5 percent, exempting income up to 150 percent of the federal poverty line based on family size, creating greater clarity among the various IDR plans, and improving the IDR program to reduce delinquency and default.
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False certification discharge
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Pell grant eligibility for prison education
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In December 2020, Congress codified much of the Obama Administration’s Second Chance Pell experiment, which allows incarcerated individuals access to Federal Pell Grant funds for qualifying prison education programs. To implement this statute, ED seeks feedback on several topics, such as student, institutional, and program eligibility, as well as how to structure the annual reporting requirement.
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Eliminate interest capitalization for non-statutory capitalization events
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Improving the Public Service Loan Forgiveness (PSLF) Application Process
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Although ED must cancel outstanding balances for borrowers employed in public service after 120 qualified payments have been made, ED has expressed concern that very few borrowers who apply for PSLF receive forgiveness. Accordingly, ED proposes the following revisions to the application process to improve the PSLF program: (1) Removing application requirements when ED determines borrowers do not need one; (2) Simplifying the regulations to ensure that an amount paid by the borrower equal to the full scheduled payment due counts toward forgiveness; (3) Allowing certain deferments and forbearances to count as payments; (4) Stopping the clock restart upon consolidation; (5) Providing FFEL lender notifications to borrowers about PSLF eligibility; and (6) Establishing a PSLF Reconsideration Process allowing for eligibility denial appeals.
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PSLF employer eligibility and full-time employment
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ED has highlighted several issues with the current eligibility guidelines, such as the difficulty determining eligibility when an organization does not have 501(c)(3) status but still serves the public. ED proposes the following solutions to improve eligibility issues: (1) Defining the primary services of a private organization to allow organizations without 501(c)(3) status that serve the public greater participation in PSLF; and (2) Clarifying the definition of full-time employment.
Committee meetings are public and can be accessed virtually. ED will post committee recordings and meeting transcripts to its website. Parties interested in registering for future committee meetings can register for the sessions on ED’s website and access relevant resources and materials here. The remaining two sessions are scheduled for November 1-5, 2021, and December 6-10, 2021.
Please contact us if you would like additional information regarding the rulemaking.
Authored by Stephanie Gold and Will Crawford.