Joe Biden and Student Loans: What He’s Done for Borrowers

On July 6, the Biden administration proposed new regulations intended to improve existing forgiveness programs and prevent instances of interest capitalization on loans (when unpaid interest is added to your loan's principal). The new regulations will take effect no later than July 1, 2023. Here's what the changes include:

Prevent interest from capitalizing when it isn’t required by statute. That includes when a borrower is:

• Entering repayment, which happens typically six months after leaving school or graduating.

• Exiting an administrative forbearance, which is automatic and happens when the education department or a servicer is processing paperwork.

• Leaving a hardship forbearance.

• Defaulting on a student loan.

• During periods of negative amortization under alternative payment plans or income-driven repayment plans.

• Exiting or failing to update income-driven repayment plans including the most accessible plan Revised Pay As You Earn or REPAYE.

Simplify rules for the borrower defense program.

• Borrower defense claims are filed by students who were defrauded or misled by their schools. New rules would establish clearer standards for the types of misconduct under which a borrower could file a claim including: aggressive and deceptive recruitment practices; substantial misrepresentations; substantial omissions of fact; breaches of contract; state or federal judgments or final Department of Education actions.

• Colleges would be on the hook to cover discharge costs. But borrowers won’t have to wait for the recoupment process to complete before they receive a discharge.

• Allow for group applications instead of individual applications. And create a clear process to form groups of borrowers.

• Create a reconsideration process for borrowers whose claims are not approved for a full discharge.

Improve arbitration access and transparency.

• Schools would no longer be able to require students to sign mandatory pre-dispute arbitration agreements or class action waivers.

• Prohibit colleges from requiring students to enter into an internal dispute resolution process before making a complaint to the college’s accreditor or government agency.

• Require colleges to be more transparent including disclosing the use of arbitration and provide records connected to borrower defense claims.

• Require a centralized database of arbitral and judicial records that relate to borrower defense claims.

Expand Public Service Loan Forgiveness eligibility.

• Allow more payments to qualify including lump-sum, partial payments and late payments.

• Count months of “nonpayment” during certain types of pauses including administrative forbearances when the department processes paperwork; cancer treatment deferment; economic hardship deferment; and military service deferments.

• Create a reconsideration process for denied applications.

• Clarify the definition of a qualifying employer.

• Better define full-time employment as a 30-hour work week.

Broaden access to Total and Permanent Disability Discharge

• Allow for more disability statuses (as recognized by the Social Security Administration) to qualify.

• Eliminate the three-year monitoring period that tracks a borrowers’ income after they get their loans discharged. The department says this monitoring has been the cause of half of all TPD discharges being reinstated.

• Allow for automatic TPD discharge “wherever the Department is able to do so.” It is unclear when this would be.

Speed up automated closed school discharge. Shorten the period for automatic discharge from three years to one year of a school’s closure. This rule would only apply to borrowers still enrolled 180 days before closure and would not apply to borrowers who complete a teach out elsewhere.

Recent court rulings suggest some of the strict standards for getting student loans discharged in bankruptcy could be easing. Student loan discharge through bankruptcy is challenging because borrowers must prove their debt proves an “undue hardship” (known as the “Brunner test”). Sometimes private student loan borrowers are successful, but it almost never happens for federal student loan borrowers.

The Department of Education in February announced it would withdraw its appeal of a bankruptcy decision that would discharge $100,000 in student loans for a man whose medical condition made it difficult for him to hold down a job to repay his debt. The department has also indicated it is reviewing bankruptcy standards.

There’s also a income-driven repayment waiver available through May 2023 that would cut through some of the red tape — at least for the next year — that led to high denial rates for loan forgiveness under the program.

Under the limited waiver, a broader set of loan types and repayment plans will be eligible for PSLF including past payments on FFEL or Perkins loans, late payments and payments made on previously non-qualifying repayment plans. Additionally, members of the military with federal student loans will also have any time spent in active duty count toward PSLF, regardless of whether payments were made during that time.

Borrowers must consolidate their loans into a direct loan and submit a PSLF form before Oct. 31 to benefit from the limited waiver.

As a result of the limited waiver, the Education Department estimates that 22,000 borrowers will automatically become eligible to have their loans discharged, and another 27,000 could as well if they certify their employment history. Overall, this could result in over $4.5 billion of loan forgiveness.

On Feb. 18, the Consumer Financial Protection Bureau said it would be stepping up its oversight of how servicers are implementing the waiver. The bureau said it had found "servicers made deceptive statements to borrowers about their ability to become eligible for PSLF." If you are having difficulty receiving the help you need from your servicer, you can make a complaint to the CFPB.

Biden proposed making the changes under the PSLF waiver permanent as part of his Aug. 24 student loan forgiveness announcement.

Beginning April 2022, borrowers whose applications were rejected for PSLF and Temporary Expanded PSLF can request a reconsideration online at studentaid.gov. Anyone who thinks their application should be reconsidered can submit a request.

You can submit one or more reconsideration requests of your application to certify employment or payment determinations. You won't need to provide more documentation with your request, but you might have to provide more information following its review. There was no deadline provided.

You still must meet payment and employment requirements under the law, which includes the current waiver that would count previously ineligible payments.

To figure out if you need a reconsideration of your employer, you can use the PSLF Help Tool. If your employer isn’t eligible, consider supplying documentation as to why the not-for-profit organization you work for should qualify.

Biden issued an executive order on Dec. 13 instructing multiple government agencies, including the Department of Education, to make updates to improve the delivery of government services. Details are still emerging, but borrowers can expect these changes:

Shifts are happening among student loan servicers, the private companies that manage federal student loans. Federal student loan servicers like FedLoan, Navient, GSMR and Cornerstone have left the space. That means your loans could change hands. Multiple loan servicers will be taking on the FedLoan portfolio including MOHELA, Aidvantage (formerly Navient), Edfinancial and Nelnet. But only MOHELA will be managing the PSLF program.

The ongoing forbearance period now ends as late as this summer, depending on the outcome of several lawsuits. Borrowers with federal student loans should begin making plans soon to ensure they’re prepared for when payments restart in 2023.

» MORE: Student loan pause is extended, with payments resuming as late as August 2023.

If you’re unsure whether you’ll be able to afford your student loan payments later this year, start setting aside your monthly student loan payment now to see if you can work it into your budget.

All collections activities through the Treasury offset program on federal student loans in default are suspended until after the payment pause ends, which includes the withholding of 2021 tax refunds, the child tax credit or Social Security benefits.

If you’re having trouble setting your payment aside or know you’ll have trouble paying your loans when payments restart, contact your servicer now to discuss income-driven repayment plans.

An IDR plan will limit payments to a portion of your income and will extend your payment term. Contact your servicer now, so you’ll be ready with a payment plan that works for your income.

» MORE: Student loan payment plan promises forgiveness, but rarely delivers

Through Feb. 28, 2023, you can temporarily self-report income when applying for or recertifying an income-driven repayment plan, according to the Education Department. That means you don't have to submit tax documentation when you submit an IDR application online. The Student Loan Servicing Alliance confirmed in December that borrowers may also self-certify by phone.

When student loan payments restart, all federal loan borrowers with loans in delinquency or default can get a “fresh start,” the education department announced Aug. 18. That means these borrowers will once again have access to income-driven repayment plans, Public Service Loan Forgiveness and will no longer face collections fees and other consequences of default. You will not have to consolidate, rehabilitate or come up with a lump sum of cash in order to get out of default under the initiative. You just need to make a call and pay the agreed-upon monthly amount under one of the income-driven options available.

Millions of borrowers are expected to benefit from one-time fixes that count past payments toward the 240 or 300 needed to qualify for income driven repayment forgiveness, the Department of Education announced on April 19. The fixes are also expected to cancel debt for at least 40,000 borrowers through Public Service Loan Forgiveness.

In 2023, federal student aid will also start displaying income-driven repayment payment counts on StudentAid.gov when borrowers log into their accounts. A one-time adjustment will allow more payments and months spent in deferment and forbearance to count toward income-driven repayment forgiveness moving forward.