Biden’s ‘Plan B’ For Student Loan Debt Forgiveness Fails Big Test

President Joe Biden’s “plan B” student debt forgiveness plan failed a big test this week when a handful of student, borrower, and consumer advocates voted against key components of the proposal.

The Department of Education (ED) met with higher education stakeholders one final time on Tuesday to vote on the department’s proposed debt forgiveness plan in a process known as negotiated rulemaking.

But consensus was hard to come by, with several stakeholders saying they voted against parts of the proposal because it doesn’t do enough to meet the needs of federal student loan borrowers sinking further into debt.

“This just doesn’t go far enough,” Kyra Taylor, an attorney at the National Consumer Law Center representing legal assistance organizations, said on Tuesday.

Two major sticking points emerged throughout the final days of discussion:

Many negotiators were also frustrated by ED’s lack of draft regulations to address borrowers “experiencing hardship.”

As the session wrapped Tuesday, it remained unclear whether ED would forgo issuing regulations to aid such borrowers or if it would reconvene negotiators sometime in 2024.

Without consensus, the department can amend its proposed plan as it sees fit. The department is expected to release a final proposal for public comment in May.

ED and negotiators failed to reach consensus – meaning at least one person disapproved – on six of the 10 proposals directed at different groups of Direct Loan borrowers.

The groups where consensus was not reached include:

Proposals impacting borrowers whose loan balances have ballooned due to accrued interest failed consensus checks due to a cap on how much debt could be forgiven through ED’s proposal.

Most borrowers would only qualify for up to $10,000 in total debt forgiveness, no matter how much interest their loans accumulated. Low-income borrowers, defined as those making 225% or less of the federal poverty guideline, can qualify for up to $20,000, according to the proposal.

Many negotiators said this would do little to address borrowers in the most debt.

Richard Haase, the representative for student loan borrowers who attended graduate programs, cited the example of a person he has worked with who originally borrowed $90,000 to attend school. That borrower paid back over $150,000 to ED over 20 years but, due to accrued interest, still owes $70,000.

“I just feel like we missed the mark in helping these people,” Haase said.

Other negotiators shared similar stories of borrowers for whom $10,000 in forgiveness would be “a drop in the bucket.”

Lead ED negotiator Tamy Abernathy said the department would not entertain pleas to change the language regarding a cap on forgiveness.

“We are not able to agree to remove the cap,” she said.

Many negotiators likewise repeatedly asked ED not to include one-time cutoff dates for borrowers who have been in repayment for 20 or 25 years.

ED’s proposal would see a borrower’s debt erased for all loans used to attend undergraduate school after 20 years of repayment, similar to many IDR plans. Any loans to attend graduate programs would be forgiven after 25 years.

However, this would be a one-time cancellation.

That means it would only apply to undergraduate loans that entered repayment on or before July 1, 2005. It would apply to graduate loans that entered repayment on or before July 1, 2000.

Negotiators said this unfairly leaves out all borrowers who may have begun repayment in September 2005. Many negotiators urged ED to amend its proposal to provide a rolling relief plan, meaning future borrowers would qualify for forgiveness after 20 or 25 years moving forward.

ED did not seem amenable to adopting this rolling forgiveness plan.

ED and negotiators did agree on language to provide relief to four groups of borrowers, including:

Relief proposals for these borrowers don’t include a cap on how much debt can be forgiven. Most also aid borrowers who attended a program that may not have provided financial value.

ED distributed a separate set of proposals that impact borrowers with commercially held Federal Family Education Loan (FFEL) program loans.

Some borrowers from the now-defunct FFEL program still have loans held by commercial entities. ED proposed regulations to forgive these loans and pay back the balance of the loan to the entities that hold the loans.

ED’s proposal included three groups of FFEL borrowers:

Unsurprisingly, negotiators did not reach consensus on the provision centered on borrowers who entered repayment 25 years ago. Similarly to past concerns, three negotiators felt the “arbitrary” July 1, 2000 cutoff date unfairly excludes too many borrowers.