President Joe Biden and the Department of Education (DOE) have announced what the administration is calling “sweeping changes to the federal student loan system,” CNBC and several other news outlets reported.
The regulations, according to a Department of Education press release, will “expand and improve the major student loan discharge programs authorized by the Higher Education Act.”
The reform will specifically address student loan forgiveness for:
- Borrowers whose for-profit schools lied to them, used deceptive or aggressive recruiting practices, or closed.
- Borrowers who are totally and permanently disabled.
- Public servers workers who met their commitments under the Public Service Loan Forgiveness (PSLF) program.
Under the PSLF program, borrowers may receive debt cancellation after 10 years. Under the new rules, loan forbearances or deferments would count toward those 10 years, and late payments would be counted toward the total number of qualifying payments.
Additionally, the regulations will remove interest capitalization on loans, which means that accrued interest won’t be added to the loan’s principal when a borrower exits a forbearance or defaults on their loan.
The changes, if approved, could affect as many as 40 million Americans, CNBC reported.
According to the DOE news release, the public will have 30 days to comment on the proposal. The DOE hopes to finalize the rules by Nov. 1, 2022, and have them go into effect no later than July 1, 2023.
“We are committed to fixing a broken system. If a borrower qualifies for student loan relief, it shouldn’t take mountains of paperwork or a law degree to obtain it,” U.S. Secretary of Education Miguel Cardona said in the news release.
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