Higher Ed Policy Roundup: Vol. 7 - Issue 24

The Education Department (ED) announced today that it would forgive student debt for more than 804,000 borrowers, totaling $39 billion, using a one-time account adjustment for income-driven repayment plans (IDR). Under this one-time account adjustment, ED is reviewing student loan accounts and will count months in repayment status and certain deferments and forbearances toward IDR and Public Service Loan Forgiveness.

On Monday, ED published the final version of its new income-driven repayment plan called the Saving on a Valuable Education (SAVE) plan. Recall that ED released an unofficial copy of the plan last week outlining the intended changes. The final version mirrors the unofficial version with the following changes being implemented on July 30, 2023:

• Increasing the discretionary income threshold from 150 percent to 225 percent of the federal poverty rate;
• Adjusting the treatment of spousal income for married borrowers who file separately; and
• Eliminating the accumulation of unpaid interest.

And the following changes will be implemented on July 1, 2024:

• Requiring borrowers with only undergraduate debt to pay five percent of their discretionary income monthly; requiring borrowers with only graduate debt to pay 10 percent of their discretionary income monthly; and requiring borrowers with both undergraduate and graduate debt to pay between five and 10 percent of their discretionary income based upon a weighted average;
• Providing student debt forgiveness after 10 years to borrowers with an original student loan principal balance of $12,000 or less;
• Providing borrowers with credit for certain deferments and forbearances;
• Preventing payments from fully resetting after consolidation;
• Automatically enrolling delinquent borrowers into an IDR plan; and
• Phasing out new enrollments in other IDR plans (e.g., ICR and PAYE).

The National Consumer Law Center published an article on the rights of student loan borrowers following the Supreme Court ruling on debt cancellation.

Experts are concerned that the Supreme Court ruling on student loan forgiveness could result in a national decrease in college enrollment.

A recent article from Forbes reviewed some of the issues with the financial aid system, such as the lack of institutional transparency and consistency in financial aid offer letters.

The following bill(s) have been recently introduced for consideration by the 118th Congress (2023-2024):

H.R. 4594 – The Clean Slate Through Rehabilitation Act [Rep. Nikema Williams (D-GA-5)] would remove all adverse credit history related to a loan from the credit history of a borrower who has rehabilitated the loan.

H.R. 4591 – The Clean Slate Through Consolidation Act [Rep. Haley Stevens (D-MI-11)] would remove a default record from a borrower's credit history upon obtaining a Federal Direct Consolidation Loan that discharges the defaulted loan.

S. 2266 – [Sen. Benjamin Cardin (D-MD)] would eliminate educational barriers for students who want to participate in a public service career.