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Proposed Rule2024-07726

Student Debt Relief for the William D. Ford Federal Direct Loan Program (Direct Loans), the Federal Family Education Loan (FFEL) Program, the Federal Perkins Loan (Perkins) Program, and the Health Education Assistance Loan (HEAL) Program

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Published

April 17, 2024

Issuing agencies

Education Department

Abstract

The Secretary proposes to amend the regulations related to the Higher Education Act of 1965, as amended (HEA) to provide for the waiver of certain student loan debts. In this NPRM, the Department proposes regulations, in accordance with the Secretary's authority to waive repayment of a loan provided by the HEA, to provide targeted debt relief as part of efforts to address the burden of student loan debt. The proposed regulations would modify the Department's existing debt collection regulations to provide greater specificity regarding certain non-exhaustive situations in which the Secretary may exercise discretion to waive all or part of any debts owed to the Department.

Full Text

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<title>Federal Register, Volume 89 Issue 75 (Wednesday, April 17, 2024)</title>
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[Federal Register Volume 89, Number 75 (Wednesday, April 17, 2024)]
[Proposed Rules]
[Pages 27564-27617]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-07726]

[[Page 27563]]

Vol. 89

Wednesday,

No. 75

April 17, 2024

Part III

Department of Education

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34 CFR Parts 30 and 682

Student Debt Relief for the William D. Ford Federal Direct Loan Program
(Direct Loans), the Federal Family Education Loan (FFEL) Program, the
Federal Perkins Loan (Perkins) Program, and the Health Education
Assistance Loan (HEAL) Program; Proposed Rule

Federal Register / Vol. 89 , No. 75 / Wednesday, April 17, 2024 /
Proposed Rules

[[Page 27564]]

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DEPARTMENT OF EDUCATION

34 CFR Parts 30 and 682

[Docket ID ED-2023-OPE-0123]
RIN 1840-AD93

Student Debt Relief for the William D. Ford Federal Direct Loan
Program (Direct Loans), the Federal Family Education Loan (FFEL)
Program, the Federal Perkins Loan (Perkins) Program, and the Health
Education Assistance Loan (HEAL) Program

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Notice of proposed rulemaking (NPRM).

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SUMMARY: The Secretary proposes to amend the regulations related to the
Higher Education Act of 1965, as amended (HEA) to provide for the
waiver of certain student loan debts.
In this NPRM, the Department proposes regulations, in accordance
with the Secretary's authority to waive repayment of a loan provided by
the HEA, to provide targeted debt relief as part of efforts to address
the burden of student loan debt. The proposed regulations would modify
the Department's existing debt collection regulations to provide
greater specificity regarding certain non-exhaustive situations in
which the Secretary may exercise discretion to waive all or part of any
debts owed to the Department.

DATES: We must receive your comments on or before May 17, 2024.

ADDRESSES: For more information regarding submittal of comments, please
see SUPPLEMENTARY INFORMATION. Comments must be submitted via the
Federal eRulemaking Portal at <a href="http://Regulations.gov">Regulations.gov</a>. However, if you require
an accommodation or cannot otherwise submit your comments via
<a href="http://Regulations.gov">Regulations.gov</a>, please contact Rene Tiongquico at (202) 453-7513 or by
email at <a href="/cdn-cgi/l/email-protection#db89beb5bef58fb2b4b5bcaaaeb2b8b49bbebff5bcb4ad">[email&#160;protected]</a>.
Federal eRulemaking Portal: Please go to <a href="http://www.regulations.gov">www.regulations.gov</a> to
submit your comments electronically. Information on using
<a href="http://Regulations.gov">Regulations.gov</a>, including instructions for finding a rule on the site
and submitting comments, is available on the site under ``FAQ.'' In
accordance with the Providing Accountability Through Transparency Act
of 2023 (Pub. L. 118-9), a summary of not more than 100 words in length
of the proposed rule, in plain language, is posted on <a href="http://Regulations.gov">Regulations.gov</a>
in the rulemaking docket: <a href="https://www.regulations.gov/docket/ED-2023-OPE-0123">https://www.regulations.gov/docket/ED-2023-OPE-0123</a>.
Privacy Note: The Department's policy is to generally make comments
received from members of the public available for public viewing on the
Federal eRulemaking Portal at <a href="http://Regulations.gov">Regulations.gov</a>. Therefore, commenters
should include in their comments only information about themselves that
they wish to make publicly available. Commenters should not include in
their comments any information that identifies other individuals or
that permits readers to identify other individuals. If, for example,
your comment describes an experience of someone other than yourself,
please do not identify that individual or include information that
would allow readers to identify that individual. The Department may not
make comments that contain personally identifiable information (PII)
about someone other than the commenter publicly available on
<a href="http://Regulations.gov">Regulations.gov</a> for privacy reasons. This may include comments where
the commenter refers to a third-party individual without using their
name if the Department determines that the comment provides enough
detail that could allow one or more readers to link the information to
the third-party individual. If your comment refers to a third-party
individual, please refer to the third-party individual anonymously to
reduce the chance that information in your comment could be linked to
the third party. For example, ``a former student with a graduate level
degree'' does not provide information that identifies a third-party
individual as opposed to ``my sister, Jane Doe, had this experience
while attending University X,'' which does provide enough information
to identify a specific third-party individual. For privacy reasons, the
Department reserves the right to not make available on <a href="http://Regulations.gov">Regulations.gov</a>
any information in comments that identifies other individuals, includes
information that would allow readers to identify other individuals, or
includes threats of harm to another person or to oneself.

FOR FURTHER INFORMATION CONTACT: For further information related to
general waivers and length of time in repayment, contact Richard Blasen
at (202) 987-0315 or by email at <a href="/cdn-cgi/l/email-protection#43112a202b2231276d012f2230262d0326276d242c35">[email&#160;protected]</a>. For further
information related to current balances that exceed original amounts
borrowed, contact Bruce Honer at (202) 987-0750 or by email at
<a href="/cdn-cgi/l/email-protection#dd9fafa8beb8f395b2b3b8af9db8b9f3bab2ab">[email&#160;protected]</a>. For further information related to waiver
eligibility based on repayment plan and targeted debt relief, contact
Vanessa Freeman at (202) 987-1336 or by email at
<a href="/cdn-cgi/l/email-protection#cd9baca3a8bebeace38bbfa8a8a0aca38da8a9e3aaa2bb">[email&#160;protected]</a>. For further information related to secretarial
actions and Gainful Employment programs with low financial value,
contact Rene Tiongquico at (202) 453-7513 or by email at
<a href="/cdn-cgi/l/email-protection#1a487f747f344e7375747d6b6f7379755a7f7e347d756c">[email&#160;protected]</a>. For further information related to FFEL Program
loans, contact Brian Smith at (202) 987-0385 or by email at
<a href="/cdn-cgi/l/email-protection#387a4a515956166b55514c50785d5c165f574e">[email&#160;protected]</a>.
If you are deaf, hard of hearing, or have a speech disability and
wish to access telecommunications relay services, please dial 7-1-1.

SUPPLEMENTARY INFORMATION:

Executive Summary

Since 1980, the total cost to receive a four-year postsecondary
credential has nearly tripled, even after accounting for inflation.\1\
Pell Grants once covered nearly 80 percent of the cost of a four-year
public college degree for students from low- and middle-income
families, but now they only cover a third of those costs.\2\ This price
growth has dramatically increased the need for students to secure
student loans, particularly Federal student loans from the Department,
to cover their educational costs. The gap between prices and income
means that many students from low- and middle-income families have to
borrow Federal student loans in addition to grants and out-of-pocket
spending so they can earn a postsecondary credential. These trends have
resulted in cumulative Federal loan debt of $1.6 trillion and rising
for more than 43 million borrowers, which has placed a significant
financial burden upon middle-income borrowers and has had an even more
devastating impact on vulnerable low-income borrowers.\3\
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\1\ Trends in College Pricing 2023: Data in Excel. Table CP-2.
Available at <a href="https://research.collegeboard.org/trends/college-pricing">https://research.collegeboard.org/trends/college-pricing</a>.
\2\ <a href="https://www.cbpp.org/research/pell-grants-a-key-tool-for-expanding-college-access-and-economic-opportunity-need">https://www.cbpp.org/research/pell-grants-a-key-tool-for-expanding-college-access-and-economic-opportunity-need</a>.
\3\ <a href="https://studentaid.gov/data-center/student/portfolio">https://studentaid.gov/data-center/student/portfolio</a>;
<a href="https://www.census.gov/library/stories/2021/08/student-debt-weighed-heavily-on-millions-even-before-pandemic.html">https://www.census.gov/library/stories/2021/08/student-debt-weighed-heavily-on-millions-even-before-pandemic.html</a>; <a href="https://www.philadelphiafed.org/-/media/frbp/assets/consumer-finance/reports/cfi-sl-1-payments-resumption.pdf">https://www.philadelphiafed.org/-/media/frbp/assets/consumer-finance/reports/cfi-sl-1-payments-resumption.pdf</a>; <a href="https://www.aarp.org/money/credit-loans-debt/info-2021/student-debt-crisis-for-older-americans.html">https://www.aarp.org/money/credit-loans-debt/info-2021/student-debt-crisis-for-older-americans.html</a>; <a href="https://www.stlouisfed.org/publications/economic-equity-insights/gender-racial-disparities-student-loan-debt">https://www.stlouisfed.org/publications/economic-equity-insights/gender-racial-disparities-student-loan-debt</a>.
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After convening the Student Loan Debt Relief negotiated rulemaking
committee (Committee) and reaching consensus on various issues
discussed in this NPRM, the Department proposes regulations, in
accordance with the Secretary's authority to waive repayment of a loan
provided by section 432(a) of the HEA, to provide debt relief targeted
to address certain specific circumstances as part of a

[[Page 27565]]

comprehensive effort to address the burden of Federal student loan
debt. The proposed regulations would modify the Department's existing
debt collection regulations to provide greater specificity regarding
the Secretary's discretion to waive Federal student loan debt and
specify the Secretary's authority to waive all or part of any debts
owed to the Department based on a number of different circumstances,
such as growth in a borrower's loan balance beyond what was owed upon
entering repayment, the amount of time since the loan first entered
repayment, whether the borrower meets certain criteria for loan
forgiveness or discharge under existing authority, and whether a loan
was obtained to attend an institution or program that was subject to
secretarial actions, that closed prior to secretarial actions, or was
associated with closed Gainful Employment programs with high debt-to-
earnings rates or low median earnings.

Summary of Select Provisions of This Regulatory Action

The Department proposes to amend subparts A, C, E, and F of 34 CFR
part 30 and to add a new subpart G. The Department also proposes to
amend part 682 by adding a new Sec. 682.403.
These proposed regulations, in accordance with the HEA, would
specify the Secretary's discretionary authority to waive repayment of
the following amounts:
<bullet> The full amount by which the current outstanding balance
on a loan exceeds the amount owed when the loan entered repayment for
loans being repaid on any Income-Driven Repayment (IDR) plan if the
borrower's income is at or below $120,000 if the borrower's filing
status is single or married filing separately, $180,000 if a borrower
files as head of household, or $240,000 if the borrower is married and
files a joint Federal tax return or the borrower files as a qualifying
surviving spouse (Sec. 30.81).
<bullet> Up to $20,000 or the amount by which the current
outstanding balance on a borrower's loan exceeds the balance owed upon
entering repayment (Sec. 30.82).
<bullet> The outstanding balance of a loan taken out to pay for the
borrower's undergraduate education, or a Federal Consolidation Loan or
a Direct Consolidation Loan that only repaid loans received for a
borrower's undergraduate education, that first entered repayment on or
before July 1, 2005 (Sec. 30.83).
<bullet> The outstanding balance of loans that first entered
repayment on or before July 1, 2000, if the borrower has any loans
obtained for study other than undergraduate study (Sec. 30.83).
<bullet> The outstanding balance of a loan for borrowers who would
be otherwise eligible for forgiveness under an IDR plan or an
alternative repayment plan but who are not currently enrolled in such a
plan (Sec. 30.84).
<bullet> The outstanding balance of a loan for borrowers determined
to be otherwise eligible for loan discharge, cancellation, or
forgiveness, but who did not successfully apply (Sec. 30.85).
<bullet> The outstanding balance of a loan obtained to pay the cost
of attending an institution or program where the Secretary or other
authorized Department official has issued a final decision, denial of
recertification, or determination that terminates or otherwise ends the
institution's or program's title IV eligibility due at least in part to
the institution's or program's failure to meet required accountability
standards based on student outcomes or to its failure to provide
sufficient financial value to students (Sec. 30.86).
<bullet> The outstanding balance of a loan obtained to pay the cost
of attending an institution or program that closed and the Secretary or
other Department official has determined the institution or program
failed, for at least one year, to meet an accountability standard based
on student outcomes, or failed to deliver sufficient financial value to
students and there was a pending program review, investigation, or
other Department action at the time of closure (Sec. 30.87).
<bullet> The outstanding balance of a loan that is associated with
enrollment in a Gainful Employment (GE) program that has closed and
prior to closure had high debt-to-earnings rates or low median earnings
rates (Sec. 30.88).
<bullet> In the case of FFEL Program loans held by a private loan
holder or a guaranty agency, the outstanding balance of a FFEL Program
loan when a loan first entered into repayment on or before July 1,
2000; when the borrower is otherwise eligible for, but has not
successfully applied for, a closed school discharge; or when the
borrower attended an institution that lost its title IV eligibility due
to a high cohort default rate (CDR), if the borrower was included in
the cohort whose debt was used to calculate the CDR or rates that were
the basis for the institution's loss of eligibility (Sec. 682.403).
Costs and Benefits: As further detailed in the Regulatory Impact
Analysis (RIA), the proposed regulations would specify the Secretary's
authority to grant waivers that would have significant effects on
borrowers, the Department, and taxpayers. For borrowers for whom the
Secretary chooses to exercise his authority, the draft rules would
provide significant benefits by waiving all or a portion of their
repayment obligations. In cases where the Secretary decides to waive
the entire outstanding balance of a loan, borrowers receiving such
waivers would benefit from no longer having to repay their debt and no
longer being at risk of delinquency or default. The debts that could be
waived in their entirety under this proposed NPRM have the following
characteristics: they are generally older; otherwise eligible for
forgiveness, but the borrower has not currently enrolled in or
successfully applied to receive relief; or were taken out to attend
programs or institutions that failed to provide sufficient financial
value as indicated by certain outcomes and conditions. Borrowers who
may receive a waiver of some of their loan balances would benefit by
seeing their total outstanding balance reduced, which would help with
their ability to repay their loans in full in a reasonable period of
time.
The Department would also benefit if the Secretary chose to
exercise his discretion to issue waivers proposed in these draft rules.
These benefits would largely come from no longer incurring costs to
service or collect on loans that are unlikely to be otherwise repaid in
full in a reasonable period.
The costs in this rule would largely come from the transfers
between the Department and borrowers that would occur if the Secretary
chose to use his discretion to issue waivers. There would also be some
administrative costs borne by the Department to implement the proposed
regulations. As detailed in Table 4.1 of the RIA, the net budget
impacts across all loan cohorts through 2034 for each of the proposed
changes are estimated to be as follows:
<bullet> $13.8 billion for the provision related to time since the
loan first entered repayment (Sec. 30.83).
<bullet> $8.6 billion for the provision related to borrowers who
are eligible for forgiveness based upon a repayment plan (Sec. 30.84).
<bullet> $15 million for the provision related to borrowers who
took out loans during cohorts that caused a school to lose access to
aid due to high cohort default rates (CDRs) as described in Sec.
30.86.
<bullet> $7.6 billion for the provision related to borrowers who
are eligible for a closed school loan discharge but have not
successfully applied (Sec. 30.85).
<bullet> $27.2 billion for the provision related to borrowers who
attended a gainful employment program that lost access to aid or closed
(Sec. Sec. 30.86 through 30.88).

[[Page 27566]]

<bullet> $11.0 billion for the provision related to borrowers whose
current balance exceeds the amount owed upon entering repayment and are
on IDR plan with income below certain thresholds (Sec. 30.81).
<bullet> $62.1 billion for the provision related to borrowers whose
current balance exceeds the amount owed upon entering repayment (Sec.
30.82).
<bullet> $17.1 billion for the provisions related to borrowers with
commercial FFEL loans that first entered repayment 25 years ago; who
are eligible for a closed school discharge but have not applied; or who
received loans to attend a school that lost access to aid due to high
CDRs (682.403).
Invitation to Comment: We invite you to submit comments regarding
these proposed regulations. For your comments to have maximum effect in
developing the final regulations, we urge you to clearly identify the
specific section or sections of the proposed regulations that each of
your comments addresses and to arrange your comments in the same order
as the proposed regulations. The Department will not accept comments
submitted after the comment period closes. Please submit your comments
only once so that we do not receive duplicate copies.
The following tips are meant to help you prepare your comments and
provide a basis for the Department to respond to issues raised in your
comments in the notice of final regulations (NFR):
<bullet> Be concise but support your claims.
<bullet> Explain your views as clearly as possible and avoid using
profanity.
<bullet> Refer to specific sections and subsections of the proposed
regulations throughout your comments, particularly in any headings that
are used to organize your submission.
<bullet> Explain why you agree or disagree with the proposed
regulatory text and support these reasons with data-driven evidence,
including the depth and breadth of your personal or professional
experiences.
<bullet> Where you disagree with the proposed regulatory text,
suggest alternatives, including regulatory language, and your rationale
for the alternative suggestion.
<bullet> Do not include personally identifiable information (PII)
such as Social Security numbers or loan account numbers for yourself or
for others in your submission. Should you include any PII in your
comment, such information may be posted publicly.
<bullet> Do not include any information that directly identifies or
could identify other individuals or that permits readers to identify
other individuals. Your comment may not be posted publicly if it
includes PII about other individuals.
Mass Writing Campaigns: In instances where individual submissions
appear to be duplicates or near duplicates of comments prepared as part
of a writing campaign, the Department will post one representative
sample comment along with the total comment count for that campaign to
<a href="http://Regulations.gov">Regulations.gov</a>. The Department will consider these comments along with
all other comments received.
In instances where individual submissions are bundled together
(submitted as a single document or packaged together), the Department
will post all of the substantive comments included in the submissions
along with the total comment count for that document or package to
<a href="http://Regulations.gov">Regulations.gov</a>. A well-supported comment is often more informative to
the agency than multiple form letters.
Public Comments: The Department invites you to submit comments on
all aspects of the proposed regulatory language specified in this NPRM
in Sec. Sec. 30.1, 30.9, 30.20, 30.23, 30.25, 30.27, 30.29, 30.30,
30.33, 30.62, 30.70, 30.80-30.89, and 682.403, the Regulatory Impact
Analysis, and Paperwork Reduction Act sections.
The Department may, at its discretion, decide not to post or to
withdraw certain comments and other materials that are computer-
generated. Comments containing the promotion of commercial services or
products and spam will be removed.
We may not address comments outside of the scope of these proposed
regulations in the NFR. Generally, comments that are outside of the
scope of these proposed regulations are comments that do not discuss
the content or impact of the proposed regulations or the Department's
evidence or reasons for the proposed regulations, which includes any
comments related to the Department's negotiated rulemaking for
borrowers experiencing hardship.
Comments that are submitted after the comment period closes will
not be posted to <a href="http://Regulations.gov">Regulations.gov</a> or addressed in the NFR.
Comments containing personal threats will not be posted to
<a href="http://Regulations.gov">Regulations.gov</a> and may be referred to the appropriate authorities.
We invite you to assist us in complying with the specific
requirements of Executive Orders 12866, 13563, 14094 and their overall
requirement of reducing regulatory burden that might result from these
proposed regulations. Please let us know of any further ways we could
reduce potential costs or increase potential benefits while preserving
the effective and efficient administration of the Department's programs
and activities.
During and after the comment period, you may inspect public
comments about these proposed regulations by accessing <a href="http://Regulations.gov">Regulations.gov</a>.
Assistance to Individuals with Disabilities in Reviewing the
Rulemaking Record: On request, we will provide an appropriate
accommodation or auxiliary aid to an individual with a disability who
needs assistance to review the comments or other documents in the
public rulemaking record for these proposed regulations. If you want to
schedule an appointment for this type of accommodation or auxiliary
aid, please contact the Information Technology Accessibility Program
Help Desk at <a href="/cdn-cgi/l/email-protection#2a637e6b7a795f5a5a45585e6a4f4e044d455c">[email&#160;protected]</a> to help facilitate.

Background

Section 432(a) of the HEA describes the legal powers and
responsibilities of the Secretary of Education that are relevant to
this rulemaking. In particular, section 432(a)(6) provides that, ``in
the performance of, and with respect to, the functions, powers and
duties, vested in him by this part, the Secretary may enforce, pay,
compromise, waive, or release any right, title, claim, lien, or demand,
however acquired, including any equity or any right of redemption.''
These provisions apply to the FFEL, Direct Loan \4\ and HEAL
programs.\5\
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\4\ Section 432(a)(6) is in, and explicitly applies to, Part B,
which establishes the FFEL program. In creating the Direct Loan
program, Congress established parity between the FFEL and Direct
Loan program, providing that Federal Direct Loans ``have the same
terms, conditions, and benefits as loans made to borrowers'' under
the FFEL program. 20 U.S.C. 1087a(b)(2). See Sweet v. Cardona, 641
F.Supp.3d 814, 823-825 (ND Cal., 2022); Weingarten v. DOE, 468
F.Supp.3d 322, 328 (D.D.C. 2020); McCain v. US, 2011 WL 2469828
(Ct.Cl. 2011). The legislative history of the Direct Loan program
shows that 20 U.S.C. 1087a(b)(2) is broadly read to apply the
provisions of the FFEL statutory provisions to Direct Loan except as
provided by statute or inconsistent with the different structure of
the Direct Loan program. For example, the Direct Loan program
provides total and permanent disability discharges, closed school
loan discharges and forbearances to borrowers although none of those
are mentioned in the Direct Loan statutory provisions.
\5\ When transferring the HEAL loan program to the Department,
Congress explicitly stated that the Secretary's powers with respect
to collecting FFEL loans extend to HEAL loans. See Division H, title
V, section 525(d) of the Consolidated Appropriations Act, 2014 (Pub.
L. 113-76) (Consolidated Appropriations Act, 2014). The Secretary's
waiver authority under section 432(a)(6) of the HEA extends to HEAL
loans.
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The Department's statutory waiver authority dates back to the
enactment of

[[Page 27567]]

the Higher Education Act in 1965.\6\ The Department has historically
viewed its waiver authority as permitting the Secretary to waive the
Department's right to require repayment of a debt \7\ when doing so
advances the goals of the title IV programs and functions, while also
aligning with the HEA's overall statutory parameters and principles.
Having such bounded flexibility is critical for the Department's
administration of the comprehensive and complex student loan programs
wherein there are unforeseen challenges that arise and, absent waiver,
such challenges could interfere with the Secretary's ability to
effectively and efficiently administer the title IV programs.
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\6\ See Public Law 89-29, 79 Stat. 1246 (Nov. 8, 1965).
\7\ Waiving the Department's right to repayment of all or part
of a debt correspondingly releases the borrower of further liability
on account of all or part of that debt.
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The Department's waiver authority operates within the context of
the HEA's goals and also the principles that govern waiver more
broadly. Some agencies that exercise waiver authority consider whether
collection of debts would be against equity and good conscience or the
best interest of the United States, thereby implicating general
principles of government debt collection. Agencies have also
articulated numerous factors that may weigh in favor of waiving an
individual's debt, including when collection would defeat the purpose
of the benefit program or impose financial hardship, among other
considerations.
On June 30, 2023, the Department announced that it would conduct a
negotiated rulemaking process to specify the Secretary's use of the
authority to waive loan debts under section 432(a) of the HEA. This
NPRM reflects regulations discussed during that process and would allow
the Secretary to address significant challenges identified with student
loan repayment that implicate considerations of equity and fairness, as
well as a borrower's inability to repay their loans in full within a
reasonable period or circumstances where the costs of enforcing the
debt exceed the expected benefits of continued collection. In
particular, this NPRM focuses on issues related to circumstances--
<bullet> When borrowers' balances have grown beyond what they
originally owed at the start of repayment.
<bullet> When loans first entered repayment at least two decades
ago.
<bullet> When a borrower is eligible for forgiveness or a discharge
opportunity but has not successfully applied for such relief or
enrolled in the repayment plan that would provide that forgiveness or
discharge opportunity.
<bullet> When a borrower received loans for attendance in a program
or at an institution that has since lost access to Federal aid because
it failed to meet required student outcomes standards, was subject to
an action by the Secretary due to failing to provide sufficient
financial value or closed after failing required student outcomes
metrics or the initiation of a Secretarial action process.
These proposed provisions account for particular challenges facing
individual borrowers, while also recognizing that many borrowers are
similarly situated in experiencing such circumstances. The Department
has a longstanding view and practice of providing appropriate relief
when it identifies specific circumstances that warrant relief and those
circumstances affect multiple borrowers. Such relief, on an automated
or individual basis, is appropriate when such individuals'
circumstances share the features relevant for determining relief. This
approach comports with the HEA's statutory requirements and can also
help to improve administrative efficiency and provide consistency
across borrowers.

Public Participation

On July 6, 2023, the Department published a notice in the Federal
Register (88 FR 43069) announcing our intent to establish a negotiated
rulemaking committee to prepare proposed regulations pertaining to the
Secretary's authority under section 432(a) of the HEA, which relates to
the modification, waiver, or compromise of loans.
On July 18, 2023, the Department held a virtual public hearing at
which individuals and representatives of interested organizations
provided advice and recommendations relating to the topic of proposed
regulations on the modification, waiver, or compromise of loans. The
Department has significantly engaged the public in developing this
NPRM, including through review of oral comments made by the public
during the public hearing and written comments submitted between July
6, 2023, and July 20, 2023. You may view the written comments submitted
in response to the July 6, 2023, Federal Register notice on the Federal
eRulemaking Portal at <a href="http://Regulations.gov">Regulations.gov</a>, within docket ID ED-2023-OPE-
0123. Instructions for finding comments are also available on the site
under ``FAQ.'' Transcripts of the public hearings may be accessed at
<a href="https://www2.ed.gov/policy/highered/reg/hearulemaking/2023/index.html">https://www2.ed.gov/policy/highered/reg/hearulemaking/2023/index.html</a>.
The Department also held three negotiated rulemaking sessions of
two days each. During each daily negotiated rulemaking session, we
provided an opportunity for public comment and expanded that time to
one hour for the second and third sessions. The Department held a
fourth two-day session in February 2024 to discuss the separate issue
of possible hardship criteria for discharge and the public had an
opportunity to comment on the first day of that session. Additionally,
non-Federal negotiators shared feedback from their stakeholders with
the negotiating committee.

Negotiated Rulemaking

Section 492 of the HEA, 20 U.S.C. 1098a, requires the Secretary to
obtain public involvement in the development of proposed regulations
affecting programs authorized by title IV of the HEA. After obtaining
extensive input and recommendations from the public, including
individuals and representatives of groups involved in the title IV, HEA
programs, the Secretary, in most cases, must engage in the negotiated
rulemaking process before publishing proposed regulations in the
Federal Register. If negotiators reach consensus on the proposed
regulations, the Department agrees to publish without substantive
alteration a defined group of regulations on which the negotiators
reached consensus--unless the Secretary reopens the process or provides
a written explanation to the participants stating why the Secretary has
decided to depart from the agreement reached during negotiations.
Further information on the negotiated rulemaking process can be found
at: <a href="https://www2.ed.gov/policy/highered/reg/hearulemaking/2023/index.html">https://www2.ed.gov/policy/highered/reg/hearulemaking/2023/index.html</a>.
On August 31, 2023, the Department published a notice in the
Federal Register \8\ announcing its intention to establish the
Committee to prepare proposed regulations for the title IV, HEA
programs. The notice set forth a schedule for Committee meetings and
requested nominations for individual negotiators to serve on the
negotiating committee. In the notice, we announced the topics that the
Committee would address.
---------------------------------------------------------------------------

\8\ 88 FR 60163 (August 31, 2023).
---------------------------------------------------------------------------

The Committee included the following members, representing their
respective constituencies:
<bullet> Civil Rights Organizations: Wisdom Cole, NAACP, and India
Heckstall (alternate), Center for Law and Social Policy.

[[Page 27568]]

<bullet> Legal Assistance Organizations that Represent Students or
Borrowers: Kyra Taylor, National Consumer Law Center, and Scott
Waterman (alternate), Student Loan Committee of the National
Association of Chapter 13 Trustees.
<bullet> State Officials, including State higher education
executive officers, State authorizing agencies, and State regulators of
institutions of higher education: Lane Thompson, Oregon DCBS--Division
of Financial Regulation, and Amber Gallup (alternate), New Mexico
Higher Education Department.
<bullet> State Attorneys General: Yael Shavit, Office of the
Massachusetts Attorney General, and Josh Divine (alternate), Missouri
Attorney General's Office who withdrew from the committee during the
third session.
<bullet> Public Institutions of Higher Education, Including Two-
Year and Four-Year Institutions: Melissa Kunes, The Pennsylvania State
University, and J.D. LaRock (alternate), North Shore Community College.
<bullet> Private Nonprofit Institutions of Higher Education:
Angelika Williams, University of San Francisco, and Susan Teerink
(alternate), Marquette University.
<bullet> Proprietary Institutions: Kathleen Dwyer, Galen College of
Nursing, and Belen Gonzalez (alternate), Mech-Tech College.
<bullet> Historically Black Colleges and Universities, Tribal
Colleges and Universities, and Minority Serving Institutions
(institutions of higher education eligible to receive Federal
assistance under title III, parts A and F, and title V of the HEA):
Sandra Boham, Salish Kootenai College, and Carol Peterson (alternate),
Langston University.
<bullet> Federal Family Education Loan (FFEL) Lenders, Servicers,
or Guaranty Agencies: Scott Buchanan, Student Loan Servicing Alliance,
and Benjamin Lee (alternate), Ascendium Education Solutions, Inc.
<bullet> Student Loan Borrowers Who Attended Programs of Two Years
or Less: Ashley Pizzuti, San Joaquin Delta College, and David Ramirez
(alternate), Pasadena City College.
<bullet> Student Loan Borrowers Who Attended Four-Year Programs:
Sherrie Gammage, The University of New Orleans, and Sarah Christa Butts
(alternate), University of Maryland.
<bullet> Student Loan Borrowers Who Attended Graduate Programs:
Richard Haase, State University of New York at Stony Brook, and Dr.
Jalil Bishop (alternate), University of California, Los Angeles.
<bullet> Currently Enrolled Postsecondary Education Students: Jada
Sanford, Stephen F. Austin University, and Jordan Nellums (alternate),
University of Texas.
<bullet> Consumer Advocacy Organizations: Jessica Ranucci, New York
Legal Assistance Group, and Ed Boltz (alternate), Law Offices of John
T. Orcutt, P.C.
<bullet> Individuals with Disabilities or Organizations
Representing Them: John Whitelaw, Community Legal Aid Society Inc., and
Waukecha Wilkerson (alternate), Sacramento State University.
<bullet> U.S. Military Service Members, Veterans, or Groups
Representing Them: Vincent Andrews, Veteran. Originally the alternate,
Mr. Andrews became the primary negotiator for this constituency group
after Michael Jones withdrew from the Committee.
<bullet> Federal Negotiator: Tamy Abernathy, U.S. Department of
Education.
At its first meeting, the Committee reached agreement on its
protocols and proposed agenda. The protocols provided, among other
things, that the Committee would operate by consensus. The protocols
defined consensus as no dissent by any negotiator of the Committee for
the committee to be considered to have reached agreement and noted that
consensus votes would be taken on each separate part of the proposed
rules.
The Committee reviewed and discussed the Department's drafts of
regulatory language and alternative language and suggestions proposed
by negotiators.
At its third meeting in December 2023, the Committee reached
consensus on proposed regulations addressing the Secretary's authority
to waive loan debts--when a loan is eligible for forgiveness based upon
repayment plan but the borrower is not currently enrolled in such plan;
based upon Secretarial actions; following a closure prior to
Secretarial actions; or obtained for attendance in closed GE programs
with high debt-to-earnings rates or low median earnings. In addition,
the Committee reached consensus on two provisions for waivers that
would apply only to FFEL Program loans held by a loan holder or
guaranty agency: Those based on a determination that a borrower has not
successfully applied for a closed school discharge but otherwise meets
the eligibility requirements for such a discharge, and cases where a
borrower received a loan for attendance at an institution that lost
title IV eligibility due to high CDRs.
This NPRM includes proposed regulations on these consensus items,
identified in the summary of proposed regulations section, as well as
the remaining items on the Committee's agenda, summarized generally
above. The Department convened a fourth session of the negotiating
committee on February 22 and 23, 2024, focused on discussing proposed
regulations related to possible waivers for borrowers facing hardship.
Proposed regulations for waivers for hardship are not included in this
NPRM.
For more information on the negotiated rulemaking sessions,
including the work of the Subcommittee, please visit: <a href="https://www2.ed.gov/policy/highered/reg/hearulemaking/2023/index.html">https://www2.ed.gov/policy/highered/reg/hearulemaking/2023/index.html</a>.

Summary of Proposed Changes

These proposed regulations would--
<bullet> Modify Sec. Sec. 30.70(a)(1) and 30.70(c)(1) to specify
that, when compromising a debt or when terminating or suspending
collection of a debt, the Secretary may use the Federal Claims
Collection Standards (FCCS).
<bullet> Add Sec. 30.80 specifying the Secretary's authority to
waive all or part of any debts owed to the Department, including, but
not limited to, waivers under Sec. Sec. 30.81 through 30.88.
<bullet> Add Sec. 30.81 specifying the Secretary's authority to
provide a one-time waiver of the amount by which the borrower's current
loan has an outstanding principal balance exceeding the amount owed
when the loan first entered repayment if they are enrolled in an IDR
plan and their income is less than or equal to $120,000 if the
borrower's filing status is single or married filing separately;
$180,000 if the borrower's filing status is head of household; or
$240,000 if their tax filing status is married filing jointly or
qualifying surviving spouse.
<bullet> Add Sec. 30.82 specifying the Secretary's authority to
provide a one-time waiver of the lesser of $20,000 or the amount by
which a borrower's current loan balance exceeds the balance owed when
the borrower entered repayment.
<bullet> Add Sec. 30.83 specifying the Secretary's authority to
waive the outstanding balance when a borrower who only has student
loans for the borrower's undergraduate studies first entered repayment
on or before July 1, 2005 (20 years) or on or before July 1, 2000 (25
years) when a borrower has student loans other than loans for the
borrower's undergraduate studies.
<bullet> Add Sec. 30.84 specifying the Secretary's authority to
waive the outstanding balance of a loan when a borrower is not
currently enrolled in an

[[Page 27569]]

IDR plan, but otherwise meets the criteria for forgiveness under an IDR
plan.
<bullet> Add Sec. 30.85 specifying the Secretary's authority to
waive the outstanding balance of a loan when a borrower has not applied
for, or not successfully applied for, any loan discharge, cancellation,
or forgiveness opportunity under parts 682 or 685, but otherwise meets
the eligibility criteria for discharge, cancellation, or forgiveness.
<bullet> Add Sec. 30.86 specifying the Secretary's authority to
waive the outstanding balance of a loan obtained to attend an
institution or program where the Secretary or other authorized
Department official has issued a final decision, denial of
recertification, or determination that terminates or otherwise ends its
title IV eligibility due at least in part to the institution's or
program's failure to meet required accountability standards based on
student outcomes or to its failure to provide sufficient financial
value to students.
<bullet> Add Sec. 30.87 specifying the Secretary's authority to
waive the outstanding balance of a loan obtained to attend a program or
an institution that closed and the Secretary has determined the
institution or program has not met for at least one year an
accountability standard based on student outcomes; or failed to provide
sufficient financial value to students and was subject to a program
review, investigation, or any other Department action that remained
unresolved at the time of closure.
<bullet> Add Sec. 30.88 specifying the Secretary's authority to
waive the outstanding balance of a loan received by a borrower
associated with enrollment in a GE program that has closed and prior to
closure either had a high debt-to-earning rate or low median earnings,
or was at a GE program where the Department did not produce debt-to-
earnings and earnings premium measures but the institution closed and
prior to the closure received a majority of funds from programs with
high debt-to-earnings or low median earnings.
<bullet> Add Sec. 682.403(a) outlining the procedures under which
the Secretary determines that a FFEL Program loan held by a lender or
guaranty agency qualifies for a waiver, the waiver claim is processed,
and the Secretary grants the waiver.
<bullet> Add Sec. 682.403(b)(1) specifying the Secretary's
authority to waive the outstanding balance of a FFEL Program loan if
the loan first entered repayment in 2000 or earlier.
<bullet> Add Sec. 682.403(b)(2) specifying the Secretary's
authority to waive the outstanding balance of a FFEL Program loan if
the borrower has not applied for, or not successfully applied for, but
otherwise meets the eligibility requirements for a closed school
discharge.
<bullet> Add Sec. 682.403(b)(3) specifying the Secretary's
authority to waive the outstanding balance of a FFEL Program loan if
the loan was received for attendance at an institution that lost its
eligibility to participate in a title IV, HEA program because of its
high CDRs.
<bullet> Add Sec. Sec. 682.403(c), 682.403(d), and 682.403(e)
describing the waiver claim filing process for a lender, guaranty
agency, and the Department.
<bullet> Add Sec. 682.403(f) specifying that if the conditions for
a waiver are met but the loan has been repaid by a Federal
Consolidation Loan that has an outstanding balance, the Secretary may
waive the portion of the outstanding balance of the consolidation loan
attributable to such a loan once the loan has been assigned to the
Secretary.
<bullet> Make conforming changes to Sec. Sec. 30.1(c), 30.62(a),
and 30.70(e)(1) based on revisions to the sections noted above.

Significant Proposed Regulations

We discuss substantive issues under the sections of the proposed
regulations to which they pertain. Generally, we do not address
proposed regulatory provisions that are technical or otherwise minor in
effect. For each section of the regulations discussed, we include the
statutory citation, the current regulations being revised (if
applicable), the new proposed regulatory text, and the reasons for why
we proposed to add new regulatory text or revise the existing
regulatory text.

34 Part 30--Debt Collection

Subparts A, C, E, and F (Sec. Sec. 30.1(c), 30.62(a), 30.70(a)(1),
30.70(c)(1) and 30.70(e)(1))

Statute: Section 432(a) of the HEA (20 U.S.C. 1082(a)) provides
that in the performance of, and with respect to, the functions, powers,
and duties, vested in him by this part, the Secretary may enforce, pay,
compromise, waive, or release any right, title, claim, lien, or demand,
however acquired, including any equity or any right of redemption.
Current Regulations: Section 30.1(c) contains the procedures that
the Secretary may use in collecting on a debt owed to the United
States.
Section 30.62(a) provides that for a debt based on a loan, the
Secretary may refrain from collecting interest or charging
administrative costs or penalties to the extent that compromise of
these amounts is appropriate under the standards for compromise of a
debt contained in 31 CFR part 902, which were formerly contained in 4
CFR part 103.
Sections 30.70(a)(1) and 30.70(c)(1) specify that the Secretary
uses the standards in the FCCS to determine whether compromise of a
debt, or suspension or termination of a debt, is appropriate.
Section 30.70(e)(1) provides that the Secretary may compromise a
debt in any amount or suspend or terminate collection of a debt in any
amount, if the debt arises under the FFEL Program authorized under
title IV, part B, of the HEA, the Direct Loan Program authorized under
title IV, part D of the HEA, or the Perkins Loan Program authorized
under title IV, part E, of the HEA.
Proposed Regulations: These proposed regulations would identify
certain conditions under which the Secretary may waive debt, identify
the loan programs eligible for such waivers, clarify the existing
compromise provisions, correct outdated references, and remove obsolete
references. These regulations do not alter the scope of the Secretary's
authority under Section 432(a) of the HEA. Relatedly, the non-
exhaustive waiver provisions neither limit the Secretary's discretion
to waive debt in other circumstances permitted under Section 432(a) nor
do they require the Secretary to undergo rulemaking before taking any
action authorized under Section 432(a). Nevertheless, by providing
greater clarity regarding the Secretary's waiver authority, these
regulations are beneficial to inform the public about how the Secretary
may exercise waiver in a consistent manner to provide appropriate
relief to borrowers in accordance with the provisions and purposes of
the HEA.
Proposed Sec. 30.1(c)(7) would provide that the Secretary may
waive repayment of a debt under subpart G of 34 CFR part 30. Proposed
Sec. 30.62(a) would add to the current compromise provisions language
that would allow the Secretary to waive the collection of interest or
charging administrative costs or penalties on a loan in accordance with
Sec. 30.80. Proposed Sec. Sec. 30.70(a)(1) and 30.70(c)(1) would
specify that, when compromising a debt or when suspending or
terminating a debt, the Secretary ``may'' use the FCCS. Proposed Sec.
30.70(e)(1) would add HEAL Program loans to the list of loan types for
which the Secretary may compromise a debt or suspend or terminate
collection of a debt.

[[Page 27570]]

Technical corrections updating and clarifying various references
and provisions contained in subparts A, C, E, and F of part 30 would
also be made. In addition, severability provisions would be added to
these subparts as new Sec. Sec. 30.9, 30.39, 30.69, and 30.79. The
severability provisions would specify that if any provision of a part
is held to be invalid, the remaining provisions would not be affected.
Reasons: The current regulations in part 30 describe the policies
and procedures that the Secretary uses to collect on a debt owed to the
Department. The Department is proposing a new subpart G to part 30
which would provide greater specificity regarding the Secretary's
discretion to waive Federal student loan debt. This greater specificity
will allow the Department to take more transparent steps that help to
consistently alleviate the significant financial burden Federal student
loans have become for struggling or vulnerable borrowers by waiving
some or all of their outstanding loan balances. Such waivers would
either reduce monthly payments, total amounts owed, or both. The
proposed new language in subpart G would require conforming changes to
some of the existing regulatory language in part 30.
The proposed revision to Sec. 30.1(c)(7) is necessary to provide a
cross-reference to proposed subpart G and the proposed revision to
Sec. 30.62(a) is necessary to provide a cross-reference to proposed
Sec. 30.80.
In 2016, the Department revised Sec. 30.70 to reflect a series of
statutory changes that expanded the Secretary's authority to
compromise, or suspend or terminate the collection of, debts.\9\ In
particular, the Department wanted to highlight the ability of the
agency to resolve debts of less than $100,000 without needing to obtain
approval from the U.S. Department of Justice (DOJ) and to include the
ability of DOJ to seek review of resolving claims of more than $1
million. But the inclusion of this provision has created questions
around whether the Department's compromise, suspension, and termination
authority is strictly bound by FCCS standards. The Department's view is
that it is not. To begin, The Federal Claims Collection Act (FCCA) and
the FCCS regulations do not, by their own terms, apply to the
Department's student loan programs.\10\ In addition, the Department's
own regulations also do not strictly bind the Secretary to the FCCS.
The history of revisions to 34 CFR 30.70 reflects that it has been
revised over time to reflect new requirements and authorities but has
consistently recognized the Secretary's broad authority to compromise
student loan debts ``in any amount.'' Reading Sec. 30.70 as subjecting
the Secretary's authority to the FCCS requirements would be contrary to
the stated purpose of the 2016 amendments, which were intended to
``reflect a series of statutory changes that have expanded the
Secretary's authority to compromise, or suspend or terminate the
collection of, debts'' (emphasis added).\11\ The proposed changes to
Sec. Sec. 30.70(a)(1) and 30.70(c)(1) would clarify that the
Secretary's compromise, termination, and suspension authority remain
broad and are not restricted by the FCCA and FCCS.
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\9\ See 81 FR 39330 (June 16, 2016); 81 FR 75926 (November 1,
2016).
\10\ When the FCCA was enacted in 1966, it stated that
``[n]othing in this Act shall increase or diminish the existing
authority of the head of an agency to litigate claims, or diminish
his existing authority to settle, compromise, or close claims.''
Federal Claims Collection Act of 1966, Public Law 89-508, 4, 80
Stat. 308 (1966). And the FCCS specifically provides that it does
not ``preclude [ ] agency disposition of any claim under statutes
and implementing regulations other than [the FCCA],'' and that
``[i]n such cases, the laws and regulations that are specifically
applicable to claims collection activities of a particular agency
generally take precedence.'' 31 CFR 900.4. The FCCA and FCCS do not,
on their own terms, limit the Secretary's authority because the HEA
endows the Secretary with separate and independent authority to
compromise a debt, or suspend or terminate collection of a debt. See
Sec. 1082(a).
\11\ 81 FR 39369 (June 16, 2016).
---------------------------------------------------------------------------

The addition of HEAL Program loans to Sec. 30.70(e)(1) would
clarify that the Secretary has the same authority to compromise,
suspend, or terminate a HEAL loan debt as in the Direct Loan, FFEL, and
Perkins loan programs. The negotiating committee agreed to add HEAL
Program loans to Sec. 30.70(e)(1) and raised no specific objections to
the proposed conforming changes or technical corrections. Although
there were no specific objections to the proposed revisions to the
regulations in subparts A, C, E, and F of part 30, the Committee did
not reach consensus on these proposed changes.
The severability provisions we propose to add as new Sec. Sec.
30.9, 30.39, 30.69, 30.79, and 30.89 are intended to clarify that each
regulatory provision in these subparts stands on its own. For the
severability sections in subparts A through F of part 30, these
additions reflect that the subcomponents of each section, as well as
the sections themselves, are distinct. For instance, subpart C lays out
the provisions related to administrative offset. The process in Sec.
30.21 that addresses when the Secretary may offset a debt and the
provisions regarding borrower notice in Sec. 30.22 are separate, and
those, in turn, are separate from the provisions in Sec. 30.25 related
to how an oral hearing may occur.
The severability provision in Sec. 30.89 reflects that the
different waivers proposed in subpart G each address a different set of
circumstances in which the Department is concerned that borrowers may
not be able to repay their loans within a reasonable period. This
severability language also acknowledges that each of these proposed
waivers have their own distinct rationale for their inclusion, and the
effects would vary. For instance, some sections in subpart G would
result in a complete waiver of a borrower's full remaining balance,
while others would only result in a partial waiver. Moreover, as
discussed elsewhere in this rule, there are also provisions within
sections where if either element of this provision were invalidated by
a reviewing court, the element that stayed in effect would continue to
provide important relief to borrowers. This, for instance, can be seen
in proposed Sec. Sec. 30.81 and 30.82. Proposed Sec. 682.403 is
already covered by an existing severability provision in Sec. 682.424.
These provisions were not subject to a consensus check on the part
of the negotiators, although none of the negotiators raised objections
to adding these provisions.

Subpart G

Sec. 30.80 Waiver of Federal Student Loan debts.
Statute: Section 432(a) of the HEA (20 U.S.C. 1082(a)) provides
that in the performance of, and with respect to, the functions, powers,
and duties, vested in him by this part, the Secretary may enforce, pay,
compromise, waive, or release any right, title, claim, lien, or demand,
however acquired, including any equity or any right of redemption.
Current Regulations: None.
Proposed Regulations: Proposed Sec. 30.80 would specify the
Secretary's authority to waive all or part of any Department-held FFEL
Program loan, William D. Ford Federal Direct Loan, Federal Perkins
Loan, and HEAL Loan debts owed to the Department under the conditions
included in, but not limited to, Sec. Sec. 30.81 through 30.88.
Reasons: Proposed new subpart G to part 30, which includes sections
Sec. Sec. 30.80-30.89, would provide greater specificity regarding the
Secretary's discretion to waive Federal student loan debt to alleviate
the significant financial burden of student loans on borrowers and
their families. The regulations in part 30 pertain to debts owed to the
Department, therefore proposed Sec. 30.80

[[Page 27571]]

would only apply to student loans held by the Department. This includes
FFEL Program loans that have been assigned to the Department, as well
as Perkins loans and HEAL loans in default. It also includes
consolidation loans that repaid a FFEL, Perkins, or HEAL loan. Waivers
specific to FFEL Program loans held by private lenders or managed by
guaranty agencies would be provided under proposed Sec. 682.403 of the
FFEL Program regulations. The proposed regulations for Sec. 682.403
are discussed later in this NPRM.
Proposed Sec. 30.80 provides an introduction to subpart G and
explains the types of loans covered by this subpart. The Department
proposes to include all the types of Federal student loans held by the
Department, including Direct Loans, FFEL Loans, Perkins Loans, and HEAL
Loans because we believe it is appropriate to consider waivers for all
the loan types managed by the Secretary and organizationally consider
similar subject matter under one subpart. As discussed in other
sections, not all these provisions will apply equally to all loan types
because there are certain benefits that are not otherwise available on
all types of loans. For example, only Direct and FFEL Loans are
eligible to be repaid under IDR plans.
The Department believes adding subpart G in these proposed
regulations better clarifies some circumstances in which the Secretary
may use his existing and longstanding authority under section 432(a) of
the HEA. Current regulations do not describe how the Secretary uses
this waiver authority. Clarifying how this authority would be used
through these regulations would better inform the public about how the
Secretary may exercise his waiver authority in a consistent and
equitable manner.
Providing such specificity would also allow the Department to
highlight circumstances where we are particularly concerned about
borrowers' ability to successfully repay their debt in full in a
reasonable period or where the costs of collection are anticipated to
exceed the amount recoverable. Each of these proposed waivers are
intended to address a variety of conditions that borrowers may
encounter where a waiver may be appropriate. They can and would operate
independently of each other.
The Committee reached consensus on proposed Sec. 30.80.
Sec. 30.81 Waiver when the current balance exceeds the balance
upon entering repayment for borrowers on an IDR plan.
Statute: Section 432(a) of the HEA (20 U.S.C. 1082(a)) provides
that in the performance of, and with respect to, the functions, powers,
and duties, vested in him by this part, the Secretary may enforce, pay,
compromise, waive, or release any right, title, claim, lien, or demand,
however acquired, including any equity or any right of redemption.
Current Regulations: None.
Proposed Regulations: Proposed Sec. 30.81 would provide that the
Secretary may waive the amount by which each of a borrower's loans has
a total outstanding balance that exceeds the amount owed upon entering
repayment if the borrower is enrolled in an IDR plan and meets certain
additional criteria. The original balance would be measured based upon
the original amount disbursed for loans disbursed before January 1,
2005, and the balance of the loans on the day after the grace period
for loans disbursed on or after January 1, 2005. Waiver of repayment of
consolidation loans would be based upon the original balances of the
loans repaid by the consolidation loan.
A borrower would be eligible to receive this waiver once on their
loans if they enrolled in an IDR plan under Sec. Sec. 682.215,
685.209, or 685.221 as of a date determined by the Secretary; and the
borrower's adjusted gross income, or other calculation of income as
shown on acceptable documentation, demonstrates that the borrower's
annual income is equal to or less than $120,000 if their tax filing
status is single or married filing separately; $180,000 if their tax
filing status is head of household; or $240,000 if they are married
filing jointly or a qualifying surviving spouse.
Reasons: Over the past several years, the Department has taken
several significant steps to address the negative effects of interest
accrual and capitalization on borrowers. Effective July 1, 2023, the
Department ceased capitalizing interest in all situations where it is
not required by statute (87 FR 65904). This includes when a borrower
enters repayment, exits a forbearance, leaves any IDR plan besides
Income-Based Repayment (IBR), and enters default. In August 2023, the
Department also implemented a provision in the SAVE plan regulations
under which the Department does not charge any amount of accrued
interest that is not otherwise covered by a borrower's required payment
(88 FR 43820). These changes provide significant benefits that may help
borrowers avoid situations where they find themselves struggling to
repay their debts because their balance has grown far beyond what they
originally borrowed.
The intent of the Department is to take action on a one-time basis
on a borrower's loans to address excessive interest accrual on Federal
student loans. The primary drivers of this accumulation are when
borrowers make payments on an IDR plan that do not cover the full
amount of accumulating interest; periods of non-payment, such as
deferments, forbearances, delinquency, and default; and interest
capitalization. Because prior to the establishment of the Saving on A
Valuable Education (SAVE) Plan IDR plans were the only repayment plans
where payments do not have to at least cover accumulating monthly
interest, the Department is concerned that borrowers owe large balances
that are higher than what they were at repayment entry from prior
enrollment in IDR. Owing such large balances can result in borrowers
needing to repay far more than would have been reasonably expected by
the Department, and the borrower themselves, at the time that the
borrower entered repayment. It can also significantly extend the amount
of time a borrower needs to repay their loans in full. Prior to SAVE,
interest balances climbed even though borrowers made monthly required
payments on IDR plans. Echoing concerns and statements the Department
heard in public comments prior to the formation of the negotiated
rulemaking committee and during the public comment periods held on most
days the negotiated rulemaking committee met, borrowers have reported
that growing balances while in repayment can lead to negative
psychological impacts on borrowers who are attempting to repay their
debt but are unable to, including that they lose hope and motivation to
repay their debt.\12\
---------------------------------------------------------------------------

\12\ <a href="https://www.pewtrusts.org/en/research-and-analysis/reports/2020/05/borrowers-discuss-the-challenges-of-student-loan-repayment">https://www.pewtrusts.org/en/research-and-analysis/reports/2020/05/borrowers-discuss-the-challenges-of-student-loan-repayment</a>;
<a href="https://www.newamerica.org/education-policy/reports/in-default-and-left-behind/">https://www.newamerica.org/education-policy/reports/in-default-and-left-behind/</a>.
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Additionally, while the Department has eliminated all non-
statutorily required instances of interest capitalization, borrowers
today owe higher balances from previous instances of interest
capitalization. Interest capitalization can significantly increase what
a borrower owes and extend the time it takes to repay their loans. The
Department is concerned that such instances are harmful to the borrower
and should therefore be corrected retroactively by waiving the
borrower's obligation to pay such interest accrual after a borrower has
entered repayment.

[[Page 27572]]

While the Department has addressed the issue of balance growth for
those in IDR going forward, there are borrowers who have spent time in
repayment prior to the implementation of these changes who have
experienced the balance of their loans grow such that their loan
balances are now greater than what they originally borrowed. The
persistence of those situations is a problem the Department seeks to
address. Recent focus group reports and extensive borrower testimony
have shown that growing loan balances lead to both financial and
psychological challenges to successful repayment by borrowers.\13\
While borrowers who experienced balance growth have a way to prevent
balance growth in the future, they still must overcome the consequences
of this past balance growth.
---------------------------------------------------------------------------

\13\ See 87 FR 41878 (July 13, 2022); 87 FR 65904 (November 1,
2022); 88 FR 43820 (July 10, 2023). See also <a href="https://www.pewtrusts.org/en/research-and-analysis/reports/2020/05/borrowers-discuss-the-challenges-of-student-loan-repayment">https://www.pewtrusts.org/en/research-and-analysis/reports/2020/05/borrowers-discuss-the-challenges-of-student-loan-repayment</a>; <a href="https://www.newamerica.org/education-policy/reports/in-default-and-left-behind/">https://www.newamerica.org/education-policy/reports/in-default-and-left-behind/</a>.
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Because the Department has taken steps to address the problem of
excess interest accrual and capitalization going forward, this
provision would only be applied once per a borrower's loans to
eliminate balance growth for all but the highest income borrowers
enrolled in an IDR plan, allowing those who experienced this situation
to successfully make progress on repaying their debts. Providing
targeted relief in this manner would be consistent with the general
principles of Federal debt collection, which permit agencies to provide
relief to borrowers when there is evidence the agency would not
otherwise be able to collect the debt in full within a reasonable
time.\14\
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\14\ See 31 U.S.C. 3711(a)(3). In addition, Congress permitted
ED to compromise or collect debt pursuant to the standards
articulated by ED's own debt collection regulations or Treasury's
debt collection regulations, see 31 U.S.C. 3711(d), which similarly
permit relief where there is evidence the agency would not collect
the debt in full within a reasonable period of time. See, e.g., 31
CFR 902.2(a)(2); 34 CFR 30.70(a)(1) (referencing 31 CFR part 902).
---------------------------------------------------------------------------

The Department proposes to provide the benefits in Sec. 30.81 only
to borrowers enrolled in IDR plans for both operational and
administrative reasons. First, borrowers in IDR plans have demonstrated
their concern that they cannot repay their loans on the standard
repayment timeline, making them an important group for the Department
to consider for relief. Second, until the creation of the SAVE plan,
borrowers on IDR plans frequently experienced balance growth from
accruing interest, which this policy seeks to address. Specifically,
the nature of the IDR plans' lower monthly payments meant borrowers'
payments often did not cover monthly interest. Borrowers in the past
who did not recertify their income could also be removed from an IDR
plan at which point any unpaid interest would be capitalized. For both
reasons, it is reasonable for the Department to focus its resources on
providing relief to borrowers on IDR plans to address the current
negative effects of prior interest accumulation and potentially
capitalization. In addition, administrative considerations weigh in
favor of limiting the policy to borrowers in IDR because the Department
has data that will allow it to verify that borrowers fall below the
income cap.
The Department proposes to limit this benefit to borrowers with
income below certain levels to benefit only borrowers for whom their
past instances of balance growth may have a greater possible negative
effect on their ability to repay their debts in the future. The SAVE
plan's interest benefit works in a similar manner. As a borrower's
income rises, their payment covers a greater amount of accumulating
monthly interest. Eventually, for any given debt level there is an
income amount at which a borrower's payment will equal or exceed
accumulating monthly interest. At that point, the borrower does not
derive any assistance from the SAVE plan's interest benefit.
The Department proposes to limit the benefit in this section to
borrowers whose incomes are at or below a certain threshold. To
determine this threshold, the Department looked at the income level at
which a borrower in a single-person household would have a calculated
payment on the SAVE plan that is sufficient to pay off all the interest
accumulating on a monthly basis if their debt level was equal to
$138,000 which is the maximum amount of Federal loans a borrower can
take out for undergraduate and graduate education without taking out
any PLUS loans. We exclude amounts related to PLUS loans because they
do not have an absolute dollar loan limit, as they can be obtained for
up to the total cost of attendance, less other aid received.
Because of the lack of an absolute dollar loan limit, there are
some borrowers who have debts that are much higher than the debt loads
of the overwhelming majority of borrowers. We do not think it was
reasonable to anchor to such outlier amounts, and we therefore take the
conservative approach of not including these dollar amounts. However,
typical balances for Parent PLUS and Graduate PLUS loans are well below
the amounts contemplated here.\15\ Using a value of $138,500 is
inclusive of over 95 percent of loan balances in repayment.
Furthermore, Parent PLUS borrowers are only eligible for an IDR plan if
the borrower has repaid those Parent PLUS loans through consolidation.
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\15\ For example, the average balance for a Parent PLUS loan
recipient is almost $30,000 and the average balance for a Grad PLUS
loan recipient is about $58,000. As of Q4, 2023, see Federal Student
Aid Portfolio by Loan Type, available at: <a href="https://studentaid.gov/data-center/student/portfolio">https://studentaid.gov/data-center/student/portfolio</a>.
---------------------------------------------------------------------------

We calculated income thresholds for waiver eligibility in the
following way: First, we assumed that a borrower had a total balance
equal to the maximum non-PLUS amount that a borrower can receive for
undergraduate and graduate education, which is $138,500. We then
assumed that a borrower received the maximum amount of loans for an
undergraduate dependent student ($31,000) and the remainder for
graduate school ($107,500). We did this calculation off a dependent
undergraduate maximum because those are the more common types of
student loan borrowers, and it allows undergraduate loans to make up a
smaller share of the total amount borrowed. If the independent
undergraduate limit were used, the SAVE payment amount would decrease
due to the increased share of undergraduate loans. Using independent
limits would produce an unfair income amount for dependent borrowers,
while independent students are not harmed by using the dependent limit.
In order to determine the interest rate to use for this analysis we
assigned the unweighted average interest rate charged on undergraduate
loans from the 2013-14 award year through the 2023-24 award year to the
undergraduate loans and the equivalent graduate loan rate for the non-
PLUS graduate loans. We used this period to generate an average
interest rate because prior to 2013-14 there were different rates
charged on subsidized versus unsubsidized loans. This produced averages
of 4.3 percent for undergraduate loans and 5.87 percent for graduate
loans. We then weighted these interest rates by the share of the
balance owed for undergraduate and graduate school. This resulted in an
interest rate of 5.52 percent. Next, we used the balance amount and the
interest rate to calculate the amount of interest that would accumulate
on $138,500 at a 5.52 percent interest rate in one month. That amount
is $637.10.
We then calculated the income that a single person would need to
earn to have a monthly payment on SAVE equal to $637.10. In doing this,
we used the

[[Page 27573]]

2024 Federal Poverty Guideline (FPL) amount of $15,060. Using those
data, we calculated that a single person who owes the maximum non-PLUS
amount would have to make more than $119,971 to cease receiving an
interest benefit on SAVE. We then rounded that amount to the nearest
$1,000, which yields a threshold of $120,000.
The Department proposes to use a threshold of $120,000 for
borrowers whose tax filing status is single. We propose to adopt the
same threshold for married-filing-separately taxpayers, mimicking many
rules in the Internal Revenue Code that treat the two filing statuses
similarly. For example, the basic standard deduction for single and
married-filing-separate filers is the same. We propose to use $180,000
for a borrower whose filing status is head of household, which mimics
the treatment under the Internal Revenue Code, in which the standard
deduction is one-and-a-half times what is used for a single-person
household (subject to rounding rules). We propose to use two times the
amount for a single-person household--$240,000 for borrowers whose
status is married filing jointly or qualifying surviving spouse. This
too mirrors how the Internal Revenue Code handles the standard
deduction for these filing statuses relative to someone whose filing
status is single.
The Department acknowledges that this approach to establishing
income thresholds for filing statuses besides single or married filing
separately is different from how we calculate payments on IDR plans.
For IDR plans, we adjust payments for larger households by using some
multiplier of the Federal Poverty Guidelines based upon the size of the
household. The result is that a two-person household does not have
double the amount of income protected that a single-person household
has. We think taking a different approach here is warranted for several
reasons. The consideration under IDR plans is about ensuring borrowers
have enough money set aside to cover their monthly key obligations,
such as food and housing. Those items have economies of scale, which
can be reflected in the household size adjustment. For instance, a two-
person household may be sharing one bedroom, meaning the per-person
household cost is not simply double that for a single person. By
contrast, this waiver is an action that would occur once per borrower
and is not focused on their monthly payment amount. Moreover, because
this waiver is concerned with balance growth borrowers have experienced
during their time since entering repayment, it is possible that some of
this growth would have occurred before borrowers married, had children,
or otherwise grew their household size. For instance, the median age at
repayment entry for borrowers is about 25, while the typical age of
first marriage is about 30 for men and 29 for women.\16\
---------------------------------------------------------------------------

\16\ Based on the American Community Survey 2022 5-year
estimates of Median Age at First Marriage.
---------------------------------------------------------------------------

The Department is not proposing to amend the regulations for SAVE
in this NPRM and will not consider comments related to adjusting the
payment calculations on SAVE in response to this NPRM.
Borrowers whose income exceeds these thresholds would not receive a
waiver under this provision but could have the lesser of $20,000 or the
amount by which their balance upon entering repayment exceeds their
current outstanding balance waived under Sec. 30.82.
The Department's overall goal with this provision is to only
address balance growth that occurred after a borrower entered
repayment. We do not propose to address interest that accumulated
before a borrower first entered repayment, which, prior to July 1,
2023, was capitalized on their balance at the end of the grace period.
The accumulation of interest while a borrower is in school is a
statutory component of Federal Student Loans.\17\ However, the
Department faces certain data limitations that make it impossible to
accurately ascertain the balance upon entering repayment for loans
disbursed before January 1, 2005. For those loans, data regarding the
balance upon the end of the grace period is not stored in the
Department's records. We are concerned that attempts to approximate
that amount may not be accurate and could result in either providing
too much or too little assistance to borrowers. Accordingly, this
provision would provide differential treatment for loans based upon
whether they were disbursed before or after the date by which the
Department can accurately assess the balance owed upon repayment entry.
For loans disbursed after January 1, 2005, we would measure the
original balance based upon the last day of a borrower's grace period,
so that no interest that accumulated prior to entering repayment is
included. For loans disbursed before that date, the Department would
use the original disbursed balance of the loan due to operational
limitations. Because the Department does not have a valid and reliable
data point for balance at repayment entry for borrowers with these
older loans, we think the balance at disbursement is the best available
data to use for loans disbursed before January 1, 2005. This would be
used only for borrowers whose loans are 20 or more years old, which
also means that the vast majority of loans that are that old and are
still outstanding belong to borrowers who have had long-term struggles
repaying. For instance, Department data in the RIA that accompanies
this NPRM show that 83 percent of borrowers whose loans are at least 20
(undergraduate debt) or 25 (graduate debt) years old have previously
experienced a default. Moreover, to the extent borrowers with these
older loans had subsidized loans, they would not have seen interest
accumulate before entering repayment on those loans. These dates
properly balance the policy goals of not waiving interest prior to
repayment entry with the operational reality of using the best
available data. Because the January 1, 2005, disbursement date creates
a clear dividing line that establishes two groups of borrowers, one
with loans disbursed before January 1, 2005, and another with loans
disbursed after that date, if either element of this provision were
invalidated by a reviewing court, the element that stayed in effect
would continue to provide important relief to borrowers.
---------------------------------------------------------------------------

\17\ See 20 U.S.C. 1077a and 1087e(b).
---------------------------------------------------------------------------

The Committee did not reach consensus on proposed Sec. 30.81.
Sec. 30.82 Waiver when the current balance exceeds the balance
upon entering repayment.
Statute: Section 432(a) of the HEA (20 U.S.C. 1082(a)) provides
that in the performance of, and with respect to, the functions, powers,
and duties, vested in him by this part, the Secretary may enforce, pay,
compromise, waive, or release any right, title, claim, lien, or demand,
however acquired, including any equity or any right of redemption.
Current Regulations: None.
Proposed Regulations: Proposed Sec. 30.82 would provide that the
Secretary may waive the lesser of $20,000 or the amount by which a
borrower's loans have a total outstanding balance that exceeds the
balance owed upon entering repayment, for loans disbursed before
January 1, 2005, the balance of the loans on the day after the grace
period for loans disbursed on or after January 1, 2005, or the total
original principal balance of all loans repaid by a Federal
Consolidation Loan or a Direct Consolidation Loan. A borrower who has
received a waiver under Sec. 30.81 would not be eligible for a waiver
under this provision.

[[Page 27574]]

Reasons: Proposed Sec. 30.82 would provide one-time relief to
borrowers who experienced balance growth. While the Department has
taken steps to address the harms of balance growth and interest
capitalization going forward, the recent changes do not address past
instances of balance growth that have resulted in some borrowers owing
more than they originally did when they entered repayment. As
explained, this balance growth adversely affects a borrower's ability
to pay off their loans in full within a reasonable period. We are also
concerned that growing balances while in repayment may lead to negative
psychological impacts on borrowers who are attempting to repay their
debt but are unable to do so.
There are several reasons why a borrower may have seen their loan
balance grow beyond what it was when they entered repayment. They may
have spent time in deferments and forbearances during which interest
accumulated on their loans. This includes both deferments for
unemployment or economic hardship, as well as deferments and
forbearances related to military service. Borrowers may also have seen
their balances grow if they previously spent time on an IDR plan during
which their income-based payment amounts were not sufficient to repay
all the monthly accumulating interest. Borrowers may also have spent
time in which they were not repaying their loans, including periods of
delinquency and in default.
Borrowers who accumulated outstanding unpaid interest also may have
experienced interest capitalization events, such as after a forbearance
ends or after they left an IDR plan, in which outstanding interest was
added onto the loan's principal balance. Once capitalization occurs,
borrowers then pay interest that is calculated off that higher
principal balance, increasing the total amount of interest they need to
repay.
The Department took steps in recent years to avoid balance growth
and in particular to decrease the instances in which borrowers see
their unpaid interest capitalize. Specifically, the Department has
recently taken action to end interest capitalization where it is not
required by statute as well as to create an interest benefit under the
SAVE plan wherein the borrower is not charged for the remaining
interest after a payment is applied. Providing relief through Sec.
30.82 allows the Department to address the current and ongoing issues
for borrowers caused by this past balance growth.
The Department proposes to make the benefits of Sec. 30.82
available to all borrowers because we are concerned about the negative
effects of balance growth regardless of borrowers' past repayment
history or circumstances. While we have proposed a separate provision
in Sec. 30.81 that would provide relief for borrowers who are on an
IDR plan and have incomes below certain levels, the Department sees
Sec. Sec. 30.81 and 30.82 as provisions that can operate in a separate
and distinct manner from each other. Therefore, in developing the
parameters for this provision, the Department considered the optimal
structure for this provision as a standalone benefit. The only
interplay between this provision and Sec. 30.81 is the proposed
limitation in Sec. 30.82(b) that a borrower may not receive relief to
address balance growth under both provisions because the Department
intends to provide one-time relief from balance growth for a borrower
if the Secretary exercises his discretion to grant such relief through
this provision.
The Department believes it is important to provide a benefit under
Sec. 30.82 that is available to all borrowers. An automatic and
universal approach is the simplest to administer and also avoids
problems commonly seen by the Department with application-based
benefits in which the borrowers who would most benefit from the relief
fail to apply. The JP Morgan Chase Institute found in 2022 that there
are two borrowers who could benefit from IDR for every one that is
enrolled.\18\ Similarly, the U.S. Department of the Treasury found that
70 percent of borrowers who were in default in 2012 would have
benefitted from a reduced payment of an IDR plan at the time.\19\
Providing this benefit on a broadly applicable, automatic basis would
allow us to reach all borrowers who face the adverse effects of balance
growth and would create a streamlined process.
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\18\ <a href="http://www.jpmorganchase.com/institute/research/household-debt/student-loan-income-driven-repayment">www.jpmorganchase.com/institute/research/household-debt/student-loan-income-driven-repayment</a>.
\19\ U.S. Government Accountability Office, 2015. Federal
Student Loans: Education Could Do More to Help Ensure Borrowers are
Aware of Repayment and Forgiveness Options. GAO-15-663.
---------------------------------------------------------------------------

However, because the Department would provide a universal benefit,
we do not believe it would be appropriate to provide uncapped relief.
In particular, there are borrowers who have experienced amounts of
balance growth significantly higher than all other borrowers who have
seen their balances grow. The Department is concerned that waiving
those excessive amounts of balance growth would provide unnecessary
windfall benefits in which there would be significant costs incurred to
help a relatively small number of borrowers.
We propose capping the amount of relief at $20,000 for a borrower
which would strike the balance between granting a level of benefits
that would provide assistance to borrowers while not granting windfall
amounts of relief. This $20,000 amount represents the 90th percentile
of the amount by which balances exceed what borrowers originally owed
upon entering repayment. This amount is informed by using a statistical
approach to identify excess balance values that are dissimilar to most
other values. There are several common ways of defining outliers in a
distribution, and we use a process here that uses multiples of the
interquartile range, referred to as a ``fence.'' \20\ The upper inner
fence is commonly defined as the 75th percentile value plus the
interquartile range multiplied by 1.5. In Department data, the inner
fence is about $18,500, which we round up to $20,000 to create a
simpler value to understand.
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\20\ For more information on this approach see the National
Institute of Standards and Technology, <a href="https://www.itl.nist.gov/div898/handbook/prc/section1/prc16.htm">https://www.itl.nist.gov/div898/handbook/prc/section1/prc16.htm</a>, or statistical textbooks
such as Ott & Longnecker, An Introduction to Statistical Methods and
Data Analysis.
---------------------------------------------------------------------------

A cap on relief under this provision also acknowledges that
generally borrowers must have larger loan balances in order to
experience greater amounts of balance growth, and that typically
borrowers with larger loan balances have greater earnings potential
than those with lower loan balances.
Examples highlight the connection between loan balance amounts and
the potential for balance growth. Consider a borrower who owes $9,500
at an interest rate of 4.32 percent, the maximum amount of debt an
undergraduate student can take out in a single year and the average
interest rate for undergraduate loans over the last 11 years. If they
did not make a single payment for 10 years their balance would grow by
$4,104. By contrast, a borrower who owes $150,000 all in graduate loans
at an interest rate of 5.87 percent (the average graduate rate over the
last 11 years), would see their balance grow by $88,050 if they did not
make a payment over 10 years. Therefore, among two otherwise similarly
situated borrowers, the borrowers who owe more, particularly in
graduate loans, will see their balance grow faster.
Borrowers with very high balances tend to have higher incomes than
do lower-balance borrowers. That may be because many higher-balance
borrowers

[[Page 27575]]

accumulated some or most of their debt from graduate school, and among
college-educated individuals, those with a graduate degree generally
have higher wages than those with only an undergraduate credential or
without any credential at all.\21\ A higher earning borrower may not
only have a greater ability to pay off their debt in full in a
reasonable period, there is also a greater likelihood that they may be
on an earnings trajectory in which their initial earnings start out
lower and then increase over time. For instance, many health care
professions start with lower wages until the individual completes their
residency. This earnings growth phenomenon is something the Department
has acknowledged in other contexts, such as in the Financial Value
Transparency and GE final regulations in which the Department proposes
to assess the earnings of graduates from certain programs from the
period six or seven years after completion instead of the standard
three or four years used for most other program types. Based upon the
proposed cap of $20,000 on balance growth, we looked at data on
borrowers who experienced balance growth to try to understand any
points where borrowers who would receive relief beyond that cap amount
appear to have a greater likelihood of showing their ability to repay
their debt. This analysis included looking at factors such as the share
of borrowers with loans from graduate school, the rate at which
borrowers received Pell Grants, and whether students had past evidence
of default. While the Department does not have data on borrower
incomes, we imputed income for borrowers based on individuals with
similar demographic and educational characteristics from Census data.
This procedure is imperfect, but we believe it provides a reasonable
approximation of income. We found that borrowers who had less than
$20,000 of excess balance were less likely to have gone to graduate
school and have a lower imputed income. They were also more likely to
have received a Pell Grant or to have experienced student loan default.
This further confirmed our belief that preventing windfall amounts of
relief also helped make this provision better targeted.
---------------------------------------------------------------------------

\21\ Borrowers with professional doctoral degrees, which include
fields like medicine, pharmacy, veterinary medicine, and law, have
the highest cumulative student loan balances among those who have
completed postsecondary education (see <a href="https://nces.ed.gov/programs/coe/indicator/tub/graduate-student-loan-debt">https://nces.ed.gov/programs/coe/indicator/tub/graduate-student-loan-debt</a>). These are also fields
that tend to have the highest wages (see for example, <a href="https://www.bls.gov/oes/current/oes_nat.htm">https://www.bls.gov/oes/current/oes_nat.htm</a>). Borrowers with master's
degrees or higher, also tend to have higher debt (see Bhutta et al.
``Changes in U.S. Family Finances from 2016 to 2019: Evidence from
the Survey of Consumer Finances,'' Federal Reserve Bulletin, 2020,
106 (5). <a href="https://www.federalreserve.gov/publications/files/scf20.pdf">https://www.federalreserve.gov/publications/files/scf20.pdf</a>) For research on the returns to graduate degrees, see, for
example, Altonji & Zhong (2021). The labor market returns to
advanced degrees. Journal of Labor Economics, 39(2).
---------------------------------------------------------------------------

The Department specifically invites feedback from the public on the
approaches considered here. In particular, we are interested in
comments on whether to consider a higher or lower cap on the amount of
balance growth that could be waived and on the rationales for choosing
such caps. We also welcome feedback on whether there should be separate
waiver policies to consider unique circumstances of different groups of
borrowers and how they might be affected by balance growth. Such
groups, for example, could recognize the effect of balance growth as
being different for parent borrowers versus student borrowers because
the former have less access to IDR plans and as a result have less of
an ability to have balances forgiven after a certain period in
repayment.
The different dates for measuring the original balance in Sec.
30.82(a) reflect data limitations the Department faces in accurately
calculating the right balance to use as a baseline. These data
limitations are explained in the discussion of reasons for Sec. 30.81.
During the third negotiated rulemaking session, the Department
proposed two regulatory sections that are similar to proposed Sec.
30.82. The Committee did not reach consensus on these proposed
sections.
Sec. 30.83 Waiver based on time since a loan first entered
repayment.
Statute: Section 432(a) of the HEA (20 U.S.C. 1082(a)) provides
that in the performance of, and with respect to, the functions, powers,
and duties, vested in him by this part, the Secretary may enforce, pay,
compromise, waive, or release any right, title, claim, lien, or demand,
however acquired, including any equity or any right of redemption.
Current Regulations: None.
Proposed Regulations: Proposed Sec. 30.83(a)(1) specifies the
conditions under which the Secretary may waive the outstanding balance
of Federal student loans received for the borrower's undergraduate
study.
Under this proposed rule, borrowers would have their outstanding
balances waived only for loans that were received for undergraduate
study or Direct Consolidation Loans that repaid only loans that were
obtained for undergraduate study, and which first entered repayment on
or before July 1, 2005. Proposed Sec. 30.83(a)(2) describes the
conditions under which the Secretary may grant waivers on outstanding
balances of Federal student loans other than those loans that were
received for undergraduate study, and first entered repayment on or
before July 1, 2000.
Proposed Sec. 30.83(b) specifies how the Department would
calculate the date when a loan originally entered repayment. For a loan
that is not a PLUS loan or a consolidation loan, the Department would
use the day after the loan's initial grace period ends. For PLUS loans
made to either a parent or a graduate or professional student, the
Department would use the date the loan is fully disbursed. For a
Federal Consolidation Loan or Direct Consolidation Loan made prior to
July 1, 2023, the Department would consider the earliest date a loan
repaid by the consolidation loan had the following occur:
<bullet> For a non-PLUS, non-consolidation loan, the day after its
initial grace period ended,
<bullet> For a PLUS loan to a graduate or professional student or a
parent, the date the loan was disbursed.
For a Direct Consolidation Loan made on or after July 1, 2023, the
date for measuring repayment entry would be based upon the latest day a
loan repaid by the consolidation loan had its initial grace period end
or was fully disbursed.
Reasons: The standard repayment plan that acts as the default
option for borrowers provides a repayment schedule of 120 monthly
installments of fixed amounts, the equivalent of 10 years.\22\
Similarly, the income contingent repayment authority provides that
borrowers repay over an extended period, but such repayment period is
not to exceed 25 years.\23\ More recently, the IBR plan provides that a
borrower's repayment term ends when they reach the equivalent of 20 or
25 years of monthly payments, depending on when they first took out
loans.\24\
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\22\ See 20 U.S.C. 1078(b)(9)(A)(i) and 20 U.S.C.
1087e(d)(1)(A).
\23\ See 20 U.S.C. 1087e(d)(1)(D).
\24\ See 20 U.S.C. 1098e.
---------------------------------------------------------------------------

The Department is concerned that despite the presence of ways for
repayment to end, too many borrowers end up owing loans for years, if
not decades, longer than the repayment plans generally require. In
estimates presented later in the RIA, millions of borrowers have been
in repayment for over 20 or 25 years.\25\ The Department

[[Page 27576]]

is particularly concerned that when loans persist for this long, they
are unlikely to be repaid in a reasonable period of time. In
recognition of this problem, Congress and the Department have made
several statutory and regulatory changes to the student loan program so
that borrowers can fully repay their debt within a reasonable time.
However, borrowers who took out loans prior to the creation of these
changes spent years or decades without the generous benefits that exist
today and, as a result, may have faced more repayment challenges and be
less likely to retire their debts within a reasonable time. The
Department has already taken some steps to address this concern through
the payment count adjustment. In that situation, the Department was
concerned that because of inaccurate recordkeeping, borrowers may not
have received appropriate credit toward forgiveness on IDR plans that
they had earned. We were also worried about incorrect application of
policies designed to limit repeated use of forbearances or properly
tracking which deferments are supposed to count toward forgiveness. To
that end, we credit all months a borrower spent in a repayment status,
plus any months during which a borrower spent 12 consecutive or 36
cumulative months in a forbearance, and any deferments besides being
in-school prior to 2013. We also do not reset progress toward
forgiveness based upon loan consolidation. While the payment count
adjustment provides important assistance, it does not capture the full
set of circumstances in which a borrower may struggle to accrue time to
forgiveness. This includes time spent in default and time spent in
forbearance that does not meet the criteria of the payment count
adjustment.
---------------------------------------------------------------------------

\25\ There is also evidence of many borrowers being in repayment
for a long time in a paper by the Urban Institute using credit panel
data estimated that there are nearly 100,000 borrowers with loans
that were first originated prior to 1990, making them well more than
30 years old. The author also estimated that 1.5 million borrowers
had a loan with an origination date before 2000. The author notes
these statistics may well be an underestimate because older debts
may no longer appear on a borrower's credit report even though they
are still outstanding. <a href="https://www.urban.org/sites/default/files/publication/101492/when_student_loans_linger_0.pdf">https://www.urban.org/sites/default/files/publication/101492/when_student_loans_linger_0.pdf</a>.
---------------------------------------------------------------------------

The Department views proposed Sec. 30.83 as providing a waiver to
borrowers who have had their loans for such an extended period that
they are unlikely to fully repay within a reasonable period.
In drafting Sec. 30.83, the Department has proposed to adopt
several parameters to mirror the existing IDR plans. For instance, we
would use debt relief thresholds of 20 or 25 years because those are
the same periods available on IDR plans. We propose applying this
provision to loans that entered repayment on or before July 1, 2005 for
borrowers who do not have any graduate loans because these borrowers
will have been in repayment for all or part of 20 calendar years or
more when the regulation is implemented; and we propose applying this
provision to loans that entered repayment on or before July 1, 2000 for
borrowers who have any graduate loans because these borrowers will have
been in repayment for all or part of 25 calendar years when this
provision is implemented. We also elected to use the differential
treatment of undergraduate and graduate borrowers that exists in SAVE
and was carried over from the since-replaced Revised Pay As You Earn
(REPAYE) plan. The Department further believes after reviewing
information identified in FSA's Enterprise Data Warehouse, that the
differential treatment for undergraduate versus graduate loans is
reasonable because Department data show that undergraduate borrowers go
into delinquency or default at significantly higher rates than graduate
borrowers. According to these data, 90 percent of borrowers who are in
default on their loans had only taken out loans for their undergraduate
education. By contrast, only 1 percent of borrowers who are in default
only had graduate loans.
In proposing this treatment of loans that entered repayment a long
time ago, the Department would not adopt the terms for a shortened
period until forgiveness that is included in SAVE. That provision
allows borrowers to receive forgiveness after as few as 120 payments if
their original principal balance was $12,000 or less. The Department
does not think it is appropriate to adopt that threshold here because
this timeline is only available under the SAVE plan. By contrast, the
goal of Sec. 30.83 is to address situations where borrowers have been
unable to fully repay in a reasonable time and have not even been able
to repay in full over an extended period. This extended period is
consistent with the forgiveness timelines on other IDR plans, which
provide repayment terms of up to 20 or 25 years.
The Department also proposes to include language in Sec. 30.83(b)
explaining how we would determine the date of repayment entry in
several different situations. For loans that are not PLUS loans or
consolidation loans, we propose to use the date after the final day of
a loan's grace period. That is the most intuitive date associated with
what it means to enter repayment. For PLUS loans made to either a
parent or a graduate or professional student we propose using the day
the loan is fully disbursed. This recognizes that PLUS loans have
multiple options for when borrowers enter repayment. Since 2008, parent
borrowers have had the option to defer repayment entry until after the
dependent undergraduate leaves school. But not all choose to do this,
and some parents choose to enter repayment right away, in which case
their repayment entry date is the same as the disbursement date.
Similarly, graduate borrowers have the option to decline their in-
school deferment. Using the date of disbursement is therefore a
consistent treatment of PLUS loans regardless of whether the borrower
elected to go into repayment right away.
The Department proposes a simpler solution for picking the date to
assign for repayment entry for a consolidation loan. We are concerned
that simply counting the date of the consolidation loan's disbursement
would be unfair to borrowers because it could result in erasing years
of time since repayment entry for borrowers, unwittingly. The
Department has addressed concerns about a full reset of forgiveness
clocks through consolidation in recent regulations on IDR and PSLF and
maintains that concern here. In those circumstances we have addressed
that issue through using a weighted average of the underlying
loans.\26\ Instead, for this regulation we propose an approach that is
simpler to administer and clearer to understand. For consolidation
loans made before July 1, 2023, we propose using the earliest date that
any loan that was repaid by a consolidation loan ended its initial
grace period or was disbursed in the case of a PLUS loan. We propose
this date of July 1, 2023, because it was the day after the Department
announced this rulemaking in a press release and there was no way a
borrower could have known to consolidate and receive this benefit.\27\
As such, borrowers could not have engaged in any strategic
consolidation to receive this benefit before July 1, 2023. For
consolidation loans disbursed on or after July 1, 2023, we propose to
instead use the latest date that any loan repaid by the consolidation
ended its initial grace period, or in the case of a PLUS loan was
disbursed. By establishing these different thresholds, a borrower's
repayment progress will not fully reset when a borrower consolidates
loans on which a borrower had previously made payments. In addition,

[[Page 27577]]

this also makes certain that a borrower could not consolidate after the
Department announced this proposal in order to receive a waiver of
newer loans alongside older ones. We have determined that this approach
is more operationally feasible and carries a lower risk of errors.
---------------------------------------------------------------------------

\26\ See 34 CFR 685.209(k)(4)(v)(B) and 34 CFR 685.219(c)(3).
\27\ <a href="https://www.ed.gov/news/press-releases/fact-sheet-president-biden-announces-new-actions-provide-debt-relief-and-support-student-loan-borrowers">https://www.ed.gov/news/press-releases/fact-sheet-president-biden-announces-new-actions-provide-debt-relief-and-support-student-loan-borrowers</a>.
---------------------------------------------------------------------------

During negotiated rulemaking, the Department proposed only waiving
loans that first entered repayment 20 or 25 years ago at the time we
would implement this section. Negotiators and public commenters raised
significant concerns about how such an approach would create a ``cliff
effect'' in which a borrower who falls just a month or two short of 20
or 25 years would not be eligible for a waiver, despite facing
significant financial burden of student loan debt over time and facing
many of the same repayment challenges as those borrowers eligible for
relief under this provision.
The Department understands the concerns raised by negotiators and
members of the public about the challenges with operating this policy
only once. At the same time, however, the Department is concerned that
an ongoing policy would not recognize how the Department has taken
steps to address many repayment challenges on a going-forward basis by
introducing several IDR plans, including the new SAVE plan, which
should make it substantially easier going forward for borrowers to make
payments that qualify for forgiveness. We have not yet identified a
solution to this issue that would still encourage borrowers who have
not yet reached forgiveness to continue making required payments until
they reach the 20- or 25-year mark. And for any solution for this
cliff, we would need a way to appropriately model the likelihood that a
borrower does take necessary steps in the future to be eligible for
relief under this approach so that we can assign it the proper
estimated cost in the net budget impact.
Given the considerations outlined above and in light of the changes
the Department has made under recent IDR plans, we invite feedback from
the public about how to acknowledge and address the repayment
challenges of borrowers who entered repayment a long time ago, but not
long enough to immediately qualify under this provision, and who are
unlikely to repay their loan in full in a reasonable period. We also
invite feedback on how to determine the likelihood that any borrower
who does not yet reach forgiveness under the proposed policy would
qualify for forgiveness under any suggested alternative one. For
example, if the Department were to award credit toward forgiveness
timelines for all months since entering repayment up until July 2024
(when all of SAVE's provisions become effective), and a borrower first
entered repayment at least 15 years ago, what standards are appropriate
for determining whether the borrower reaches the 20- or 25-year
threshold in light of the Department's recent steps to fix repayment
challenges through SAVE? In addition, how would the Department
determine the likelihood that such borrower ultimately takes necessary
steps to reach a 20 or 25-year forgiveness threshold under the proposed
standard?
The Committee did not reach consensus on proposed Sec. 30.83.
Sec. 30.84 Waiver when a loan is eligible for forgiveness based
upon repayment plan.
Statute: Section 432(a) of the HEA (20 U.S.C. 1082(a)) provides
that in the performance of, and with respect to, the functions, powers,
and duties, vested in him by this part, the Secretary may enforce, pay,
compromise, waive, or release any right, title, claim, lien, or demand,
however acquired, including any equity or any right of redemption.
Current Regulations: None.
Proposed Regulations: Proposed Sec. 30.84 would specify that the
Secretary may waive the outstanding balance of a loan for borrowers who
are otherwise eligible for forgiveness under an IBR plan, Income-
contingent Repayment (ICR) plan, or an alternative repayment plan but
are not currently enrolled in the plan where they could receive
forgiveness. The amount of the waiver would be the same as what the
borrower would receive under the applicable IDR plan. Currently
borrowers who are repaying their loans under an IDR plan must meet the
eligibility requirements to enroll and qualify for forgiveness of their
Federal student debt. Under all IDR plans, any remaining loan balance
is forgiven if their loans are not fully repaid at the end of the
repayment period.
Reasons: Congress and the Department have provided borrowers with
various income-based repayment plan options over time. The Department
currently offers four IDR plans: the IBR plan, ICR plan, Pay as You
Earn Repayment (PAYE) plan, and the new SAVE plan that replaced the
former REPAYE plan. For purposes of this NPRM we refer to IBR, ICR,
PAYE, SAVE, and REPAYE collectively as IDR plans.
The HEA sets forth the requirements for borrowers to receive relief
under the terms of the various IDR plans. For both ICR and IBR, a
borrower may receive relief as long as they have accumulated the
requisite amount of time making qualified payments or being in a
qualified deferment.\28\ The HEA does not require these qualifying
payments or deferments to occur while the borrower is enrolled in an
ICR plan to receive relief under ICR,\29\ nor must they occur while a
borrower is on an IBR plan to receive relief under IBR.\30\ Rather, the
HEA permits borrowers to receive relief under these plans so long as
the borrower participates in them at some point after such qualifying
payments or deferments have occurred.\31\ While the HEA's ICR and IBR
provisions do specify steps and procedures for obtaining a borrower's
income information to calculate reduced payments under these plans,
there is no requirement that borrowers provide such information as a
condition of receiving relief. Instead, the HEA leaves the specific
details of how to operationalize the procedures for enrolling in IDR
plans up to the Secretary. Under this proposed provision, the Secretary
would use information within the Department's possession to identify
borrowers already eligible for relief and provide them with the
opportunity to enroll in the IDR plan by choosing not to opt-out of
receiving a waiver.
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\28\ See 20 U.S.C. 1087e(e)(7) (ICR provision describing
qualifying payments and deferments for relief); 20 U.S.C. 1098(b)(7)
(IBR provision describing qualifying payments and deferments for
relief).
\29\ See 20 U.S.C. 1087e(e)(7).
\30\ 20 U.S.C. 1098(b)(7) (stating the Secretary may repay or
cancel any outstanding balance of principal and interest for a
borrower who ``at any time, elected to participate in'' an IBR plan
and meets the conditions for qualified payments or deferment).
\31\ See 20 U.S.C. 1087e(e)(7); 20 U.S.C. 1098(b)(7).
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Such waivers would benefit many borrowers because the Department's
current IDR regulations require borrowers to apply to enroll in IDR
plans.\32\ Unfortunately, Department experience and independent
research shows that there have been persistent challenges getting
borrowers who would benefit from IDR plans to enroll in them.\33\ And
when borrowers do enroll, large shares of them fail to successfully
recertify and stay enrolled. For example, one study by the JP Morgan
Chase Institute found that for every borrower enrolled in IDR there are
two others who would benefit from such a plan but

[[Page 27578]]

are not enrolled.\34\ Similarly, the Federal Reserve Bank of
Philadelphia found that many borrowers were unaware of the new SAVE
plan, especially among borrower groups who were most likely to benefit
from it, and potential beneficiaries remained uncertain even after
learning about plan features and benefits.\35\
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\32\ 34 CFR 685.209(l).
\33\ Goldstein, Adam, Charlie Eaton, Amber Villalobos, Parijat
Chakrabarti, Jeremy Cohen, and Katie Donnelly. ``Administrative
Burden in Federal Student Loan Repayment, and Socially Stratified
Access to Income-Driven Repayment Plans.'' RSF: The Russell Sage
Foundation Journal of the Social Sciences 9, no. 4 (2023): 86-111.
\34\ <a href="https://www.jpmorganchase.com/institute/research/household-debt/student-loan-income-driven-repayment#finding-1">https://www.jpmorganchase.com/institute/research/household-debt/student-loan-income-driven-repayment#finding-1</a>.
\35\ <a href="https://www.philadelphiafed.org/-/media/frbp/assets/consumer-finance/reports/cfi-sl-payments-3-resumption.pdf">https://www.philadelphiafed.org/-/media/frbp/assets/consumer-finance/reports/cfi-sl-payments-3-resumption.pdf</a>.
---------------------------------------------------------------------------

The Department is concerned that its past practices of
administering IDR plans have made it too challenging for borrowers to
successfully navigate these processes. The result has been borrowers
struggling to figure out which IDR plan is best, determine whether they
are eligible, and then submit an application.\36\
---------------------------------------------------------------------------

\36\ Herbst, Daniel. ``The impact of income-driven repayment on
student borrower outcomes.'' American Economic Journal: Applied
Economics 15, no. 1 (2023): 1-25.; Conkling, Thomas S., and Christa
Gibbs. ``Borrower experiences on income-driven repayment.'' Consumer
Financial Protection Bureau, Office of Research Reports Series 19-10
(2019).
---------------------------------------------------------------------------

Under the Department's current regulations, borrowers must also re-
enroll in the IDR plan each year and risk being removed from the plan
if they fail to recertify their participation in a timely basis. The
Department has taken many steps in recent years to address this
problem. We created the SAVE plan, which addresses many of the issues
that borrowers experienced in other IDR plans. We also are implementing
a regulatory change \37\ that makes it possible for borrowers to
automatically recertify their IDR enrollment by providing approval for
the disclosure of their Federal tax information.
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\37\ <a href="https://www.federalregister.gov/documents/2023/07/10/2023-13112/improving-income-driven-repayment-for-the-william-d-ford-federal-direct-loan-program-and-the-federal">https://www.federalregister.gov/documents/2023/07/10/2023-13112/improving-income-driven-repayment-for-the-william-d-ford-federal-direct-loan-program-and-the-federal</a>.
---------------------------------------------------------------------------

The Department is also concerned about how past challenges with
administering IDR plans may have exacerbated these issues for borrowers
with older loans. In April 2022, the Department announced it was taking
executive action to address concerns about a lack of consistent
tracking of borrower progress toward forgiveness and improper
implementation of policies designed to limit the use of extended time
in forbearances.\38\ Through that process we have identified and
provided relief to hundreds of thousands of borrowers who were eligible
for IDR forgiveness but had not enrolled. Simultaneously, the
Department put in place processes to fix these issues going forward,
including giving borrowers a clear count of their progress toward
forgiveness and addressing the use of forbearances. However, we are
concerned that there is still a group of borrowers who did not reach
forgiveness through the payment count adjustment and who are not so new
to borrowing that all their time in repayment would be covered by these
improvements. In particular, these would be borrowers who are eligible
for the forgiveness benefits under the SAVE plan, which provides
forgiveness after as few as 120 months (10 years) in repayment for
borrowers who originally took out $12,000 or less. Keeping borrowers
such as these in the repayment system when they could receive a
discharge immediately creates costs for the Department because we have
to continue to pay servicers to manage these loans.
---------------------------------------------------------------------------

\38\ <a href="https://www.ed.gov/news/press-releases/department-education-announces-actions-fix-longstanding-failures-student-loan-programs?utm_content=&utm_medium=email&utm_name=&utm_source=govdelivery&utm_term=">https://www.ed.gov/news/press-releases/department-education-announces-actions-fix-longstanding-failures-student-loan-programs?utm_content=&utm_medium=email&utm_name=&utm_source=govdelivery&utm_term=</a>.
---------------------------------------------------------------------------

The Department proposes applying this section to borrowers repaying
under all types of IDR plans, including those created under the income-
contingent repayment authority and IBR, and the alternative plan. We
include the alternative plan as well because that plan contains an
option to provide borrowers forgiveness after a set period of time,
even if they have not paid off the full balance. In that regard it is
similar to IDR plans. By contrast, other payment plans do not provide
forgiveness and so are not appropriate to include in this section.
In applying this waiver, the Secretary would provide borrowers with
relief identical to what they would have otherwise received on the
relevant IDR plan. They are not receiving benefits any larger than they
otherwise would have if they successfully navigated the enrollment or
re-enrollment process.
The non-Federal negotiators supported the Department's proposal to
waive the outstanding balance of loans and encouraged the Department to
automate the process and expedite the approval and debt relief as much
as possible.
The Committee reached consensus on proposed Sec. 30.84.
Sec. 30.85 Waiver when a loan is eligible for a targeted
forgiveness opportunity.
Statute: Section 432(a) of the HEA (20 U.S.C. 1082(a)) provides
that in the performance of, and with respect to, the functions, powers,
and duties, vested in him by this part, the Secretary may enforce, pay,
compromise, waive, or release any right, title, claim, lien, or demand,
however acquired, including any equity or any right of redemption.
Current Regulations: None.
Proposed Regulations: Proposed Sec. 30.85 would provide that the
Secretary may waive up to the entire outstanding balance of a loan
where the Secretary determines that a borrower has not successfully
applied for, but otherwise meets, the eligibility requirements for any
other loan discharge, cancellation, or forgiveness program under 34 CFR
parts 682 or 685. This includes opportunities such as false
certification discharge, closed school loan discharges, and Public
Service Loan Forgiveness (PSLF).
The proposed regulations also specify that if a borrower has a
Direct Consolidation Loan or a Federal Consolidation Loan where only
part of it would meet the criteria of this section that the Secretary
may waive the portion of the outstanding balance of the consolidation
loan attributable to such loan.
Reasons: The HEA outlines several opportunities for borrowers in
the Direct or FFEL Programs to receive Federal student loan forgiveness
in certain situations if the borrower meets the eligibility
requirements. For both loan types, this includes forgiveness when a
borrower is enrolled at a school that closes, if they have a total and
permanent disability, or have a loan that has been falsely certified.
Direct Loan borrowers are also eligible for PSLF.
The Department has historically seen many situations where
borrowers do not successfully apply for available relief when they are
eligible. For example, in August 2021, the Department issued a final
rule that provided automatic forgiveness for borrowers who were
identified as eligible for a total and permanent disability discharge
through a data match with the Social Security Administration.\39\ The
Department had been using such a match for years to identify eligible
borrowers but required them to opt in to receive relief. After
switching to an opt out model, we have provided relief to more than
350,000 borrowers, showing that a default of inclusion helps these
programs to reach the people who need them. Absent this action it is
possible many of these borrowers would still have loans today.
Similarly, GAO studies of closed school loan discharges have found that
many borrowers eligible for a closed school loan discharge fail to
apply, and that those who in the past received automatic closed school
loan discharges after a three-year waiting period were

[[Page 27579]]

highly likely to default during the waiting period.\40\
---------------------------------------------------------------------------

\39\ 87 FR 65904 (November 1, 2022).
\40\ <a href="https://www.gao.gov/assets/gao-21-105373.pdf">https://www.gao.gov/assets/gao-21-105373.pdf</a>.
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The waivers proposed in this section would build on efforts made by
the Department over the past several years to improve regulations for
existing discharge programs to allow the Secretary to award borrowers
relief under different programs if we determine that they otherwise
meet the criteria. Beyond the regulatory programs to automatically
provide discharges to eligible borrowers, the Secretary may have or
obtain information showing that additional borrowers are or should be
eligible for relief on their loans. For example, borrowers whose
schools closed while they were enrolled outside of the time periods
that the Department provided automatic relief would nonetheless be
eligible for this relief if they applied. By giving these borrowers an
opportunity to obtain the relief intended for them by choosing not to
opt out, this rule would make that relief available in a fairer manner
that lessens the burdens on borrowers. Although schools can be liable
for relief provided based on the closed school discharge regulation,
schools would not face a liability for waivers granted under this
section. Because the Secretary would have waived the amounts owed by
the borrower there is no liability that could then be established
against the institution and then pursued through administrative
proceedings.
It is possible that a borrower whose loans have been consolidated
could have some of the loans repaid by the consolidation that are
eligible for a waiver and some that would not be. For example, a
borrower could have loans from one school that are eligible for a
closed school loan discharge and other loans that are not. In such
situations the Department would waive repayment of the portion of the
consolidation loan attributable to that loan repaid by the
consolidation loan that is eligible for the waiver.
Overall, the Department believes that this waiver will provide
additional flexibility and help get relief to more borrowers who are
eligible for Federal student loan forgiveness.
One non-Federal negotiator opposed this proposed regulation. The
negotiator stated concerns for other borrowers who are already eligible
for Federal student loan discharges who would be treated differently
under the waiver authority and may lose other benefits currently
provided by existing Federal student loan discharge programs. This same
negotiator provided an example of a borrower who may face tax
consequences if they receive this benefit under the waiver instead of
utilizing other discharge programs where such a discharge would be
statutorily excluded from being considered taxable income. By law,
there is no Federal taxation on Federal student loans forgiven by the
Department through the end of 2025.\41\ Before any usage of this
authority the Department would also consider whether a borrower is
already eligible for a discharge under the existing forgiveness
opportunity.
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\41\ See Title IX, Subtitle G, Part 8, section 9675 of the
American Rescue Plan Act, 2021 (Pub. L. 117-2).
---------------------------------------------------------------------------

The Committee did not reach consensus on proposed Sec. 30.85.
Sec. 30.86 Waiver based upon Secretarial actions.
Statute: Section 432(a) of the HEA (20 U.S.C. 1082(a)) provides
that in the performance of, and with respect to, the functions, powers,
and duties, vested in him by this part, the Secretary may enforce, pay,
compromise, waive, or release any right, title, claim, lien, or demand,
however acquired, including any equity or any right of redemption.
Current Regulations: None.
Proposed Regulations: Under proposed Sec. 30.86(a), the Secretary
may waive the entire outstanding balance of a loan associated with
attending an institution or a program at an institution if the
Secretary or other authorized Department official took certain final
agency actions. These final agency actions are: termination of the
institution or academic program's participation in the title IV, HEA
programs; a denial of the institution's request for recertification; or
determination that the institution or program loses title IV
eligibility. To qualify under this section, the final agency action
must have been taken in whole or in part due to the institution or
academic program failing to meet an accountability standard based on
student outcomes for determining eligibility in the title IV, HEA
programs or the Department determining that the institution or program
failed to deliver sufficient financial value to students. Such
situations that are evidence of failure to provide sufficient financial
value include when the institution or program has engaged in
substantial misrepresentations, substantial omissions, misconduct
affecting student eligibility, or other similar activities. Currently,
proposed 30.86(a)(2) also includes the following language: ``this
paragraph applies to circumstances when the institution or program has
lost accreditation at least in part due to such activities.'' The
intent of the consensus language was to clarify that the underlying
finding that supports the Department's determination that an
institution or program failed to deliver financial value under proposed
Sec. 30.86(a)(2) could be a finding made by the Department or it could
be a finding made by an accreditor that terminated accreditation based
at least in part on that finding. Since the Committee reached consensus
on the language included in 30.86, the Department included it in these
proposed regulations. However, the Department believes that this intent
could be stated more clearly as: ``The institution or program has
failed to deliver sufficient financial value to students, including in
situations where either (i) the Department has determined that the
institution or program has engaged in substantial misrepresentations,
substantial omissions, misconduct affecting student eligibility, or
other similar activities; or (ii) the Department has determined that
the accrediting agency has terminated its accreditation based at least
in part upon a finding that the institution or program has engaged in
the activities described in paragraph (a)(2)(i) of this section.'' The
Department invites comments on this possible change.
Proposed Sec. 30.86(b) would specify that the waiver applies to a
borrower's loans received for attending that program or school during
the period that corresponds with the findings or outcomes data unless
the Department believes the use of a different period is appropriate.
In the case of a Federal Consolidation Loan or Direct Consolidation
Loan that has an outstanding balance, under proposed Sec. 30.86(c) the
Secretary would waive the portion of the outstanding balance of the
consolidation loan attributable to such loan received for attending
that program or school during the period that corresponds with the
findings or outcomes data.
Reasons: Conducting rigorous oversight and enforcing accountability
measures are key functions for the Department.\42\ Identifying
situations in which institutions or programs are failing to meet
requirements of the HEA and taking action to prevent the flow of future
title IV aid dollars is an important way to solidify that taxpayer
funds are well spent and to protect future borrowers and aid recipients
from harm.

[[Page 27580]]

However, while we take aggressive action to protect future borrowers
and aid recipients, we often do not address loans held by borrowers who
attended programs or institutions at the very time we observed the
issues that led to the termination of future aid receipt. For example,
a borrower who attended an institution that lost access to aid because
of high CDRs, is still left to repay their loans, even as the
Department takes steps to protect future borrowers from going into debt
at those institutions.
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\42\ Some examples of the Department's oversight and compliance
measures over institutions include but are not limited to: program
reviews authorized under Sec. 498A of the HEA; requiring most
institutions to submit a compliance and financial audit authorized
under Sec. 487(c) of the HEA; and others.
---------------------------------------------------------------------------

This waiver would provide relief to borrowers who received loans to
attend programs or institutions that lost access to title IV aid for
specific agency actions if they took out loans during the period that
generated the outcomes data that led to the aid termination or who
attended during the period covered by evidence that was used to justify
cutting off title IV aid into the future.
The Department believes waivers in this situation are appropriate
because we think it is unfair to expect borrowers to continue repaying
loans from a time when we know the issues at the institution or program
were so significant that they warranted adverse Secretarial action.
These are loans where we know the borrower is not getting the benefit
of the bargain one should expect when they take out loans for
postsecondary education or, in cases such as substantial
misrepresentation, that the loans should not have been made in the
first place.
Waivers of Federal student loan debt under proposed Sec. 30.86
would only apply after a final agency action. That means the
institution would have exhausted its administrative appeals for that
final action. For example, if the Secretary denies an institution's
request for recertification, that institution would still be afforded
the opportunity to appeal that denial in accordance with 34 CFR part
668, subpart G and only until the institution exhausts its appeals
options for the denial of the recertification--or indicates that it
does not intend to appeal the decision--would the Department consider
waiving affected borrowers' loan balances in accordance with this
regulation. If an institution does not appeal a liability in a specific
finding in a Final Program Review Determination (FPRD), the finding in
that FPRD would be considered final. Relying only on final agency
actions also means that instances in which the Secretary initiates an
action and then does not finalize it due to a successful appeal would
not be included. For example, if an institution successfully appeals a
failing CDR and does not lose aid eligibility, borrowers who attended
the institution would not be eligible for a waiver under this section.
The Department also recognizes that sometimes agency actions are
ultimately resolved through settlements. We propose that settlements
where there is an acknowledgement of wrongdoing would qualify as a
final agency action under this section, while settlements that lack
such an acknowledgment of wrongdoing would not. We believe this
approach is appropriate because the proposed regulation applies if the
Department determines the program or institution failed an
accountability measure related to student outcomes or failed to provide
sufficient financial value.
Institutions would also not be liable for the costs associated with
any waivers granted under this section. Because this is an exercise of
the Secretary's waiver authority there would not be a liability to seek
against an institution. The one exception is for liabilities related to
certain loans issued while an institution appeals or requests for an
adjustment to its CDR. Liabilities for those amounts are discussed in
Sec. 668.206(f).
This waiver would be used only when the termination of the
institution's title IV participation occurred for specific reasons.
These fall into two categories. The first is the institution's failure
of accountability standards based on student outcomes, namely those
related to CDRs and Gainful Employment. This includes failures of those
measures that occurred in the past when they resulted in loss of title
IV eligibility.\43\ The Department chose these types of measures
because those are situations in which the Department directly measured
the outcomes of borrowers in a specific cohort and found the results so
lacking that aid could not continue.
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\43\ There are some institutions that previously lost title IV
eligibility because of failing CDRs, and qualifying loans associated
with those institutions would be eligible. By contrast, there are
not any programs that previously lost title IV eligibility based on
failing GE measures because the prior rule was rescinded before any
program lost eligibility, and the new rule does not go into effect
until July 2024.
---------------------------------------------------------------------------

An institution would have to fail its CDR or GE metrics enough
times to warrant a final action from the Department and that failure
would have to be sustained following any appeal options available to
the institution or program.
This waiver would not apply to the failure of other metrics that
are not directly tied to student outcomes. This includes the
calculation of an institution's financial responsibility composite
score prescribed in 34 CFR part 668, subpart L or for proprietary
institutions, their 90/10 non-Federal revenue calculation prescribed in
34 CFR 668.28. These other performance standards are important but do
not directly measure student outcomes.
The Department is not concerned that granting a waiver based upon
student outcomes would create an incentive for future borrowers to
willfully default on their loans or take other actions that could cause
the program to fail the debt-to-earnings or earnings premium measures
used in Gainful Employment. First, all these measures operate on the
observed outcomes across either all borrowers who entered repayment or
all those who received title IV aid and graduated. They also generally
require measuring performance across multiple years. The lone exception
to this being a one-year CDR in excess of 40 percent, which leads to a
loss of loan eligibility. Intentionally failing the measure would
require extremely coordinated activity across likely multiple years of
students. Making such a situation further unlikely is the fact that the
consequences of intentionally failing a measure with uncertain odds of
success could be significant. Defaulting on a student loan has
significant consequences. Borrowers can see their credit scores plummet
and tax refunds seized. Regarding Gainful Employment metrics, borrowers
would be having to settle for lower earnings, which has additional
effects on their ability to afford basic necessities.
The second type of actions relate to situations where there is a
determination that the institution or program failed to deliver
sufficient financial value. We propose defining this as findings that
an institution engaged in substantial misrepresentations or omissions
of fact, misconduct affecting student eligibility, or other similar
activities. We chose these situations because those would be cases in
which the institution engaged in behavior that affected the value of
what a borrower received for their loans. For instance, if the
Department terminates aid on a prospective basis because it finds that
an institution had been consistently lying to borrowers about their
ability to get jobs when in fact internal statistics showed that fewer
than half of students obtained employment in the field in which they
were being prepared then that is a sign that the borrower did not
receive what they were promised. We would also waive repayment of the
loans of borrowers who were included in those periods used to determine
that the actual employment rates were far lower than what was promised.
Waivers

[[Page 27581]]

granted because of this section could also include circumstances where
the Secretary terminates aid because an institution or program loses
accreditation at least in part for the same type of reasons.
The Department recognizes that borrowers eligible for relief under
this provision may also be eligible for relief under the Department's
other discharge programs, such as borrower defense. As a general
matter, the Department does not see a problem with providing
overlapping pathways to relief. Such overlaps are not uncommon in the
student loan system. For example, there have been many borrowers who
have been eligible for both a closed school loan discharge and a
borrower defense discharge. In such instances, the Department has opted
to proceed with the most operationally efficient discharge since the
borrower receives the same benefits under either option. Where
possible, the Department intends to provide eligible borrowers relief
through other existing discharge programs, such as borrower defense or
closed school discharge. But the Department's experience is that there
are some circumstances where a borrower may not receive relief under
these discharges but meets the conditions of Sec. 30.86(a)(2).
Waivers in this section would not be granted in response to every
action the Department takes to terminate aid access at an institution.
For instance, an institution that loses access to aid because of
financial problems, solely because it closed, or other situations that
do not speak to the returns received by students would not be captured
here. Because those aid loss circumstances do not relate to the benefit
received by borrowers, we do not think it is appropriate to include
them here as a waiver. The Department would make the determination as
to whether an action meets this requirement for each institution or
program.
Final actions under proposed Sec. 30.86 would include those
sanctions in 34 CFR part 668, subparts G and H, other final actions
stemming from an institution's loss of eligibility under 34 CFR part
600, subpart D, as well as other final action by the Department. As the
Department explained during negotiated rulemaking sessions, these final
actions are situations where the Secretary or other Departmental
official has taken formal action to cease an institution or program's
participation in the title IV, HEA programs on a prospective basis.
A non-Federal negotiator encouraged us to include an institution's
loss of accreditation as a condition under which the Department could
waive repayment of Federal student loan debt and another negotiator
believed a more expansive general loss of title IV eligibility should
be used as a basis for waiving repayment. The Department concurred and
incorporated in Sec. 30.86(a)(2), circumstances when the institution
or program loses accreditation as a basis for waiving Federal student
loan debt under this proposed section.
Under proposed Sec. 30.86(b), the Department would apply this
provision to a borrower's loans received for attending that institution
or program during the period that corresponds with the findings or
outcomes data that forms the basis for the final action for this
waiver. For example, if an institution lost access to title IV aid due
to CDRs in excess of the statutory limits for borrowers who entered
repayment in 2016, 2017, and 2018, then we would waive repayment of the
loans from that institution of borrowers who borrowed during that
period. Similarly, if an institution lost access to aid because of
substantial misrepresentations in a nursing program in 2023, then we
would waive repayment of the loans of borrowers who took out loans for
that program in that period of the final action.
Limiting this waiver only to borrowers whose enrollment overlaps
during the corresponding period enables the scope of the findings or
outcomes data to apply to similarly situated borrowers and provides
consistent treatment to all affected borrowers. At the same time, the
Department recognizes that there could be unique circumstances in which
the period used for the Secretarial action does not fully capture the
period during which the Department believes the actions covered by this
section otherwise occurred. In such circumstances, proposed Sec.
30.86(b), allows for the Secretary to designate an alternative period
for determining a borrower's eligibility for a waiver. Examples of such
considerations could be capturing additional years related to CDR
failures where the Department has reason to believe an institution
would have failed except for efforts to manipulate rates to keep them
artificially low. Another instance might also be years that took place
after an investigation that led to a Secretarial action and a school
action started but the institution later closed making it infeasible
for the Department to add the years after its investigation finished to
be included in the period of identified conduct. For example, if the
Department investigated an institution from 2020 to 2022 and finished
the process of a Secretarial action in 2024, after which the school
closed, the Secretary may choose to consider whether loans disbursed
from 2023 and 2024 should also be considered under this provision.
Finally, the Department also concurred with a non-Federal
negotiator who suggested we include an additional paragraph which
states that if the conditions of the waiver are met and the loan was
repaid by a consolidation loan that has an outstanding balance, the
Department would waive the portion of the outstanding balance of the
consolidation loan attributable to such loan. We believe that it is
logical to waive only the underlying loan that was part of a
consolidation loan associated with the final action associated for this
waiver. Borrowers who otherwise consolidated their loans would have a
pathway toward this waiver and would not lose their opportunities for
this waiver because of the consolidation.
The Committee reached consensus on proposed Sec. 30.86.
Sec. 30.87 Waiver following a closure prior to Secretarial
actions.
Statute: Section 432(a) of the HEA (20 U.S.C. 1082(a)) provides
that in the performance of, and with respect to, the functions, powers
and duties, vested in him by this part, the Secretary may enforce, pay,
compromise, waive, or release any right, title, claim, lien, or demand,
however acquired, including any equity or any right of redemption.
Current Regulations: None.
Proposed Regulations: Under proposed Sec. 30.87(a)(1), the
Secretary may waive the entire outstanding balance of a loan associated
with attending an institution or a program at an institution if the
institution or program closes and the Secretary or other authorized
Department official has determined that, based on the most recent
reliable data for an institution or program, the institution or program
has not satisfied, for at least a year, an accountability standard
based on student's outcomes for determining that institution or
program's eligibility for title IV funds. Under proposed Sec. Sec.
30.87(a)(2)(i) and (ii) the Secretary may also waive the entire
outstanding balance of a loan associated with attending a closed
institution or a closed program at an institution if the institution or
program failed to deliver sufficient financial value to students and is
the subject of a Departmental action that remains unresolved at the
time of that institution or program's closure, in whole or in part, on
certain conduct specified in regulation.
Currently, proposed Sec. 30.87(a)(2)(i) also includes the
following language: ``this paragraph applies to

[[Page 27582]]

circumstances when the institution or program has lost accreditation at
least in part due to such activities.'' The intent of the consensus
language was to clarify that the underlying finding that supports the
Department's determination that an institution or program failed to
deliver sufficient financial value under proposed Sec. 30.87(a)(2)(i)
could be a finding made by the Department or it could be a finding made
by an accreditor that terminated accreditation based at least in part
on that finding. Since the committee reached consensus on the language
included in 30.87, the Department has included it in these proposed
regulations. However, the Department believes that the intent could be
stated more clearly as: ``The institution or program has failed to
deliver sufficient financial value to students, including in situations
where either (A) the Department has determined that the institution or
program has engaged in substantial misrepresentations, substantial
omissions, misconduct affecting student eligibility, or other similar
activities; or (B) the Department has determined that the accrediting
agency has terminated its accreditation based at least in part upon a
finding that the institution or program has engaged in the activities
described in (A).'' The Department invites comments on this possible
change.
Under proposed Sec. 30.87(b), a waiver under this section would
apply to a borrower's loans received for attending that institution or
program during the period that corresponds with the findings or
outcomes data. Proposed Sec. 30.87(c) would provide that in the case
of Federal Consolidation Loans and Direct Consolidation Loans, the
Secretary would waive the portion of the outstanding balance of the
consolidation loan attributable to such loan received for attending
that institution or program during the period that corresponds with the
findings or outcomes data.
Institutions or programs that close where the Secretary determined
that the institution or program has not satisfied an accountability
standard based on student outcomes would include institutions that fail
or failed to meet the CDR standards prescribed in 34 CFR part 668,
subpart N and programs that do not lead to Gainful Employment
prescribed in 34 CFR part 668, subpart S. An institution or program
that failed to deliver sufficient financial value to students would
include an institution or program that engaged in: substantial
misrepresentations, substantial omissions, misconduct affecting student
eligibility, or circumstances around loss of accreditation associated
with such activities. The Department would predicate this determination
through a program review, investigation, or any other action that
remains unresolved at the time of closure and that action as based in
whole or in part to the aforementioned misconduct.
Waivers of Federal student loan debt under proposed Sec. 30.87
would apply to actions the Department has taken as soon as one year
after the institution or program has not satisfied an accountability
standard based on student outcomes. This provision would also apply to
an institution or program failing to deliver sufficient financial value
to students and was the subject to a program review, investigation, or
any other Department action that remains unresolved at the time of
closure and that action was based, in whole or in part, on such
conduct.
Under these proposed regulations, we would not assess liabilities
against the institution as a result of the Secretary waiving a
borrower's Federal student loan debt. As such, institutions would not
be subject to any request to repay funds waived under this provision.
Reasons: Similar to proposed Sec. 30.86, the Department seeks to
capture circumstances where an institution or program failed
accountability standards based on student outcomes. The main difference
between this provision and Sec. 30.86 is that Sec. 30.87 captures
situations in which an institution or program chooses to close before
the action becomes final and could be considered under Sec. 30.86. The
Department is proposing a separate section to address situations where
an institution or program has closed because we have seen past
situations where programs or institutions fail accountability measures
and voluntarily close, and the closure leaves the Department with
insufficient data to conduct a final agency action. The same is true of
situations in which the Department begins an investigation or program
review related to whether the institution or program is providing
sufficient financial value, but the institution or program chooses to
close before that investigation or program review is finished. When
that occurs, the Department may not finish those processes. In the
circumstances described above, the Department believes that it would be
reasonable for the Secretary to infer that in the absence of additional
data or completion of program review or investigation that the
Department would have terminated aid access going forward and the
borrower would be eligible for a waiver. In other words, we do not hold
borrowers responsible for the Department's inability to obtain
necessary additional information. Institutions and programs, meanwhile,
are not affected by this inference because they have ceased
participation in the title IV programs and would not face any
liabilities from these waivers.
While Sec. 30.87 is designed to provide parity with the waivers in
Sec. 30.86 so that a borrower is not made worse off because a school
decided to close, this provision would not cover all borrowers enrolled
at the school at the time of closure. Because the institution closed,
borrowers who did not complete and were enrolled at or just before the
date of closure would be eligible for a closed school discharge.
Some examples highlight the differences between Sec. 30.86 and
Sec. 30.87 that necessitate a separate section. In general,
institutions are subject to loss of eligibility to participate in the
Direct Loan \44\ and Pell Grant \45\ programs if that institution's CDR
is equal to or greater than 30 percent for each of its three most
recent cohort fiscal years. An institution that voluntarily closes to
avoid loss of eligibility due to a high CDR would not face sanctions,
but those students could still be repaying loans incurred for
attendance in what would otherwise be an ineligible institution.
Proposed Sec. 30.87 would cover such instances if an institution or
program voluntarily closes.
---------------------------------------------------------------------------

\44\ Section 435(a)(2) of the HEA (20 U.S.C. 1085(a)(2)).
\45\ Section 401(j) of the HEA (20 U.S.C. 1070a(j)).
---------------------------------------------------------------------------

The Department has encountered situations in the past during
oversight and compliance measures over institutions and programs where
those institutions or programs choose to close before further reviews
can be completed. During program reviews, investigations, or other
actions, institutions would voluntarily close the institution or
program rather than face the consequences of sanctions. Borrowers
enrolled at those institutions or programs who did not continue their
postsecondary education would be eligible for a closed school loan
discharge if the institution closed. But a borrower who completed their
program during this period would not be eligible for a closed school
discharge. A borrower who graduated, meanwhile, may also not be able to
raise a successful defense to repayment claim based on the specific
factual circumstances. This provision would provide an alternative path
to relief where the Department has sufficient evidence to determine the
institution or

[[Page 27583]]

program did not provide sufficient financial value.
This waiver would operate in a manner separate and distinct from
closed school loan discharges. The idea behind closed school loan
discharges is to provide relief to borrowers who are left with loan
debt and are unable to complete their programs. That is why closed
school loan discharges are unavailable to borrowers who graduated. By
contrast, the purpose of this waiver is to provide relief to borrowers
who did not get the benefit of the bargain of postsecondary education
in the sense that their institution or program did not meet required
student outcomes standards or failed to provide sufficient financial
value, but it closed prior to the final agency action that would have
made that determination. The underlying reason for the waiver and for
why relief would be appropriate are different from the reason for
closed school discharges. Negotiators expressed support for this
provision during negotiated rulemaking sessions.
One negotiator encouraged us to also include an institution or
program's loss of accreditation as a condition of waiving Federal
student loan debt under this section. In response, the Department
concurred and incorporated in proposed Sec. 30.87(a)(2)(i)
circumstances when the institution or program loses accreditation as a
basis for waiving Federal student loan debt.
Similar to Sec. 30.86, this provision would only provide waivers
to borrowers who took out loans during the period used to measure
student outcomes or for the program review or investigation. For
example, if an institution had a high CDR for borrowers who entered
repayment in 2019 and then closed, the Department would waive loans
taken to attend that institution for borrowers in that repayment
cohort. Borrowers whose loans are not included in those periods would
not receive a waiver.
The Committee reached consensus on proposed Sec. 30.87.
Sec. 30.88 Waiver for closed Gainful Employment (GE) programs with
high debt-to-earnings rates or low median earnings.
Statute: Section 432(a) of the HEA (20 U.S.C. 1082(a)) provides
that in the performance of, and with respect to, the functions, powers
and duties, vested in him by this part, the Secretary may enforce, pay,
compromise, waive, or release any right, title, claim, lien, or demand,
however acquired, including any equity or any right of redemption.
Current Regulations: None.
Proposed Regulations: Under proposed Sec. 30.88(a), the Secretary
may waive the entire outstanding balance of a loan received by a
borrower associated with enrollment in a GE program if the following
conditions are met: the program or institution closed; the GE program
was not a professional medical or dental program; and, for a period in
which the borrower received loans for enrollment in the GE program, the
Secretary has reliable and available data demonstrating that title IV
recipients in the GE program failed the debt-to-earnings rates or
earnings premium measure described in Sec. 30.88(a)(3).
For purposes of a waiver under Sec. 30.88(a)(3)(i), the GE program
would be considered failing if that program had a debt-to-earnings rate
greater than 8 percent of their median annual earnings and 20 percent
of their median discretionary income. Discretionary earnings would be
calculated as median annual earnings minus 150 percent of the Federal
Poverty Guideline for a single individual for the measurement year.
Denominators of either measures that are zero or negative would be
considered a failure if the numerator is a non-zero number. A GE
program would also be considered failing if it fails the earnings
premium measure described in Sec. 30.88(a)(3)(ii). For the earnings
premiums measure, a GE program would be considered failing if the
median annual earnings of GE program graduates are equal to or less
than the median annual earnings for typical high school graduates in
the labor force (i.e., either working or unemployed) between the ages
of 25-34. The median annual earnings would be compared to the high
school graduates in the State in which the institution is located, or
nationally in the case of a GE program at a foreign school, or if fewer
than 50 percent of the students in the GE program are from the State
where the institution is located.
Under proposed Sec. 30.88(b), a GE program would be identified by
its six-digit Classification of Instructional Program (CIP) code, the
institution's six-digit Office of Postsecondary Education ID (OPEID)
number and the program's credential level. If the Department does not
have reliable and available data at the GE program's six-digit CIP
code, it would use the four-digit CIP code. The Department would
calculate the annual loan payment by determining the median loan debt
of students who completed the GE program during the applicable cohort
and amortizing that debt based upon the average of the Direct
Unsubsidized Loan interest rates based on the applicable credential
level and the years preceding the completion year.
Additionally, under proposed Sec. 30.88(c), the Secretary may
waive loans received for enrollment in a GE program if the institution
closed, and the institution received a majority of its title IV funds
for GE programs for which the Department could calculate debt-to-
earnings rates and earnings premium measures, and the Department was
unable to calculate measures for that program.
Proposed Sec. 30.88(d) would provide that in the case of Federal
Consolidation Loans and Direct Consolidation Loans, the Secretary
waives the portion of the outstanding balance of the consolidation loan
attributable to such loan received for attending that GE program in the
corresponding period for which the Secretary is waiving those
borrowers' Federal student loan debt.
Reasons: The Department published final regulations related to GE
to address ongoing concerns about educational programs that are
supposed to prepare students for gainful employment in a recognized
occupation but that instead leave them with unaffordable amounts of
student loan debt in relation to their earnings, or with no gain in
earnings compared to others with no more than a high school
education.\46\ Going forward, if a program fails to meet the standards
required of the GE rates, borrowers may be eligible for waivers under
either Sec. 30.86 or Sec. 30.87. However, the Department is also
concerned about circumstances in which it has evidence that a program
is failing to meet the GE standards and the program closes. Such
situations may not result in a waiver under Sec. 30.87 even though the
Department knows that the borrowers included in the metrics are facing
challenges similar to those where programs formally fail the measures
once and then close.
---------------------------------------------------------------------------

\46\ 88 FR 70004 (October 10, 2023).
---------------------------------------------------------------------------

The provisions in Sec. 30.88 particularly would address situations
where there have been data showing failures of GE metrics, but they are
not necessarily official rates, and the program has closed. For
example, during rulemaking processes to establish GE regulations, the
Department released debt-to-earnings rates about programs across the
country. In January 2017,\47\ the Department also produced a round of
official rates under the 2014 GE final rule \48\ but did not publish
subsequent GE rates under those rules. In response to these rates some
institutions preemptively closed programs that did

[[Page 27584]]

not meet the standards. The Department believes it is important to
provide a waiver in these situations because these metrics show similar
concerns about the potential that a borrower may be unable to
successfully repay their loans. We believe it is reasonable to draw an
inference in favor of the borrower since the program closed and there
will not be other data available showing the longer-term performance of
the program.
---------------------------------------------------------------------------

\47\ See January 17, 2017 Gainful Employment Electronic
Announcement #100--Upcoming Release of Final Gainful Employment
Debt-to-Earnings (D/E) Rates.
\48\ 79 FR 64890 (October 31, 2014).
---------------------------------------------------------------------------

While the proposed waiver in Sec. 30.88 would only be available
when an institution or program closes, it is distinct from closed
school discharge. The purpose of a closed school discharge is to
provide relief to a borrower who is unable to complete their program.
That is why it excludes graduates from eligibility. By contrast, this
proposed waiver would provide relief to borrowers where data shows that
the typical borrower who took out loans is not getting the benefit of
the bargain. The purpose of the closure requirement is to address how
the Department would handle situations where it does not have, and has
no way to obtain, additional data that would otherwise be needed to
take a final agency action and deny continued title IV participation if
the institution or program were to continue to fail the metrics. This
section establishes how the Department would go about drawing an
inference in favor of the borrower to determine that they did not
receive the benefit of the bargain.
Because the circumstances addressed in proposed Sec. 30.88 are not
ones where the Department would calculate official GE rates, we have
crafted a framework to explain how the Secretary would otherwise assess
a GE program's debt-to-earnings rates and earnings premium measure for
purposes of this section.
In Sec. 30.88(a)(2) the Department explains that we would not
apply this section to GE medical or dental programs. These are GE
programs identified as Doctor of Medicine (MD), Doctor of Osteopathy
(DO), or Doctor of Dental Science (DDS) based upon their level and CIP
code. We propose to not include those programs here because in past
versions of the GE regulations we have said that students in these
programs would have had their earnings evaluated after a longer time
following graduation than other types of programs. The Department does
not have data for this longer measurement period so we cannot
accurately assess these GE programs.
Section 30.88(a)(3) describes how the Department would calculate
whether a program fails to meet GE standards. These definitions for
debt-to-earnings and earnings premium are all modeled on how the
Department proposes to calculate these measures in the recently
finalized GE regulation.\49\ The definitions for debt-to-earnings rates
are also similar to what was used in the GE regulations finalized in
2014.\50\
---------------------------------------------------------------------------

\49\ 88 FR 70004 (October 10, 2023).
\50\ 79 FR 64890 (October 31, 2014).
---------------------------------------------------------------------------

The provisions in Sec. 30.88(b) provide greater detail related to
how the Department would identify programs as well as how we would
calculate typical earnings and debt payments. In Sec. 30.88(b)(1), we
propose identifying GE programs by the six-digit CIP code level, or at
the four-digit CIP code if we did not have data available. We propose
this to mirror the definition of a GE program defined in 34 CFR 668.2.
We more fully explain in the 2023 GE final rule \51\ our analysis of
data coverage and our basis for assessing GE programs at the six-digit
CIP code and, where appropriate, the four-digit CIP code to meet the
minimum n-size requirements for GE metrics. This approach also
recognizes the data limitations that exist related to past data used to
assess GE programs.
---------------------------------------------------------------------------

\51\ 88 FR 70035, 70127 (October 10, 2023).
---------------------------------------------------------------------------

Other provisions of Sec. 30.88(b) similarly reflect choices made
and explained in greater detail in the 2023 GE final rule. This
includes how we would calculate the annual loan payment and calculate
median annual earnings.
The language in proposed Sec. 30.88(c) addresses circumstances
where borrowers attended programs that did not have GE results
calculated at an institution that has since closed. It proposes to
provide relief to students who borrowed to enroll in a program at an
institution that closed in which, prior to the closure, the institution
received a majority of its title IV, HEA funds from programs that met
the conditions under proposed Sec. 30.88(a)(3) and there were no
metrics calculated for that program. Because the majority of the title
IV, HEA funds received by the institution went to failing programs, the
Secretary could reasonably infer that the title IV, HEA funds that went
to other programs for which there were insufficient data would have
likely failed, as well, and such borrowers should be granted relief.
Loans from programs at such an institution where we did have data
showing the program did not fail the GE metrics would not result in a
waiver.
Finally, Sec. 30.88(d) clarifies that if the conditions of the
waiver are met and the loan was repaid by a Federal Direct
Consolidation Loan or a Direct Consolidation Loan that has an
outstanding balance, the Department would waive the portion of the
outstanding balance of the consolidation loan attributable to such
loan. We believe that it is logical to waive the only underlying loan
associated with this waiver that was part of a consolidation loan.
Borrowers who otherwise consolidated their loans would have a pathway
toward this waiver and would not have their chances at a waiver
foreclosed because of the consolidation.
The Committee reached consensus on proposed Sec. 30.88. The
Department has made one clarifying technical change to this language in
paragraph (a)(2) to change the word ``this'' to ``the program.''

Part 682--Federal Family Education Loan (FFEL) Program

Subpart D--Administration of the Federal Family Education Loan Programs
by a Guaranty Agency Waiver of FFEL Program Loan Debt (Sec. 682.403)

[[Page 27585]]

school discharge but otherwise meets the eligibility requirements for
the discharge; or
<bullet> The loan was received for attendance at an institution
that lost its eligibility to participate in any title IV, HEA program
because of its CDR and the borrower was included in the cohort whose
debt was used to calculate the CDR or rates that were the basis for the
loss of eligibility.
Proposed Sec. 682.403(c) would provide that if the Secretary
determines that a loan qualifies for a waiver, the Secretary notifies
the lender and directs the lender to submit a waiver claim to the
applicable guaranty agency and to suspend collection activity, or
maintain a suspension of collection activity, on the loan.
Proposed Sec. 682.403(d) would describe the waiver claim
procedures. Under proposed Sec. 682.403(d)(1), the guaranty agency
would be required to establish and enforce standards and procedures for
the timely filing of waiver claims by lenders.
Proposed Sec. 682.403(d)(2) would require the lender to submit a
claim for the full outstanding balance of the loan to the guaranty
agency within 75 days of the date the lender received the notification
from the Secretary. Under proposed Sec. 682.403(d)(3), the lender
would be required to provide the guaranty agency with an original or a
true and exact copy of the promissory note and the notification from
the Secretary when filing a waiver claim. Proposed Sec. 682.403(d)(4)
would allow a lender to provide alternative documentation deemed
acceptable to the Secretary if the lender is not in possession of an
original or true and exact copy of the promissory note.
Proposed Sec. Sec. 682.403(d)(5) and (d)(6) would require the
guaranty agency to review the waiver claim and determine whether it
meets the applicable requirements. If the guaranty agency determines
that the claim meets the requirements specified in proposed Sec. Sec.
682.403(d)(3) and 682.403(d)(4) the guaranty agency would be required
to pay the claim within 30 days of the date the claim was received.
Under proposed Sec. 682.403(d)(7) the lender would be required to
return any payments received on the loan during the suspension of
collection activity or after receiving the claim payment to the sender.
Under proposed Sec. 682.403(d)(8) the Secretary would reimburse
the guaranty agency for the full amount of a claim paid to the lender
after the agency pays the claim to the lender. Proposed Sec.
682.403(d)(9)(i) would require the guaranty agency to assign the loan
to the Secretary within 75 days of the date the guaranty agency pays
the claim and receives the reimbursement payment. If the guaranty
agency is the loan holder, under proposed Sec. 682.403(d)(9)(ii) the
guaranty agency would be required to assign the loan on the date that
the guaranty agency receives the notice from the Secretary.
After the guaranty agency assigns the loan, the Secretary may waive
the borrower's obligation to repay up to the entire outstanding balance
of the loan, as provided under proposed Sec. 682.403(d)(10). After the
Secretary grants the waiver, under proposed Sec. 682.403(d)(11) the
Secretary would notify the borrower, the lender, and the guaranty
agency that the borrower's obligation to repay the debt or a portion of
the debt, has been waived.
Proposed Sec. 682.403(e)(1) would require a guaranty agency to
return any payments received on the loan during the suspension of
collection activity or after the guaranty agency assigned the loan to
the Secretary. The guaranty agency would also be required to notify the
borrower that there is no obligation to make payments on the loan
unless the borrower received a partial waiver or unless the Secretary
directs otherwise. Under proposed Sec. 682.403(e)(2), the guaranty
agency would remit to the Secretary any payments received after it has
notified the borrower. Under proposed Sec. 682.403(e)(3), if the
Secretary receives any payments on the loan after waiving the entire
outstanding balance on the loan, the Secretary would return these
payments to the sender.
Proposed Sec. 682.403(f) would provide that if the conditions for
a waiver specified in proposed Sec. 682.403(b) are met on a loan that
has been repaid by a Federal Consolidation Loan with an outstanding
balance, the Secretary may waive the portion of the outstanding balance
of the consolidation loan attributable to the loan that qualifies for
waiver once the loan has been assigned to the Secretary.
Reasons: The proposed regulations applicable to FFEL Program loans
held by a guaranty agency or lender are intended to mirror some of the
proposed regulations in 34 CFR part 30 that would apply to FFEL Program
loans held by the Department. Since no new FFEL Program loans have been
made on or after July 1, 2010, some of the provisions in part 30 that
would apply to Direct Loans are not applicable to FFEL Program loans.
Therefore, the proposed FFEL-only regulations are more limited than the
proposed regulations that would apply to all student loans held by the
Department.
In proposed Sec. 682.403(b)(1) the Department proposes to provide
a waiver for a FFEL loan that first entered repayment at least 25 years
ago. The Department proposes a different time in repayment requirement
for FFEL loans from what is in proposed Sec. 30.83 because the version
of IBR that is available in the FFEL program only provides forgiveness
after 25 years of payments. There is no forgiveness option after 20
years the way there is for Department-held loans.
The Department proposes to include Sec. 682.403(b)(1) because we
are concerned that borrowers who first entered repayment a long time
ago may not be able to repay their loans in a reasonable period. It
would come with full compensation for the outstanding balance to
lenders. The existence of repayment plans that provide forgiveness
after an extended period in repayment indicates Congress's concern with
borrowers being stuck in repayment for an unreasonable period of time
and reflects Congress's intent that borrowers have paths to relief, so
they are not stuck with their loans forever. We are concerned that many
borrowers with older loans have spent years, if not decades, in
repayment before being able to benefit from those options and might
otherwise be trapped by their debts until they pass away. We have
proposed applying this provision to loans that entered repayment on or
before the July 1, 2000, because these borrowers will have been in
repayment for all or part of 25 calendar years or more when the
regulation is implemented. This approach reflects the more limited data
the Department has in its possession about commercial FFEL borrowers.
We are proposing 25 years because FFEL borrowers have access to an
income driven repayment plan that provides forgiveness after 25 years.
Similar to proposed Sec. 30.83, this provision would only be exercised
once per borrower.
The Committee did not reach consensus on proposed Sec.
682.403(b)(1).
The Committee did reach consensus on proposed Sec. Sec.
682.403(b)(2) and 682.403(b)(3), which would provide waivers for FFEL
borrowers who qualify for, but have not received, a closed school
discharge and for borrowers who attended an institution that lost its
title IV eligibility due to high CDRs, if the borrower was included in
the cohort whose debt was used to calculate the CDRs that were the
basis for the loss of eligibility. Regarding waivers based on a
school's loss of title IV eligibility, the Department modified proposed
Sec. Sec. 682.403(b)(3) by adding clarifying language specifying that
the borrower's loan must have been in the cohort of

[[Page 27586]]

loans that resulted in the school losing title IV eligibility for a
borrower to qualify for a waiver under this provision.
The Department proposes waivers for closed school discharges
because that is a forgiveness opportunity that is available to FFEL
borrowers which we are concerned that many eligible borrowers do not
appear to be aware of and, as a result, may be unnecessarily struggling
with unaffordable loans. For example, a 2021 study by the Government
Accountability Office found that at least 42 percent of discharges from
2013 to 2021 were automatic discharges, indicating that a substantial
share of borrowers may not have been aware of the potential for
discharge or may have struggled with the application.\52\ Further, more
than half of borrowers who received an automatic discharge were in
default on their loans, and an additional 21 percent had experienced at
least one delinquency spell that lasted 90 days or longer.\53\
Exercising waivers in these situations would help borrowers who have a
high likelihood of being in default for loans that they should not have
to repay.
---------------------------------------------------------------------------

\52\ GAO-21-105373, COLLEGE CLOSURES: Many Impacted Borrowers
Struggled Financially Despite Being Eligible for Loan Discharges
<a href="https://www.gao.gov/assets/gao-21-105373.pdf">https://www.gao.gov/assets/gao-21-105373.pdf</a>.
\53\ Ibid.
---------------------------------------------------------------------------

The Department proposes to include waivers for borrowers who took
out loans that are captured in CDRs that led to institutional
ineligibility because we are concerned that when the Secretary cuts off
aid to an institution for this reason it is a sign that a borrower is
not getting the benefit of the bargain. This provision provides
equitable treatment for the borrowers whose results showed their loans
were not faring well with those who were protected after that point
because the institution was no longer eligible to participate in the
Federal student loan programs. One of the non-Federal negotiators urged
the Department to provide FFEL regulations that were robust, clear, and
detailed. The Department responded by providing detailed proposed FFEL
regulations outlining the waiver claims filing process for waivers
granted to FFEL borrowers whose loans are held by a private lender or a
guaranty agency. These proposed regulations are modeled on the
regulations in Sec. 682.402 governing other loan discharges in FFEL,
specifically the regulations governing total and permanent disability
(TPD) discharges. As with TPD discharges, the Department would make the
determination of eligibility, rather than the lender or the guaranty
agency before a claim is filed. The Department would then direct the
lender to file a claim with the guaranty agency. The claim would be for
the outstanding balance of the loan less any unpaid late fees and
unpaid collection costs. The process for filing and paying the claim
and assigning the loan to the Department would be essentially the same
process used for TPD discharge claims. In the case of a consolidation
loan, the claim would be for the outstanding principal and interest of
the consolidation loan, even if only a portion of the consolidation
loan qualifies for a waiver. After the guaranty agency pays the claim
and the Department reimburses the guaranty agency, the guaranty agency
assigns the consolidation loan to the Department. The Department would
then waive repayment on the portion of the consolidation loan
attributable to loans eligible for a waiver. This is consistent with
proposed Sec. 682.403(f) and several other provisions in these
proposed regulations that allow the Secretary to waive a portion of a
Federal Consolidation Loan (or, for Direct Loans, a Direct
Consolidation Loan) if one or more of the underlying loans qualifies
for a waiver. The Department would then resume collection on the
portion of the consolidation loan that was not waived.
The suspension of collection activity, which is generally
authorized for brief periods during which an application is submitted,
or a claim is filed, would be deemed to be a forbearance in cases where
payment resumes on the loan after it has been assigned to the
Secretary.
Once a FFEL Program loan is assigned to the Department, the
Department would be responsible for furnishing information about the
loan to consumer reporting agencies and would report the reduction or
elimination of the outstanding balance to consumer reporting agencies
after granting the waiver. Guaranty agencies and lenders would only be
responsible for reporting that the loan has been assigned to the
Department, as they currently do for TPD discharges.
During negotiated rulemaking, the Department proposed providing
more time for the claims process, giving 75 days for a lender to submit
a claim, and 75 days for the guaranty agency to pay the claim. The
Department believes that the timeframes are appropriate, since the
Department will have already determined that the borrower qualifies for
a waiver before notifying the lender. There would be no requirement
that the lender or guaranty agency conduct an additional review of
borrower eligibility. Therefore, the claims process would be entirely
administrative on the part of the lender and the guaranty agency. There
would be no need for a guaranty agency or lender to review an
application or to request additional information from a borrower, which
is sometimes the case with other loan discharges. However, the
Department acknowledges that initially there may be a large volume of
FFEL borrowers qualifying for the waivers specified in Sec. 682.403.
Therefore, we would work with guaranty agencies and lenders who may
have difficulty meeting these timeframes and be flexible in enforcing
the requirements in proposed Sec. Sec. 682.403(d)(2) and
682.403(d)(9).
The Committee did not reach consensus on the proposed regulations
in Sec. Sec. 682.403(a), (c), (d), (e) and (f) that would establish
the procedures for processing a waiver claim and stipulate that if the
conditions for a waiver are met on a loan that has been consolidated,
the Secretary would waive repayment of the portion of the consolidation
loan attributable to the loan that qualifies for waiver.
After the third negotiating session, the Department determined that
it would be appropriate to specify in regulation that, when filing a
waiver claim, a lender may provide alternative documentation in the
event that the lender does not possess the original promissory note or
a true and exact copy of the promissory note. This is consistent with
the Department's practice with regard to accepting alternative
documentation for loan assignments.
The Department also noted that the proposed regulations did not
address the treatment of payments received after the Department has
notified the lender that the loan qualifies for a waiver and before the
payment of a waiver claim. Therefore, the Department added proposed
language specifying that payments on the loan received during the
suspension of collection activity--which would occur at the start of
the waiver claim process--would be returned to the sender by either the
lender or by the guaranty agency, as applicable. The Department
believes that returning payments at this stage of the process is
appropriate, because the Department has already determined that the
borrower's loan qualifies for a waiver. Accepting payments
inadvertently submitted on a loan that may have its entire outstanding
balance waived would unnecessarily deprive the borrower of the payment
amounts submitted.

[[Page 27587]]

Executive Orders 12866 (as Modified by 14094) and 13563

Regulatory Impact Analysis

Under Executive Order 12866, the Office of Management and Budget
(OMB) must determine whether this regulatory action is ``significant''
and, therefore, subject to the requirements of the Executive Order and
subject to review by OMB. Section 3(f) of Executive Order 12866, as
amended by Executive Order 14094, defines a ``significant regulatory
action'' as an action likely to result in a rule that may--
(1) Have an annual effect on the economy of $200 million or more
(adjusted every 3 years by the Administrator of OIRA for changes in
gross domestic product), or adversely affect in a material way the
economy, a sector of the economy, productivity, competition, jobs, the
environment, public health or safety, or State, local, territorial, or
Tribal governments or communities;
(2) Create a serious inconsistency or otherwise interfere with an
action taken or planned by another agency;
(3) Materially alter the budgetary impacts of entitlement grants,
user fees, or loan programs or the rights and obligations of recipients
thereof; or
(4) Raise legal or policy issues for which centralized review would
meaningfully further the President's priorities, or the principles
stated in the Executive Order, as specifically authorized in a timely
manner by the Administrator of OIRA in each case.
This proposed regulatory action will have an annual effect on the
economy of $200 million or more. Table 4.1 in this RIA provides an
estimate of the net budget effects of each provision of this proposed
rule. We also provide estimates of the administrative costs for these
provisions. Because the net budget effect is larger than $200 million a
year, this proposed regulatory action is subject to review by OMB under
section 3(f) of Executive Order 12866 (as amended by Executive Order
14094). Notwithstanding this determination, we have assessed the
potential costs and benefits, both quantitative and qualitative, of
this proposed regulatory action and have determined that the benefits
will justify the costs.
We have also reviewed these regulations under Executive Order
13563, which supplements and explicitly reaffirms the principles,
structures, and definitions governing regulatory review established in
Executive Order 12866. To the extent permitted by law, Executive Order
13563 requires that an agency--
(1) Propose or adopt regulations only on a reasoned determination
that their benefits justify their costs (recognizing that some benefits
and costs are difficult to quantify);
(2) Tailor its regulations to impose the least burden on society,
consistent with obtaining regulatory objectives and taking into
account--among other things and to the extent practicable--the costs of
cumulative regulations;
(3) In choosing among alternative regulatory approaches, select
those approaches that maximize net benefits (including potential
economic, environmental, public health and safety, and other
advantages; distributive impacts; and equity);
(4) To the extent feasible, specify performance objectives, rather
than the behavior or manner of compliance a regulated entity must
adopt; and
(5) Identify and assess available alternatives to direct
regulation, including economic incentives--such as user fees or
marketable permits--to encourage the desired behavior, or provide
information that enables the public to make choices.
Executive Order 13563 also requires an agency ``to use the best
available techniques to quantify anticipated present and future
benefits and costs as accurately as possible.'' The Office of
Information and Regulatory Affairs of OMB has emphasized that these
techniques may include ``identifying changing future compliance costs
that might result from technological innovation or anticipated
behavioral changes.''
We are issuing these proposed regulations only on a reasoned
determination that their benefits would justify their costs. In
choosing among alternative regulatory approaches, we selected those
approaches that in the Department's estimation best balance the size of
the estimated transfer and qualitative benefits and costs. Based on the
analysis that follows, the Department believes that these proposed
regulations are consistent with the principles in Executive Order
13563.
We have also determined that this regulatory action will not unduly
interfere with State, local, territorial, and Tribal governments in the
exercise of their governmental functions.
As required by OMB Circular A-4, we compare the proposed
regulations to the current regulations. In this regulatory impact
analysis, we discuss the need for regulatory action, the summary of key
proposed provisions, potential costs and benefits, net budget impacts,
and the regulatory alternatives we considered.
Elsewhere in this section under Paperwork Reduction Act of 1995, we
identify and explain burdens specifically associated with information
collection requirements.

1. Congressional Review Act Designation

Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.),
the Office of Information and Regulatory Affairs designated that this
rule is covered under 5 U.S.C. 804(2) and (3).

2. Need for Regulatory Action

Postsecondary education is a critical pathway for entering and
succeeding in the middle class. Generally, earning a postsecondary
credential provides individuals with a range of personal benefits in
the labor market, including higher income and lower unemployment
risk.\54\ In addition to individual benefits related to earnings and
employment, additional education provides a host of individual benefits
including greater access to benefits like health insurance, increased
job satisfaction and overall happiness.\55\ Increasing levels of
postsecondary attainment also have spillover benefits for communities
and society that benefit those who never attended or completed
postsecondary education. For example, researchers have documented that
wages of non-college graduates rise when the supply of college
graduates increases.\56\ Increases in education is also linked to
higher civic participation, reduced crime, and improved health of
future generations.\57\
---------------------------------------------------------------------------

\54\ Barrow, L. & Malamud, O. (2015). Is College a Worthwhile
Investment? Annual Review of Economics, 7(1), 519-555. Card, D.
(1999). The Causal Effect of Education on Earnings. Handbook of
Labor Economics, 3, 1801-1863.
\55\ Oreopoulos, P. & Salvanes, K.G. (2011). Priceless: The
Nonpecuniary Benefits of Schooling. Journal of Economic
Perspectives, 25(1), 159-184.
\56\ Moretti, Enrico. ``Estimating the social return to higher
education: evidence from longitudinal and repeated cross-sectional
data.'' Journal of econometrics 121, no. 1-2 (2004): 175-212.
\57\ Currie, Janet, and Enrico Moretti. ``Mother's education and
the intergenerational transmission of human capital: Evidence from
college openings.'' The Quarterly journal of economics 118, no. 4
(2003): 1495-1532; Lochner, Lance, ``Nonproduction Benefits of
Education: Crime, Health, and Good Citizenship,'' in E. Hanushek, S.
Machin, and L. Woessmann (eds.), Handbook of the Economics of
Education, Vol. 4, Ch. 2, Amsterdam: Elsevier Science (2011); Ma,
Jennifer, and Matea Pender. Education Pays 2023: The Benefits of
Higher Education for Individuals and Society. Washington, DC:
College Board. Milligan, Kevin, Enrico Moretti, and Philip
Oreopoulos. ``Does education improve citizenship? Evidence from the
United States and the United Kingdom.'' Journal of public Economics
88, no. 9-10 (2004): 1667-1695.; Lochner, Lance, and Enrico Moretti.
``The effect of education on crime: Evidence from prison inmates,
arrests, and self-reports.'' American economic review 94, no. 1
(2004): 155-189.
---------------------------------------------------------------------------

The high price of postsecondary education, however, means that
large

[[Page 27588]]

shares of Americans seeking postsecondary credentials rely on Federal
student loans to pay for college.\58\ Though the rate of student
borrowing has declined slightly in recent years, there have been
appreciable changes in who borrows for college and how much debt they
have taken on over the last several decades.\59\ For instance, in the
early 1990s, approximately one-third of full-time undergraduates
received Federal student loans.\60\ Following the Great Recession, the
total dollar amount of annual student loan borrowing increased,
reaching a peak in the 2010-11 school year.\61\ These trends are shown
in Table 2.1.
---------------------------------------------------------------------------

\58\ According to 2022 Digest of Education Statistics (Table
331.10), 34.6 percent of undergraduates received Federal student
loans for the 2019-20 academic year.
\59\ Fry, Richard. ``The changing profile of student
borrowers.'' (2014). Pew Research Center. <a href="https://www.pewresearch.org/social-trends/2014/10/07/the-changing-profile-of-student-borrowers/">https://www.pewresearch.org/social-trends/2014/10/07/the-changing-profile-of-student-borrowers/</a>.
\60\ U.S. Department of Education, National Center for Education
Statistics. Digest of Education Statistics 2022. Table 331.60.
\61\ Ma, Jennifer and Matea Pender (2023), Trends in College
Pricing and Student Aid 2023, New York: College Board.

Table 2.1--Share of Full-Time Undergraduates Borrowing for College and Amount Borrowed
----------------------------------------------------------------------------------------------------------------
Average amount Median amount
Share borrowing borrowed in given borrowed in given
Academic year federal loans % year (2019-20 year (2019-20
dollars) dollars)
----------------------------------------------------------------------------------------------------------------
2003-2004.............................................. 46 $7,419 $6,306
2007-2008.............................................. 52 9,101 6,804
2011-2012.............................................. 53 8,417 7,347
2015-2016.............................................. 50 8,643 7,017
2019-2020.............................................. 42 6,526 6,250
----------------------------------------------------------------------------------------------------------------
Note: Excludes Parent PLUS lo

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