On Friday, the Biden administration announced its refined approach to addressing student loan debts, following the Supreme Court’s rejection of its previous policy in June.
- The U.S. Department of Education’s initial policy agenda was released, detailing their second shot at providing student loan relief for Americans.
- Key figures like Wisdom Cole (NAACP) and Kyra Taylor (National Consumer Law Center) have been named members of the newly created “Student Loan Debt Relief Committee.”
The administration’s focus has shifted to specific groups of borrowers, notably those:
- Facing financial hardships
- Who began repaying their loans several decades ago.
In contrast, the original policy was more encompassing but excluded borrowers who had high earnings.
However, this revamped strategy faces a looming challenge. The halt on federal student loan repayments, which was a relief measure during the COVID-19 pandemic, will be lifted soon. From September 1, the interest on federal student loans began accruing again, with billing set to resume on October 1.
The Supreme Court’s Role
President Joe Biden’s initial plan to forgive up to $20,000 in student debt faced a significant setback when conservative groups and Republican states took legal action to prevent the relief. Subsequently, the Supreme Court decided in June that the President lacked the authority to eliminate such a vast amount of consumer debt without Congress’s explicit permission. As a solution, Biden has now opted for a more extended rule-making process instead of executive orders. This means relief might not be available until July 2025, though efforts to expedite this are ongoing.
Regulations on Higher Education Institutions
In parallel with the student loan relief measures, a significant regulation has been finalized for higher educational institutions.
Ensuring Value in Education
The Biden administration is ensuring that schools of higher education demonstrate that specific certificate programs significantly enhance employment prospects for their graduates. If they fail to do so, these institutions could lose access to federal student aid.
- Gainful Employment Rule: Schools need to meet two critical metrics:
- Graduates’ median annual debt repayments should not exceed 8% of their median annual income or 20% of their discretionary income.
- At least half the school’s graduates should earn more than high school graduates aged between 25-34 in the same state.
Failure to meet these standards will have consequences. Schools not meeting one metric will have to notify students of the risk of the program losing federal aid access. Schools that don’t meet the same metric twice in three years will be cut off from federal financial aid altogether.
Increasing Transparency for Students
A financial value transparency framework has been introduced to ensure that prospective students understand the true costs of acquiring a degree and the financial outcomes they can anticipate.
- Schools are now mandated to publicize various costs, including tuition, fees, books, supplies, non-federal grant aid, and borrowing amounts.
- All this data will be accessible on a dedicated website managed by the Department of Education.
Feedback from Experts
The revised regulations have received mixed reactions. Many, like Aaron Ament (president of Student Defense), believe that these steps are vital to ensure students aren’t exploited by predatory educational programs. Others, like Mark Kantrowitz, feel the rule has missed addressing degrees like associate’s and bachelor’s, suggesting a more encompassing approach would have been ideal.
The Broader Implications
As these policy changes ripple through the educational sector, it’s crucial to understand the broader implications for both institutions and students.
For Educational Institutions
- Adaptation: Institutions will need to be agile, re-evaluating and potentially restructuring their programs to align with the new rules and ensure they are providing genuine value to their students.
- Financial Impact: Those institutions unable to meet the newly established criteria risk losing federal financial aid. This could have profound financial consequences, especially for those schools that heavily rely on federal student aid as a substantial source of revenue.
- Reputation Management: Schools will be under increased scrutiny. Those consistently failing to meet the standards risk reputational damage which might deter prospective students.
The Biden administration is making determined efforts to reshape the student loan and higher education landscape. While these steps mark a significant shift in addressing ongoing concerns, their true impact will only become apparent once they are fully implemented. It remains essential to keep monitoring these policies and adjust them as needed to ensure the best outcomes for students across the country.