Student loan debts: Department of Education announces relaxed rules for debt forgiveness

The Department of Education on Monday announced several changes in student debt forgiveness programs aimed at lowering the debt owed by millions of Americans.

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The department’s new rules intend to make it easier for those duped by colleges promising job placements and those who want to erase student loan debt by working in the public service.

“We’re putting students ahead of special interests,” said Education Secretary Miguel Cardona.

Some of the rules, which will go into effect in July 2023, include:

An overhaul of the borrower defense program

The plan offers various degrees of debt forgiveness to students whose colleges made false advertising claims about the school and what it offers.

The Department of Education will now review claims from individual borrowers, or it can grant forgiveness to large groups of students from the same college, if the college is found to have committed fraud.

The department erased such debts in June and August owed to borrowers who attended Corinthian Colleges and ITT Tech.

The federal government will be able to force colleges to cover the cost when students are granted loan cancellation due to fraud, a cost previously paid by taxpayers.

House Republicans led by North Carolina Rep. Virginia Foxx, who is the top Republican member on the House Education and Labor Committee, criticized the proposed borrower defense rules as being “inconsistent with the norms of due process,” in a letter to the Justice Department, the Wall Street Journal reported.

Closed school discharges

Borrowers will have an automatic discharge after one year if a college closes and the borrowers were enrolled at the time of closure or left 180 days before closure and who do not accept an approved teach-out agreement or a continuation of the program at another location of the school.

Those who accept but do not complete a teach-out agreement or program continuation will receive a discharge one year after their last date of attendance.

Public Service Loan Forgiveness

Another change will come in the way those under the Public Service Loan Forgiveness program have their payments counted.

Public service workers, such as teachers and nurses, can get their student loan debt erased after making 120 monthly payments. Before, if a payment was made 15 days after it was due, or was not a full payment, it did not count as one of the 120 monthly payments.

The new rule allows for payments to count even if they are made more than 15 days after they are due or are made in installments. Borrowers can now also make a single payment instead of monthly payments.

Paused loans still count

Some who have their payments paused for various approved reasons will be treated as if they are still making the payments, according to the new rules.

Student loans and those with disabilities

More people with disabilities will have debts canceled, and a rule that required three years of income monitoring has been eliminated.

The new rules are not connected to President Joe Biden’s student loan forgiveness plan, which is temporarily on hold after a federal appeals court blocked it while a judge evaluates a challenge to the program that would cost an estimated $400 billion, according to the Congressional Budget Office.