Education Department Issues Final Rules on Student Debt Relief, Other Programs
November 04, 2022

The Department of Education released final regulations on targeted student debt relief programs on Oct. 31, hitting the Nov. 1 deadline to meet an implementation date of July 1, 2023.

The new rules for borrower defense to repayment, the Public Service Loan Forgiveness program, and other debt relief provisions expand eligibility, remove barriers, and provide for some automatic discharges.

This announcement follows the final institutional regulations announced last week that close the 90/10 loophole, add new accountability measures for when colleges and universities change ownership, and set standards that postsecondary prison education programs will have to meet to access Pell Grant funds.

There were few surprises in either batch, and ACE is broadly supportive of the final versions. See the comments we submitted on the draft regulations here and here.

Among the changes:

For Student Borrowers

Borrower defense to repayment: The final rules revise the existing framework for borrowers to have their loans forgiven if their institution misled them. Among the changes to the current, Trump-era rule are the ability to decide claims individually or as a group and that successful claims will receive full relief, a change from the proposed rule, which allowed for partial discharges.

Public Service Loan Forgiveness: A year after announcing a temporary waiver of many of the requirements for the Public Service Loan Forgiveness (PSLF) program, the new rules make several of those changes permanent. Borrowers will be allowed to count late or partial payments and to count certain periods of forbearance or payment suspension toward their total number of payments, and borrowers who have loans that don’t qualify for the program but consolidate into a direct loan managed by the federal government will receive credit for payments made before consolidation. The department also is planning to simplify and standardize the criteria to qualify for the program and will issue a separate final rule about how an eligible employer is defined. See ED’s fact sheet for more details.

Closed school discharges: The final rules will provide an automatic discharge one year after a college’s closure date for borrowers who were enrolled at the time of closure or left 180 days before closure and who don’t accept an approved teach-out agreement or a continuation of the program at a branch campus.

Disability discharges: The final rules provide additional pathways for borrowers who have a total and permanent disability to receive a discharge, including allowing borrowers who receive additional types of disability review codes from the Social Security Administration to qualify. This also includes borrowers who later aged into retirement benefits. The rule also eliminates the three-year income monitoring requirement that the department said too often caused borrowers to lose their discharges solely because they failed to respond to paperwork requests.

Interest capitalization: Interest capitalization occurs when borrowers have outstanding unpaid interest added to their principal balance. The final rules eliminate all instances where interest capitalization is not required by law.

For Institutions

Closing the 90/10 loophole: The new rules implement a change enacted by Congress last year that tightens the 90/10 rule, which requires for-profit colleges to get no more than 90 percent of their revenues from federal sources. This change would, for the first time, make GI Bill benefits and Department of Defense tuition assistance count toward the federal portion of institutional revenue.

Prison education programs: Congress recently re-established eligibility for Pell Grants for incarcerated individuals enrolled in qualifying prison education programs, effective July 1, 2023. In the interim, ED has expanded its Second Chance Pell Experimental Sites Initiative to serve incarcerated individuals in nearly every state. Incarcerated individuals are now eligible for the "Fresh Start" initiative, which will help borrowers with defaulted loans access low monthly payments based on their income and allow them to access Pell Grants.

Change in ownership: The new rule clarifies the requirements and processes institutions must follow when undergoing a change in ownership, including updating the definition of a nonprofit institution to prevent improper financial benefits to a former owner or other affiliate of a college. Institutions undergoing a change in ownership will be required to notify both the department and the institution's students at least 90 days prior to the change to ensure advance notice is provided.