How The Biden Administration Will Make College More Affordable

Sunday, November 8, 2020

Joe Biden’s agenda for higher education may be limited by split control of Congress. Nevertheless, there are several proposals that have bipartisan support. President Biden can also implement some changes using his executive, regulatory and enforcement authority.

Likely changes will include an extension of the payment pause and interest waiver for federal student loans, improvements in college access, college affordability and student loan repayment, and relief for undocumented students. There will also be increased enforcement of existing laws and regulations affecting for-profit colleges and student loan servicers.

Split Control of Congress

Although Democrats retained their majority in the U.S. House of Representatives, they have not yet gained control over the U.S. Senate.

Split control of Congress will make it more difficult for Joe Biden to implement his legislative agenda without negotiation and compromise. Bipartisan support will be required to pass legislation, preventing the passage of extreme, partisan legislation.

The Georgia runoff elections may affect control of the Senate. Votes for Republican and Democratic candidates are about evenly split, with a slight edge to Republicans. The elections will therefore depend on voter turnout in the state.

If Democrats succeed in achieving a 50/50 split in the Senate, they could control the Senate since the Vice President breaks any ties. However, Senate Republicans could use filibusters to block passage of legislation that does not have a 60-vote supermajority. The one exception is budget reconciliation legislation, which must cut the federal deficit.

Legislation through Regulation

Split control of Congress may require the Biden administration to rely on executive orders, regulations and the authority to enforce existing laws and regulations to implement Joe Biden’s proposals.

The Congressional Review Act allows Congress to overturn new regulations by a simple majority vote within 60 legislative days after a final rule is issued. However, the President can veto the resolution to overturn a regulation. Republicans will not be able to achieve the two-thirds majority required to override a Presidential veto and thereby block the new regulations.

Judicial review of new regulations is authorized by the Administrative Procedures Act (APA), but this review is limited to situations in which the regulations are “arbitrary and capricious, an abuse of discretion, or otherwise not in accordance with the law.”

President Trump’s agenda focused on undoing everything that President Obama ever did. The Biden administration is likely to reverse most of President Trump’s efforts, restoring the Obama-era policies, since President Trump’s executive orders lack the permanency of legislation.

Waiver Authority in the Higher Education Act

The Higher Education Act of 1965, at 20 USC 1082(a), allows the Secretary of Education to “consent to modification, with respect to rate of interest, time of payment of any installment of principal and interest or any portion thereof, or any other provision of any note or other instrument evidencing a loan which has been insured by the Secretary under this part” and to “enforce, pay, compromise, waive, or release any right, title, claim, lien, or demand, however acquired, including any equity or any right of redemption.”

President Trump’s executive order to extend the student loan payment pause and interest waiver relied on this waiver authority when he called on the Secretary of Education to “take action pursuant to applicable law to effectuate appropriate waivers of and modifications to the requirements and conditions of economic hardship deferments.” The economic hardship deferment normally provides an interest waiver for just subsidized Federal Direct Stafford Loans, not unsubsidized loans.

Proponents of forgiving all or most federal student loans have referred to the same statutory language when asserting that the Secretary of Education can forgive all federal student loan debt.

Both ignore the preamble of this section of the Higher Education Act of 1965, which limits the authority to “the performance of, and with respect to, the functions, powers, and duties, vested in him by this part.” The Secretary of Education is limited to using the waiver authority within the confines of the statute.

Also, this statutory language is limited to the Federal Family Education Loan (FFEL) program. There is no similar statutory language in the Direct Loan program. The language at 20 USC 1087e(a)(1) concerning parallel terms in the Direct and FFEL programs provides for federal education loans to have the same terms, conditions, benefits and amounts, but does not extend to waiver authority.

Only Congress has the power of the purse. Nobody opposed President Trump’s reliance on the waiver authority to extend the payment pause and interest waiver because it has strong bipartisan support and cost only about $15 billion. But, any attempt by the Executive Branch to forgive a trillion dollars in federal student loans will likely be challenged in the courts.

Extending the Student Loan Payment Pause and Interest Waiver

When President Trump extended the student loan payment pause and interest waiver, he said “Today I’m extending this policy through the end of the year, and we’ll extend it further than that, most likely right after December 1.”

If President Trump does not extend the payment pause and interest waiver further, Congress might extend it in the next stimulus bill, perhaps to September 30, 2021. Senator Mitch McConnell, the Senate majority leader, has called for passage of the next stimulus package before the end of the year.

In any event, President Biden could rely on the precedent set by President Trump’s extension to extend the payment pause and interest waiver further.

Student Loan Forgiveness

Democrats generally favor student loan forgiveness, while Republicans do not. For example, President Trump proposed repealing Public Service Loan Forgiveness in each of his federal budget proposals.

Joe Biden has several proposals for student loan forgiveness, including:

  • Forgiveness of tuition-related undergraduate federal student loan debt for borrowers who attended public colleges, Historically Black Colleges and Universities (HBCU), Tribal Colleges and Universities (TCU), Hispanic-Serving Institutions (HSI) and Minority-Serving Institutions (MSI) and who earn less than $125,000 a year.
  • Forgiveness of up to $10,000 in federal student loans per borrower. House Democrats limited this proposal to just borrowers who are experiencing financial distress.
  • Restoration of bankruptcy discharge rights for student loans.
  • Simplification of Public Service Loan Forgiveness (PSLF). This proposal would switch PSLF from a back-end loan forgiveness program (forgive remaining debt after 10 years of qualifying payments) to an up-front loan forgiveness program (forgive up to $10,000 per year for five years).

Republicans might support the changes to PSLF because they reduce the amount of loan forgiveness to graduate and professional school students and because they eliminate the potential for moral hazard in the program.

College Affordability

Joe Biden has made several proposals for improvements in college affordability.

  • Double the maximum Federal Pell Grant.
  • Provide free tuition at public colleges and universities for families with income under $125,000 per year.
  • Cut student loan payments under income-driven repayment in half, from 10% of discretionary income to 5%, with tax-free forgiveness of the remaining debt after 20 years of payments.
  • Increase funding for HBCUs, TCUs, HSIs and MSIs.
  • Eliminate barriers to college completion.

Some of these proposals have bipartisan support.

The changes to income-driven repayment could be implemented through regulatory changes, just like the PAYE and REPAYE plans, although the forgiveness would still be taxable to the borrower.

Consumer Protection

The Biden administration is likely to increase enforcement of regulations affecting for-profit colleges and student loan servicers and to issue new regulations.

The new Secretary of Education will restore the defense to repayment rules that were implemented under the Obama administration and will cancel the federal student loan debt of borrowers who were defrauded by their colleges.

The gainful employment regulations will also be restored. These regulations require for-profit colleges to comply with limits on the aggregate debt-to-income ratio of their graduates.

Statutory changes will be required to eliminate loopholes in the 90/10 rule, which limits for-profit colleges to receiving no more than 90% of their funding from Title IV federal student aid. Joe Biden has proposed counting military student aid in addition to Title IV federal student aid.

Due to lax oversight of student loan servicers during the Trump administration, states stepped into the void and asserted the authority to impose requirements on student loan servicers. But, only the federal government has the authority to regulate servicers of federal student loans. The states have some consumer protection responsibilities, but they cannot decide who can and cannot serve as a federal government contractor.

The Biden administration will increase oversight over federal student loan servicers. In addition, the Private Student Loan Ombudsman, who is part of the Consumer Financial Protection Bureau (CFPB), will exercise increased oversight over private student loans.

Undocumented and International Students

There are more than 450,000 undocumented students, according to a report by the New American Economy. Of these, 216,000 are eligible for DACA. These Dreamers will not have to fear deportation, like they did under the Trump administrator.

Changes in federal policy and a more welcoming atmosphere for international students will reverse the declines in international student enrollment in the U.S. from several countries.

Reauthorization of the Higher Education Act of 1965

The Higher Education Act of 1965 controls most federal student aid programs. Major changes in student aid policy generally occur during reauthorization. It has been 12 years since the last reauthorization, which is supposed to occur every 4-5 years.

Most of the proposals for reauthorization have bipartisan support. These include the following:

  • FAFSA simplification by reducing the number of questions on the Free Application for Federal Student Aid (FAFSA) from more than 100 to less than 25.
  • Increased transparency on college costs and financial aid by standardizing college financial aid award letters.
  • Better student loan counseling for borrowers.
  • Higher loan limits for Federal Direct Stafford Loans and new limits on Federal Direct PLUS Loans. The new limits on Federal Direct PLUS Loans will reduce the potential for moral hazard in the loan program.
  • Simplify federal student loan repayment by reducing the number of repayment plans from a dozen to just two: standard repayment and an income-driven repayment plan.

Reauthorization could occur during the lame duck.

However, Title IX of the Education Amendments of 1972, which relates to sexual assault and harassment on college campuses, is a major source of disagreement that is preventing reauthorization from occurring. The disagreement concerns the balance between the rights of the victims and the rights of the accused, as well as the required standards of evidence.

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