The past couple of years have been big for student loan borrowers – both in good and in bad ways. Student loan debt has continued to grow at a rapid clip, now surpassing $1.5 trillion. Meanwhile, the student loan servicing system remains poorly administered, which has led to widespread complaints and even lawsuits brought by state and federal authorities. However, other student loan borrowers have gotten their student loans forgiven through programs like Public Service Loan Forgiveness and Defense to Repayment. Here’s what we can expect during the coming year.
Gradual Uptick in PSLF Approvals
A lot has been written about the Public Service Loan Forgiveness (PSLF) program and problems associated with its implementation. Despite some serious threats, PSLF remains intact, and people are indeed getting their student loans forgiven under the program. But the approval rates are currently alarmingly low. That’s largely because the program is not retroactive to before October 2007, and most income-driven repayment plans were not enacted until after 2008. Since PSLF requires 10 years of qualifying payments, this means that many borrowers may not yet be eligible for loan forgiveness. But I expect that to gradually change starting this year. And while the program will likely still have problems, gradually more borrowers should be eligible to have their loans forgiven under PSLF during 2019.
Borrower Defense to Repayment Intact, But Still in Danger
Student loan borrowers who have been defrauded by their schools still have the ability to apply for federal loan forgiveness via Borrower Defense to Repayment (DTR). DTR was enacted at the end of the Obama administration, and allows people to petition the U.S. Dept. of Education to have their federal student loans cancelled on the basis of misconduct by their school. Under Secretary Betsy DeVos, the Dept. of Education improperly failed to process many DTR applications, and tried to rewrite the rules governing the DTR program to make it harder for borrowers to obtain relief. DeVos lost a series of major court cases in 2018 on both fronts, ensuring that the program remains intact and forcing the Dept. of Education to follow the Obama-era rules. However, the program remains in danger, as the Dept. of Education will likely try again to modify the DTR program through new regulations.
Will the HEA be Reauthorized?
The Higher Education Act (HEA) is a massive law that governs much of the federal student loan system. It must periodically be reauthorized by Congress, and the reauthorization process is often used to make changes (sometimes significant changes) to the federal aid system. Last year, congressional Republicans proposed the “PROSPER Act,” which would have made significant changes to income-driven repayment, eliminated the PSLF program, and altered how federal student aid works. The PROSPER Act never passed. Meanwhile, congressional Democrats proposed the Aim Higher Act, which would have increased federal grant funding, encouraged states to invest in free college, reduced payments under income-driven repayment plans, and preserved loan forgiveness programs. The Aim Higher Act didn’t pass, either. Looking ahead, neither the PROSPER Act nor the Aim Higher Act will pass with the current divided Congress – but it’s possible we will see a compromise HEA reauthorization that blends some proposals from each bill. We’ll have to see what happens.
School Closures May Continue
Over the past few years we’ve seen an increase in school closures, primarily in two sectors. First, some major for-profit college chains like ITT Technical Institute and Education Corp of America have closed amidst accusations that they left their students with massive debt, worthless degrees, and few marketable career skills. At the same time, there’s been a significant uptick in small liberal arts colleges failing due to financial pressures and low endowments. In Boston alone (where my law practice is based), we saw two schools (Boston Conservatory and Wheelock College) merge with much larger neighboring institutions, while two others (Mount Ida College and Newbury College) announced abrupt closures, leaving students with limited options for completing their educations. As more and more families grow skeptical of for-profit schools or cannot afford the price tag of small private liberal arts colleges, I expect that we will continue to see a steady stream of school closures through 2019.