Approximately 43 million Americans hold student loans — loans totalling around $1.6 trillion. With the average borrower owing around $36,000, loan forgiveness would immediately boost the economic health of some of those indebted.

                By                    David Nadelle

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After a series of federal student loan payment pauses and extensions by President Biden and former President Trump, advocates are calling for further loan pauses — as well as an unprecedented system of loan forgiveness. On May 1, 2022, the current student loan payment extension ends and people will have to start repaying their loans again.

The president seemingly would prefer to run any student debt forgiveness legislation through Congress or, if he has the authority, through an executive order. However, a leading expert on student financial aid has come up with a way to transform student loan plans — or cancel student loans completely — by avoiding both options.  

Mark Kantrowitz of The College Investor claims that the power to execute broad student loan forgiveness rests with the U.S. Secretary of Education (and by extension, the Department of Education) via the Income-Contingent Repayment plan (ICR). Additionally, by implementing new regulations concerning ICR, a forgiveness program can be created more easily as compared to passing one through the existing legislative process — and such a forgiveness program will ostensibly stand up to legal challenges better than one created via presidential executive order.

The Department of Education’s existing four income-contingent repayment plans are essentially student loan forgiveness plans, and the original ICR may eliminate remaining debt after 25 years of payments. The ICR requires a limited payment of 20% of the borrowers’ discretionary income whenever circumstances permit.

Congress has already authorized changes concerning the creation of new income-contingent repayment plans. Modifications have been done through the Department of Education when implementing the Pay-As-You-Earn Repayment (PAYE) and Revised PAYE (REPAYE) plans in Dec. 2012 and Dec. 2015 respectively. Income-driven plans already forgive repaying outstanding debt after several years, and could be transformed into a new program targeting student debt forgiveness.

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As Kantrowitz explains it, ICR “provides the U.S. Department of Education with broad regulatory authority to modify the details of the program” in terms of leniency of specified repayment terms, setting alternate documentations of income, limitations on the capitalization of interest, adjusting borrower’s loan payments due to special circumstances (i.e.: becoming unemployed) or changing eligibility and repayment obligations through obtaining income tax records (with the borrower’s permission).   

With May 1 just around the corner, the White House could address the growing concerns surrounding federal student debt sooner, rather than later.

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