President Donald Trump just vetoed a major student loan forgiveness bill.
Here’s what you need to know.
Student Loan Forgiveness
In a widely expected move, Trump vetoed congressional legislation that would have overturned a key student loan forgiveness rule drafted by the U.S. Education Department under the leadership of Education Secretary Betsy DeVos. In March, the U.S. Senate voted 53-42 to overturn a new student loan forgiveness rule introduced by U.S. Secretary of Education Betsy DeVos that critics argue limit student loan forgiveness for students when a college closes due to fraud. All Senate Democrats and 10 Republicans voted on a bipartisan basis. The House of Representatives overturned the rule in January by a vote of 231-180.
The student loan forgiveness rules are known as borrower defense to repayment, which allow students to have their federal student loans forgiven if a school employed illegal or deceptive practices to encourage the students to borrow debt to attend the school. Without these rules, students are potentially on the hook to repay federal student loans even if they didn’t find gainful employment or finish their degree before their school closed. The original rules were issued during the Obama administration. However, DeVos rewrote the rules to narrow the requirements to receive student loan forgiveness.
Why DeVos argued for a narrow definition of student loan forgiveness
DeVos has long believed that the Obama-era rules were too broad and that too many borrowers could qualify for student loan forgiveness. DeVos has sought to strike a balance between the needs of students and taxpayers. The Obama-era rules, in her view, could cost taxpayers billions of dollars in unnecessary student loan forgiveness. Her rules, she has said, would save taxpayers $11 billion over 10 years. Rather than make student loan forgiveness automatic, DeVos said borrowers impacted by school closure would need to apply for student loan forgiveness and prove financial harm. The new rules also would have potentially limited the amount of student loan forgiveness that defrauded students could receive.
“Whereas the last administration promoted a regulatory environment that produced precipitous school closures and stranded students, this new rule puts the needs of students first, extends the window during which they can qualify for loan discharge, and encourages schools to provide students with opportunities to complete their educations and continue their pursuit of economic success,” Trump said in sending the joint resolution back to the House of Representatives. The veto doesn’t impact public service loan forgiveness or student loan forgiveness through income-driven repayment.
A federal judge intervened to address the borrower defense rule
A federal judge previously ordered DeVos to comply with the borrower defense rule. However, rather than comply with the judge’s order, the Education Department instead did the following, according to the Project on Predatory Student Lending at Harvard Law School.
- “The Department demanded incorrect loan payment from 16,034 students
- Of those students, 3,289 student borrowers made one or more loan payments because of these demands, which they were not actually supposed to pay
- The Department has still not confirmed that 1,147 students’ loans are in the correct status, leaving those students in limbo
- The Department has harmed the credit of 847 non-defaulted students
- The Department subjected 1,808 students to involuntary debt collections (garnished their wages or taken their tax refunds or benefits)”
Next Steps: Student loan forgiveness veto
The president has the power to veto congressional legislation. For this legislation to become law, Congress would need to override the president’s veto, which is unlikely. The House of Representatives may vote as early as July 1.
How to pay off student loans faster
What’s the best way to pay off student loans faster? Start with these four options, all of which have no fees:
- Student loan refinancing
- Student loan consolidation
- Income-driven repayment plans
- Student loan forgiveness
Resources: Student Loans
5 student loan changes for 2020
What Trump and Biden think about your student loans
5 ways to get student loan forgiveness
Don’t expect student loan forgiveness or a $2,000 a month stimulus check
Student loan forgiveness reduced in new stimulus bill
Here’s when Social Security recipients get their stimulus check
Navient settles lawsuit — what it means for your student loans
Should you pay off student loans during COVID-19?
How COVID-19 affects student loan forgiveness
Here’s everything that’s happened to your student loans in 2 weeks
15 most popular questions about student loans and Coronavirus
How long do your unemployment benefits last?
How to pay your student loans during Coronavirus
Student loan forgiveness benefits these members of Congress
How to get financial relief for your student loans during Coronavirus
5 ways to lower your student loan payments during Coronavirus
Student loan refinancing rates are incredibly cheap
JOIN THE MOVEMENT #iBELIEVE