The Education Department has a plan for canceling student debt — if Biden gives the word

Top Education Department officials have developed detailed plans to carry out student loan forgiveness for millions of Americans as they wait on President Joe Biden to make a final decision, according to internal agency documents obtained by POLITICO.

The documents sketch out the mechanics of how the agency expects to manage and operate a possible mass debt cancellation program on a scale that would be unprecedented in the history of the federal student loan program — if the White House were to give it the green light.

Education Department officials, the documents show, are prepared to provide debt relief automatically, within several months, to several million borrowers for whom the agency already has income information. Most other borrowers, according to the documents, would apply through a form on StudentAid.gov by self-certifying they qualify for relief.

The department’s plan contemplates that all types of federal student loans would be eligible for loan forgiveness, including Grad and Parent PLUS loans as well as federal loans owned by private entities. And it also suggests that borrowers who ever received a Pell grant, financial assistance for low-income families, could receive an additional amount of loan forgiveness.

Biden is considering using executive action to provide $10,000 of debt relief per borrower, but White House deliberations over the issue have stretched on for months without resolution. After initially promising in April a decision on the issue within a “couple of weeks,” Biden has since said he plans to decide by the end of August when the moratorium on loan payments is set to expire.

The Education Department documents do not reflect any final decisions on how the White House may ultimately choose to structure a debt relief program, including the amount of relief for borrowers or any income limits, if they pursue any program at all. But the documents show some of the ideas the administration is taking seriously and circulating among senior leaders — and, importantly, how the agency would be prepared to execute them.

Senior department officials briefed Secretary Miguel Cardona on plans to implement broad-based student loan cancellation earlier this week, according to a copy of the internal memo and presentation obtained by POLITICO. It is not clear whether Cardona has approved any of the plans.

“Internal discussions have resolved most key operational and policy issues necessary for speedy implementation” of a broad-based student debt cancellation program, the memo prepared for Cardona says, “potentially allowing immediate eligibility determination for millions of borrowers, the first cancellations within 45 days of announcement and millions of cancellations within 90 days.”

White House advisers are looking at limiting any loan forgiveness to borrowers earning below a certain income threshold, but they have not finalized that amount. The internal Education Department presentation for Cardona cites — as an example of a threshold — $125,000 for individuals and $250,000 for families, which are among the figures that have been previously reported as under consideration.

Senior department officials caution in the memo that some remaining policy and implementation issues need to be addressed. Among the ongoing concerns, the officials cite in the memo are “efforts to minimize legal risk.”

"The Department’s review of broad based debt cancellation remains ongoing and no decisions have been made," an Education Department spokesperson said in a statement. "We are not going to comment on any alleged internal documents or internal deliberations about hypothetical scenarios."

A White House official said in a statement that the administration “is continuing to assess options for cancellation and no decision has been made.”

A person familiar with the administration’s discussions on loan forgiveness warned that proposals have floated around at various levels for months. “I wouldn’t put any particular weight on any one idea and not all ideas have been presented to the White House or the president,” the person said.

The internal Education Department documents also address some of the granular details of how the agency might carry out any loan forgiveness. The department, for example, is looking at allocating loan forgiveness across multiple loans in a way that would “maximize borrower benefits,” the documents say. It also is considering applying forgiveness to a borrower’s outstanding interest before principal balance.

For borrowers who still have remaining balances after loan forgiveness, department officials are proposing to “re-amortize” their loan, recalculating their monthly payments based on the new, smaller principal balance, according to the documents. This would result in lower monthly payments for many borrowers.

In addition, the department officials floated the possibility of a June 30, 2022 cut-off for any loan forgiveness program, requiring loans to be disbursed before that date to qualify for relief.

Administration officials have repeatedly said publicly they are considering various options for canceling student debt. But the full scope and level of detail of the Education Department’s preparations for the possibility of such a program have not been previously reported.

The planning has been orchestrated by the department’s Office of Federal Student Aid, led by Rich Cordray; Undersecretary of Education James Kvaal and his team; as well as lawyers from the Office of General Counsel. White House staff have been involved generally in the agency's preparations for the possibility of loan forgiveness, according to people familiar with the efforts.

A draft implementation timeline envisions that the White House would communicate a final decision on loan forgiveness to the Education Department two weeks before announcing it publicly. The department’s goal, according to the documents, is to have a communications strategy for borrowers and an application form ready to go around the time of the announcement or within several days of it.

A central challenge for the Education Department, as POLITICO previously reported, is that the agency lacks current income information for many of the nation’s 43 million federal student loan borrowers.

For most borrowers, the Education Department expects to create an online application form in which borrowers could self-attest that their income qualifies them for relief under whatever threshold the White House sets, according to the documents. The department documents discuss an application deadline of 15 months after payments restart.

The agency has also been developing a “risk-based verification process” to check the accuracy of applications. It would require a “small percentage” of borrowers who self-attest they are eligible for loan forgiveness to submit documentation to prove their income. The department is exploring options with the Treasury Department to allow borrowers to submit that information electronically from their tax filings, according to the documents.

The Education Department already has income data for several million borrowers and has determined it could automatically discharge their loans without requiring any action from them, according to the documents. That includes about 6 million borrowers who recently provided their 2020 income when they applied for federal student aid for the 2022-23 school year. Another roughly 2 million borrowers recently provided either 2020 or 2021 income when they enrolled or re-enrolled in an income-driven repayment plan. It's not clear, however, exactly which income data the White House will ultimately decide to use, if any.

In addition, the Education Department is exploring the possibility of automatically providing loan forgiveness to the roughly 8 million borrowers in default. “Due to outstanding policy and legal questions, this is on a longer timeframe,” the presentation for Cardona says.

The Biden administration has already publicly announced an effort to automatically expunge the defaults from those borrowers’ records and place them back into good standing to offer them a “fresh start” when loan repayments resume.

Cardona told reporters earlier this year that his agency was “ready to roll” to deliver on whatever Biden ultimately decides on debt relief.

Republicans who oppose student debt cancellation have vowed to fight any mass forgiveness program, arguing that it would be economically unsound and legally dubious. Rep. Virginia Foxx (R-N.C.), the top GOP lawmaker on the House education committee, is adamantly opposed to sweeping loan forgiveness but has also raised concerns about the department's capacity to carry out such a plan.

"I am gravely concerned the Department will further harm borrowers and taxpayers if it acts on student loan forgiveness, in part because of its inability to follow through on its grandiose proposals," she wrote in a letter to the Education Department last month.