Education Department Cancels Loan Cancellation Scheme

The U.S. Department of Education announced today that it will be withdrawing both parts of its Plan C for student loan cancellation. One part involves various ways the department would have declared that a borrower has a “hardship” deserving of complete loan cancellation. The other part would have identified additional categories for waivers of loan repayments, such as when the borrower’s loan balance is larger than the original loan (which is, in fact, a normal situation for many borrowers who get their loan payments deferred for various reasons). Both are being withdrawn via a scheduled notice in the Federal Register on Dec. 26.

Withdrawing the hardship rule was what my Heritage Foundation colleague Madison Marino and I advised in our regulatory comment on the proposed rule. We argued that the department should confess its pretextual rulemaking—conveniently finding “authority” to cancel as much debt as quickly as possible—and that this newly discovered authority violated what is called the Major Questions Doctrine, which presumes that Congress doesn’t delegate to agencies issues of major political or economic significance.

We noted several additional problems in the proposed hardship rule, such as a completely unknown cost to the government and, therefore, to the taxpayers. That’s because other student loan schemes of the department, especially the SAVE plan (which changes the parameters of income-based repayment plans), have been enjoined by courts—they can’t be enforced—so it’s very hard to determine how many borrowers would be affected by eligibility for one scheme or the other. (Read more from “Education Department Cancels Loan Cancellation Scheme” HERE)

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