The U.S. Department of Education released new policy guidance today that will allow colleges and universities to use stimulus funds for a variety of student needs, including cancelling student debt in certain cases.
The Department’s expanded guidance allows educational institutions to use stimulus funding from the Higher Education Emergency Relief Fund (HEERF) grant program to support college students in a variety of new ways. According to a Department press release, this includes “financial aid grants to dual enrollment, continuing education, non-degree seeking, or non-credit students, as well as to a broad range of students with exceptional needs, such as certain refugees or persons granted asylum.” Colleges can also use the funds to “reimburse themselves for lost revenue while supporting students during the pandemic, including discharging unpaid institutional balances so students can resume their studies and subsidizing childcare services for student parents.” The guidance also provides for outreach initiatives for expanded student access to federal nutritional assistance programs.
“Many students have had their postsecondary careers turned upside down as they manage their schoolwork while also protecting themselves from this virus,” said Secretary of Education Miguel Cardona. “We hope every eligible student takes advantage of these benefits while continuing to focus on their studies.”
The scope of student debt cancellation related to this guidance would be limited to institutional debts — student debts or unpaid bills owed directly to the college or university. It would not apply to student debts owed to other entities, such as federal student loans owed to the Department of Education, or to private student loans owed to commercial lending entities.
Nevertheless, institutional student debts can be a major headache for students and borrowers. Institutional student debts are typically ineligible for federal student loan relief and forgiveness programs. And failure to repay these debts can result in serious consequences including academic transcript withholding and inability to transfer credits, complete a degree program, or pursue a secondary degree or enter a graduate program.
This latest initiative comes on the heels of additional efforts by the Biden administration to address student loan debt. Yesterday, Secretary Cardona announced a change to the Borrower Defense to Repayment program that will result in $1 billion in student loan forgiveness for 72,000 student loan borrowers.
On his first day in office, President Biden signed an executive order extending the moratorium on most federal student loan payments and interest to September 30, 2021. Subsequently, Biden directed his Justice Department to review the legality of cancelling student debt through executive action — something that he has expressed discomfort with, but has not expressly taken off the table. And earlier this month, Biden signed into law his sweeping new stimulus package, the “American Rescue Plan,” which will exempt student loan cancellation and forgiveness from taxation under federal law through the end of 2025. Progressive lawmakers hailed this provision as “paving the way” for Biden to cancel student debt.
“This is a win!” said Young Invincibles, an organization advocating for young adults, in a Tweet on Friday. “This guidance from [the U.S. Department of Education] pushes institutions to use relief money to better address and support the needs of students. Funds can be used to clear student balances & lift transcript holds, unsubsidized child care, and more.”
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