Education Dept. Won't Revisit Loan Rules

June 21, 2006

The U.S. Education Department has rejected a petition from a coalition of student groups, lenders and others that asked the department to consider rewriting its regulations for repaying student loans. Department officials said that while they were concerned about the debt burden faced by many students, they did not consider it appropriate to begin a formal process for reviewing their rules now.

Last month, the groups, led by the Project on Student Debt, filed an unusual "petition for rule making" urging the department to review and change some of its “inconsistent, confusing and contradictory” rules governing how and when students repay their loans. Specifically, the groups called for changes in the government's regulations governing income contingent repayment and "hardship relief," to make them more helpful to a broader array of students.

“To ensure that low-income students meet their full potential through higher education, the secretary has the duty to improve the current regulations so that more students are able to manage debt repayment and low-income students are not deterred from pursuing higher education,” the groups said in their petition.

In a letter this month to Robert Shireman, who heads the Project on Student Debt, the department's acting secretary for postsecondary education, James F. Manning, said its officials had decided "not to initiate a specific rulemaking process on this issue at this time."

Manning's letter said that the department is supposed to review its rules "only if absolutely necessary and then in the most flexible, most equitable, and least burdensome way possible.... We have decided that the rulemaking process proposed in your petition is not consistent with those principles at this time."

That's partly, Manning suggested, because many aspects of federal higher education and student loan policy are in flux right now. Two new grant programs enacted by Congress as part of the budget reconciliation process this winter have yet to take effect, legislation to renew the Higher Education Act is still pending in Congress -- passed in the House of Representatives, stalled in the Senate -- and the Secretary of Education's Commission on the Future of Higher Education plans a fall report that could influence loan policy, Manning wrote.

Lauren Asher, deputy director of the Project on Student Debt, said the group was "disappointed that the department is putting the problem of student debt on hold just as higher interest
rates will bring even more urgency to the need for affordable repayment options." Interest rates on most loans are set to rise July 1.

"However," she added, "the department has identified opportunities for action in the near future, and we will continue to press for fast action on these practical and necessary reforms."

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