AACOM is actively engaged in efforts to make postsecondary education more affordable for osteopathic medical students. The following update and analysis of federal student aid and loan relief was prepared by Venable, LLP, on behalf of AACOM.
Recent Developments in Higher Education
Federal policymakers have amplified their focus on higher education reform as affordability remains a concern for American families. The COVID-19 pandemic has also exacerbated many Americans’ struggles with paying down their student loans. Updates to the Higher Education Act of 1965 (HEA)—the federal law that authorizes the primary sources of direct federal support to postsecondary students, including the federal student loan and grant programs—are long overdue. And although Congress last reauthorized the HEA in 2008, it is unlikely that comprehensive legislation will pass in the 117th Congress. Nevertheless, there are numerous recent developments in the higher education space, including several COVID-relief bills, student loan repayment relief, and legislative proposals aimed at making college more affordable and helping borrowers manage debt.
The American Association of Colleges of Osteopathic Medicine (AACOM) has its finger on the pulse of these recent developments and is actively engaged in efforts to make postsecondary education more affordable for osteopathic medical students. This fact sheet summarizes recent efforts and developing initiatives that affect higher education.
COVID-19 Emergency Financial Aid Grants
Since the outbreak of the COVID-19 pandemic in March of 2020, Congress has passed three laws that provide funds to institutions of higher education and their students to help mitigate its negative effects. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provided approximately $14 billion for the first Higher Education Emergency Relief Fund (HEERF I). The Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA) provided an additional $22.7 billion for HEERF II. And the American Rescue Plan Act (ARP) provided an additional $39.6 billion for HEERF III. Institutions must use significant portions of their HEERF awards (at least half under HEERF I and similar proportions under HEERF II and III) to make emergency financial aid grants directly to students. Students can generally use these grants for any component of their cost of attendance or for emergency costs that arise due to coronavirus, such as tuition, food, housing, health care (including mental health care), or child care.
Federal Student Loan Repayment Relief
Since March 2020, the Department of Education (ED) and Congress have provided temporary relief on most federal student loans by suspending loan payments, stopping collections on defaulted loans, and lowering the interest rate to 0%. This relief is automatic and extends through at least September 30, 2021. In addition, borrowers will continue to receive credit towards the Public Service Loan Forgiveness (PSLF) Program during the pause, provided they have a Direct Loan and continue to work full-time for a qualifying employer. You can learn more here.
Student Loan Forgiveness
Proposals for student loan forgiveness are gaining steam. President Biden has rejected calls to immediately cancel up to $50,000 of student debt but instead supports eliminating up to $10,000. In early April, President Biden asked ED to review his executive authority to forgive student debt without congressional approval.
Key Members of Congress, such as Sens. Chuck Schumer (D-N.Y.), Bernie Sanders (I-Vt.), and Elizabeth Warren (D-Mass.), have also developed various forgiveness proposals. Sen. Sanders has proposed cancelling all private and federal student loans for all borrowers. Sens. Schumer and Warren have proposed discharging federal loans for student loan borrowers with an annual income up to $125,000.
If some form of student loan forgiveness passes, the ARP makes the forgiveness tax-free. Previously, most student debt cancellation was subject to taxation, partially eroding the benefits to borrowers. Only a narrow band of borrowers—those enrolled in the PSLF Program or determined to be permanently disabled—could receive tax-free debt forgiveness. Now, all student loan debt discharges occurring before January 1, 2026 will be tax-free.
In addition to the proposals for blanket debt cancellation, strengthening the PSLF Program remains an AACOM priority. Up to 80 percent of osteopathic medical students graduating in the 2019–20 academic year who reported entering a loan forgiveness program planned on entering the PSLF Program. PSLF incentivizes careers in public service by granting tax-free student loan forgiveness to borrowers who make 120 qualifying monthly payments while working full-time for a qualifying employer, such as a government agency, tax-exempt nonprofit organization, non-exempt nonprofit that provides public services. Changes to the PSLF Program have been discussed in Congress, particularly during recent hearings. Some Members have called for reforms to the program to make it easier for borrowers to qualify. There has also been focus on the role of servicers in the forgiveness process.
Grad PLUS Loans
AACOM also remains committed to preserving federal Direct Graduate PLUS (Grad PLUS) loan program. Grad PLUS loans allow graduate and professional students to borrow up to the cost of attendance minus any other financial aid received, and can be used to pay for tuition, textbooks, room and board, and other important living expenses. However, there have been recent calls to cap how much a graduate student can borrow. 87 percent of osteopathic medical students graduating in the 2019 – 2020 academic year who reported receiving loans to finance their medical education relied on Grad PLUS loans. AACOM understands the importance of Grad PLUS loans for osteopathic medical students and will advocate against a limit on borrowing under the program.
Making College More Affordable
President Biden and Members of Congress have recently unveiled numerous plans aimed at making college more affordable. President Biden’s American Families Plan would provide two years of free community college to all Americans, including DREAMers, and make college more affordable for low- and middle-income students by raising the maximum Pell Grant award by $1,400. President Biden’s 2021 budget request also calls to raise the maximum Pell Grant award by $400, the largest one-time increase since 2009, to $6,895.
Sen. Sanders and Rep. Pramila Jayapal (D-Wash.) recently introduced the College For All Act (S. 1288/H.R. 2730). This bill would guarantee tuition-free community college for all students; allow students from families earning under $125,000 annually to attend public colleges and universities, as well as public and private historically black colleges and universities (HBCUs) and other minority-serving institutions, tuition- and debt-free; double the maximum Pell Grant to $12,990; and invest $10 billion to provide ongoing support to students at historically underfunded institutions.
Sen. Ron Wyden (D-Or.) reintroduced the Retirement Parity for Student Loans Act, which would allow employers to make “matching” contributions to a 401(k) retirement plan as if their employees’ student loan repayments were salary reduction contributions made to the retirement plan. Under this proposal, recent graduates who cannot afford to save money above their student loan repayments would no longer have to forego the employer match.
Please contact AACOM Government Relations at aacomgr@aacom.org with questions or for further information.
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