President Biden Releases New Student Debt Plan
The Biden administration's plan to provide relief to student loan borrowers could have a significant impact, potentially benefiting millions of Americans burdened by student debt. By reducing payments for 25 million borrowers and wiping out debt entirely for over four million individuals, the proposal aims to alleviate financial strain on a substantial scale. A key aspect of the plan involves forgiving interest balances, with up to $20,000 in interest cancellation for borrowers whose loan balances increased due to accruing interest. This relief particularly targets low- and middle-income borrowers enrolled in income-driven repayment plans. These low- and middle-income borrowers would have their entire interest balance waived.
Moreover, the plan extends assistance to various groups facing distinct challenges related to student loan repayment. Borrowers eligible for existing forgiveness programs but who have not yet applied to the programs, such as the Public Service Loan Forgiveness Program or the Saving on a Valuable Education (SAVE) Program, could have their debts automatically canceled. Additionally, the government is offering relief to undergraduate borrowers who have been making payments on their student loan debt for 20 years or more, graduate student borrowers who have paid on their student loan debt for 25 years or more and those borrowers whose educational institutions engaged in fraudulent practices or lost federal funding. The plan also addresses borrowers experiencing hardship due to medical or child care expenses. The Department of Education has not yet determined how those borrowers would be identified, but the agency is considering automatic forgiveness for those at risk of defaulting.
The Biden administration recalibrated its approach to align with legal parameters established by the Supreme Court. Following the Court's rejection of a $400 billion relief proposal under the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act, the administration devised a new strategy tailored to the provisions of the Higher Education Act. By focusing on specific subsets of borrowers rather than pursuing blanket forgiveness, the administration narrowly tailored its plan to navigate within the confines of existing legislation and not overreach its authority. The Biden administration’s overreach was the basis of the Supreme Court’s rejection of President Biden’s first student debt relief plan.
Though the plan was announced, the Biden administration has not yet published the plan in the Federal Register. Once published and after the close of the comment period, the administration believes that it will be able to begin implementation of the plan in the fall, barring any delays or legal challenges.