The Biden administration unveiled a new set of plans on Monday aimed at eliminating student debt for millions of Americans, potentially bringing the number of borrowers who've seen some or all of their debt forgiven during the president's term to more than 30 million. The new proposals, which come after the Supreme Court struck down the administration's first attempt at sweeping student loan forgiveness last summer, target specific groups of borrowers and could start providing relief as early as this fall.
U.S. Education Secretary Miguel Cardona said the new proposals will fulfill a promise President Biden made while a candidate in 2020. "It means freedom from feeling like your student loan bills compete with basic needs like grocery or health care," Cardona said, emphasizing the "breathing room" the relief would provide to many borrowers.
The announcement outlined efforts aimed at four groups of borrowers: those who owe more money than they did at the start of their repayment, borrowers who started paying more than 20 years ago, those already eligible for existing loan forgiveness or discharge programs but haven't yet applied, and borrowers facing economic hardship.
One key element of the plan would allow any borrower, regardless of income, to cancel up to $20,000 in interest, addressing what Cardona called "runaway interest." More than 25 million borrowers owe more in student loans now than they took out originally. Low and middle-income borrowers enrolled in an income-driven repayment plan would have all of their interest forgiven, including single borrowers earning $120,000 or less a year and married borrowers who make $240,000. The administration estimates that this proposal would forgive some interest balances for 25 million borrowers, with 23 million receiving full forgiveness on their interest.
The new proposals also aim to help long-term borrowers, with more than 2.5 million borrowers having carried student loan debt for more than two decades. Under the plan, borrowers carrying undergraduate debt would qualify for forgiveness if they started repayment on or before July 1, 2005, while those with graduate school debt would qualify if they started repayment on or before the same date in 2000.
Another component of the plan would provide automatic relief for borrowers who qualify for existing loan forgiveness or discharge programs but haven't yet applied. The Education Department plans to use data it already has to identify these borrowers and automatically credit their accounts, benefiting more than 2 million eligible borrowers who have not yet enrolled.
Borrowers experiencing economic hardship could also see relief under the new proposals. Some of this relief would happen automatically, such as for borrowers at a high risk of defaulting on their student loans, while other relief would require an application for those struggling with medical debt or child care costs.
The Biden administration's new approach to student debt relief comes after its first attempt at widespread forgiveness was overturned by the Supreme Court in June 2023. The Education Department has been undergoing a process called "negotiated rule-making" to develop a new avenue for debt relief, hearing from stakeholders, advocates, and critics in advance of this announcement.
While the new proposals are expected to take some time before eligible borrowers can begin to see their debt eliminated, the administration believes this effort may be on stronger legal ground than the first debt-relief plan. The Education Department must gather public comment on the proposal before issuing a final version of its plan, which will likely face legal challenges.
President Biden will travel to Wisconsin, a key swing state in the upcoming November election, to announce the plan on Monday. The White House press secretary, Karine Jean-Pierre, said, "President Biden will use every tool available to cancel student loan debt for as many borrowers as possible, no matter how many times Republican elected officials try to stand in his way."
If implemented as proposed, the new student debt relief plan could benefit a significant portion of the 43 million Americans currently carrying some form of student loan debt. The administration's efforts to provide targeted relief to specific groups of borrowers aim to address the long-term financial burden of student loans and provide much-needed assistance to those struggling to make payments or facing economic hardship.
