The Biden administration revealed a comprehensive plan to address student debt on Monday, targeting relief for millions of Americans. This plan, if fully implemented, aims to forgive the debt of over 30 million borrowers during President Biden’s term. Building on an earlier version rejected by the Supreme Court in June, the new proposal offers targeted relief to specific groups, including long-term borrowers and those facing financial hardship.
Education Secretary Miguel Cardona emphasized that the proposed plan fulfills a campaign promise made by President Biden in 2020, providing what he described as “breathing room” for borrowers struggling with loan payments. The relief extends to borrowers burdened by high-interest balances and those finding it challenging to meet basic needs amid loan obligations.
The announcement outlines efforts aimed at four key groups: borrowers who owe more than their original loan amounts due to accrued interest, those who began repayment over two decades ago, individuals eligible for existing forgiveness programs but haven’t applied, and borrowers experiencing economic hardship.
Biden (Credits: CNBC)
One significant aspect of the plan addresses the issue of “runaway interest,” with more than 25 million borrowers owing more than their initial loan amounts. The proposal allows borrowers to cancel up to $20,000 in interest, with low and middle-income borrowers in income-driven repayment plans eligible for full interest forgiveness.
Under the proposed plan, eligible borrowers would no longer need to apply for forgiveness. The Education Department intends to utilize existing data to identify qualifying borrowers and automatically credit their accounts, simplifying the process for borrowers.
Additionally, relief is extended to long-term borrowers, including those with undergraduate or graduate debt dating back to specific periods. Borrowers meeting the criteria would qualify for automatic forgiveness, further streamlining the process for debt relief recipients.
The plan also includes provisions for borrowers experiencing economic hardship, offering relief for those at risk of defaulting on loans. Some relief measures would be automatic, while others would require an application, particularly for borrowers struggling with medical debt or childcare expenses.
The Biden administration’s efforts to address student debt have faced legal challenges in the past, notably with a $20,000 relief plan overturned by the Supreme Court in June 2023. The current proposal, developed through a negotiated rule-making process, aims to establish a stronger legal foundation for debt relief initiatives. However, the plan is expected to undergo public comment before finalization, and legal challenges are anticipated once again.
