Almost a year after the Supreme Court blocked his original $400 billion plan for widespread student loan forgiveness, President Joe Biden is unveiling his backup plan, which is not as expansive but could still benefit tens of millions of borrowers.
At a campaign stop Monday in Madison, Biden detailed the new regulations. An estimated 25 million borrowers could see their debt reduced, with around 10 million receiving relief of at least $5,000.
“Today, too many Americans, especially young people, are saddled with unsustainable debts in exchange for a college degree,” Biden said during the speech. “It’s a drag on our local economy.”
That’s far less than the $10,000 to $20,000 each Biden originally proposed. Still, the one component of the new plan that could most affect borrowers is relief those whose balances have ballooned due to interest. The administration is proposing eliminating up to $20,000 in unpaid interest for all borrowers who owe more than their original loan amount, and all of the unpaid interest for those enrolled in an income-driven repayment (IDR), earning less than $120,000 individually or $240,000 as a married couple.
Those paying for at least 20 years on undergraduate loans or 25 years on graduate loans also would receive forgiveness, and the new regulations would cancel debt for those who attended “low financial-value programs” and for borrowers facing financial hardship.
Additionally, borrowers who already qualify to have their loans eliminated through existing programs like Public Service Loan Forgiveness (PSLF) but have not applied will have their balances automatically forgiven by the U.S. Department of Education. The Biden administration estimates that figure at 2 million people.
All of these regulations apply to federal loans, not those that from private companies. According to the White House, most of this forgiveness will happen automatically—borrowers won’t need to apply or do anything else, other than possibly provide some financial information.
The new regulations have been in the works for months, slowly making their way through the rule-making process and other official channels. This was done to decrease the likelihood that a court could rule it was not implemented properly, which was one of the issues with the original plan. That said, many of the details, like who exactly will qualify for forgiveness under the “hardship” umbrella, haven’t been released yet. There is also not an estimate to how much it could cost.
Another legal challenge
The plan, which is still not finalized, will be implemented in phases over the coming months. For example, the cancellation of interest may not occur until the fall. And that’s if the changes are implemented at all: GOP state attorneys general have already said they’ll challenge the rules when finalized.
And the regulations still need to be published in the Federal Register. Once that happens, a lengthy public commenting period can commence.
The Biden administration has forgiven $146 billion in student loan debt through other avenues, including discharging loans for borrowers with disabilities and those who were defrauded by their organizations of higher learning.
But bigger, longer-term fixes include the retooling of the PSLF program and income-driven repayment plan forgiveness. Biden has made it a point to forgive the debt of borrowers who should have already received it under these programs but didn’t because of years of administrative errors.
Student loan relief and the ever-growing cost of higher education has become a major issue in the U.S., and Biden promised to look into cancelation options during his first run for president. Now as his reelection campaign kicks into high gear, these new proposals are meant to fulfill the promise—or at least show voters he’s serious about it.