The Biden Administration announced a comprehensive plan to provide targeted student debt relief for tens of millions of borrowers across the nation.The proposed measures seek to significantly reduce the student debt crisis that has long affected former college students and hindered economic progress.
This latest announcement represents a significant expansion of the administration’s commitment to debt cancellation, adding to the $146 billion already approved in relief for 4 million Americans through various executive actions.
Key Student Loan Relief Proposals
The Biden Administration is targeted its student debt relief to key areas of the bureaucracy that have kept borrowers in limbo for years.
Here are the key aspects of the proposal:
Cancelling Accrued Interest
President Biden will announce plans that, if finalized as proposed, would cancel up to $20,000 of the amount a borrower’s balance has grown due to unpaid interest on their loans after entering repayment, regardless of their income.
Low and middle-income borrowers enrolled in the SAVE plan or any other income-driven repayment (IDR) plan would be eligible for the entire amount their balance has grown since entering repayment to be canceled under the Administration’s plans. This group of borrowers includes single borrowers who earn $120,000 or less and married borrowers who earn $240,000 or less. No application will be needed for borrowers to receive this relief if the plan is implemented as proposed.
Automatic Loan Forgiveness For Programs Like SAVE And PSLF
A plan to automatically cancel debt for borrowers otherwise eligible for relief through the SAVE plan, Public Service Loan Forgiveness, or other forgiveness opportunities like closed school loan discharges but who have not successfully applied for that assistance.
Loan Forgiveness For Borrowers In Repayment For 20 Years Or More
It’s estimated that over 2.5 million student loan borrowers have been in repayment for 20 years or more.The Administration’s new proposals, if finalized as proposed, would cancel student debt for borrowers who first entered repayment 20 or more years ago.
Borrowers with only undergraduate debt would qualify for forgiveness if they first entered repayment 20 years ago (on or before July 1, 2005), and borrowers with any graduate school debt would qualify if they first entered repayment 25 or more years ago (on or before July 1, 2000). Both Direct Loans and Direct Consolidation Loans that repay only undergraduate study or graduate study for 20 or 25 years respectively are eligible for relief in this proposal. Borrowers would not need to be on an income-driven repayment plan to qualify.
Cancelling Debt For Students In Low-Value Programs
The President is proposing to cancel student debt for loans associated with institutions or programs that lost their eligibility to participate in the Federal student aid program or were denied recertification because they cheated or took advantage of students.
Further, borrowers who attended institutions or programs that closed and failed to provide sufficient value— for example that leave graduates with unaffordable loan payments or earnings no better than what someone with a high school diploma earns— would be eligible for relief under this proposal.
When Can Borrowers Expect Relief?
It’s important to note that these new proposals are not yet available for borrowers. The Department of Education has been going through a processed called “Negotiated Rule-making”, which is a specific process that allows the Administration to create new student loan rules.
This process requires a public comment period, followed by a response. If the Administration moves forward with the rules, they could take effect as early as this fall. However, if they are approved, it’s more likely the would take effect next July.
However, it’s also possible these rules will face new legal challenges as well. Republicans are already challenging the SAVE plan in court, and if these rules move forward, they will likely be challenged as well.
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