The Biden administration’s student loan forgiveness plan aims to provide relief to more than 25 million borrowers who owe more than their original loan amount due to accrued interest charges. This plan includes forgiving up to $20,000 of unpaid interest for eligible borrowers, regardless of income. Additionally, borrowers enrolled in income-driven repayment plans may have their entire interest balance canceled. Those enrolled in the SAVE plan or any other income-driven repayment plan will be eligible without needing to apply.
Many borrowers who are eligible for debt forgiveness programs have not applied due to difficulty in accessing information about the programs. Biden’s plan is expected to automatically cancel debt for borrowers who qualify for relief through Public Service Loan Forgiveness, SAVE, or other income-driven repayment plans. The Department of Education will review accounts to identify eligible borrowers, with relief going into effect automatically.
Over 2.5 million borrowers who have held student loans for two decades or longer are set to benefit from loan forgiveness under the plan. Borrowers with undergraduate debt who entered repayment on or before July 1, 2005, and those with graduate debt who entered repayment on or before July 1, 2000, are eligible. Both direct loans and consolidated loans qualify for this relief.
Graduates of “low-value” institutions or programs are also included in the loan forgiveness plan. Borrowers who attended institutions that closed or failed to provide sufficient value could apply for relief. This category primarily targets colleges that lost eligibility for federal aid due to cheating or taking advantage of students. The Education Department has already forgiven student loans for over 1 million students who attended certain for-profit schools.
The plan also aims to help borrowers experiencing hardship that prevents them from fully repaying their loans now or in the future. Borrowers at high risk of defaulting or facing financial challenges such as medical debt or child care expenses may qualify for debt cancellation. The relief provided will disproportionately benefit Black and Latino borrowers due to their higher debt burdens.
Overall, the Biden administration’s student loan forgiveness plan is expected to provide much-needed relief to millions of borrowers facing financial challenges due to their student loan debt. By targeting various categories of borrowers, including those with accumulated interest, long-standing loans, attendance at low-value institutions, and experiencing financial hardship, the plan aims to address the diverse needs of those burdened by student loans.
