President Joe Biden is set to announce a new plan to provide student loan relief to additional categories of borrowers next week, nearly a year after the Supreme Court blocked his initial attempt to cancel debt for millions of college attendees. The specifics of the plan will be detailed in Madison, Wisconsin, at the University of Wisconsin’s flagship campus. The federal regulations outlining who would qualify for reduced or eliminated student loan debt are expected to be released at a later date. This effort follows a negotiated rulemaking process at the Department of Education, which has been working on defining the new categories of borrowers who will benefit from the relief.
Biden’s latest plan aims to expand federal student loan relief to specific categories of borrowers through the Higher Education Act, in an effort to make it more legally sound than his previous $400 billion proposal that was rejected by the Supreme Court. The new initiative is expected to be smaller and more targeted than the original plan, which would have canceled up to $20,000 in loans for over 40 million borrowers. The Education Department has outlined five categories of borrowers who would be eligible for loan cancellation, focusing on those with the greatest need for relief, including individuals with snowballing interest and those facing financial hardship.
The new plan includes provisions to reset balances for borrowers whose unpaid interest has exceeded the original loan amount, erasing up to $10,000 or $20,000 in interest based on the borrower’s income. Additionally, borrowers who have been repaying their loans for decades would have their remaining debt erased, with undergraduate loans canceled after 20 years of repayment and other federal loans canceled after 25 years. The plan also includes automatic loan cancellation for those who attended low-value for-profit college programs and for borrowers eligible for other types of loan forgiveness programs.
The Department of Education has added a category for borrowers facing financial hardship, offering cancellation to those at risk of default within two years and expanding relief to a wider range of individuals. The plan also simplifies the application process for existing loan forgiveness programs such as Public Service Loan Forgiveness and Borrower Defense to Repayment, which have been historically difficult to navigate. The proposed rule is currently under review after a series of hearings concluded in February, and it will undergo a public comment period before being finalized.
The Biden administration’s latest effort to provide student loan relief is part of a larger strategy to address the burden of student debt, particularly for public service workers and low-income borrowers. Through targeted initiatives, the administration claims to have canceled $144 billion in student loans for nearly 4 million Americans. The announcement of the new plan could help build support among young voters and energize parts of Biden’s political coalition, who may be disillusioned with his performance and could be crucial to his reelection campaign against presumptive Republican candidate Donald Trump. Biden views the new plan as a more legally sound path to providing debt relief to as many borrowers as possible, following the setback of his initial proposal being rejected by the Supreme Court.
