The Biden administration has announced a new plan to provide relief to borrowers struggling with student loan debt. The plan includes canceling up to $20,000 of interest for low- and middle-income borrowers enrolled in income-driven repayment plans. Additionally, borrowers who are eligible for loan forgiveness under existing programs, such as Public Service Loan Forgiveness or the new SAVE program, would have their debts automatically canceled. Those who have been repaying their loans for 20 years or more for undergraduates, or 25 years for graduate students, would also have their debts forgiven.
Moreover, borrowers who attended programs or colleges that lost federal funding due to cheating or fraud, as well as those with significant debt and limited job prospects, would be eligible for relief. Individuals facing financial hardship due to medical or childcare costs may also qualify for some form of forgiveness. The administration is considering automatic forgiveness for those at risk of defaulting, although the specific criteria for identifying eligible borrowers has not yet been determined.
This new plan differs from a previous attempt by President Biden to provide $400 billion in debt relief to 40 million borrowers through the HEROES Act. However, the Supreme Court blocked this move, stating that Biden had overstepped his authority. The current plan aims to provide relief to nearly 30 million borrowers under the Higher Education Act, targeting specific groups to ensure compliance with the law. Legal experts from the White House and the Education Department have carefully designed the program to adhere to the principles outlined by the Supreme Court in its ruling last year.
The plan includes the largest relief valve in the form of interest forgiveness, with an estimated 23 million borrowers having their entire interest balances wiped out. Borrowers who have been repaying their loans for decades or who experienced fraud at their educational institution would have their debts waived. Additionally, those facing financial hardship due to medical or childcare expenses may be eligible for relief. The administration is focused on providing targeted support to specific groups of borrowers to address their individual circumstances and financial challenges.
The new plan represents a strategic shift in the approach to student loan relief, moving away from broad forgiveness to targeted assistance for specific borrower groups. By working within the parameters of the Higher Education Act, the administration aims to provide relief to a significant number of borrowers while avoiding potential legal challenges. The design of the program reflects a careful consideration of the Supreme Court ruling from last year, ensuring that the relief measures are legally sound and effective in addressing the financial burden faced by millions of student loan borrowers.
