Biden administration releases formal proposal for new student loan forgiveness plan

The
Biden
administration
has
published
its
new
student
loan
forgiveness

proposal,
putting
it
on
the
path
to
start
clearing
debt
for
millions
of
borrowers
this
fall.

The
public
has
30
days,
through
May
17,

to
comment
on
the
details
of
the
revised
aid
package.

Since
the
U.S.
Supreme
Court
rejected
President

Joe
Biden‘s
first
attempt
at
wide-scale
loan
cancellation
last
summer,
his
administration
has
been
working
on
this
do-over
plan.

Biden
wants
the
program
to
survive
legal
challenges
this
time.
To
that
end,
the
U.S.
Department
of
Education
has
made
the
relief
more
targeted
and
turned
to
the
regulatory
process.
The
president
initially
attempted
to
forgive
student
debt
through
an
executive
action.

Outstanding
federal
education
debt
in
the
U.S.
stands
at
around
$1.6
trillion,
and
burdens
Americans
more
than
credit
card
or
auto
debt.
More
than
40
million
people
hold
student
loans.

Here’s
what
to
know
about
Biden’s
new
relief
plan.

While
Biden’s
previous
relief
plan
forgave
student
debt
for
most
borrowers,
this
aid
package
targets
specific
groups
of
people,
and
the
interest
on
the
loans.

It
calls
to
cancel “the
full
amount”
of
someone’s
debt
that
has
grown
from
their
original
balance
when
they
first
entered
repayment.
To
qualify
for
this
provision,
these
borrowers
would
also
need
to
be
enrolled
in
one
of
the
Education
Department’s
income-driven
repayment
plans
and
to
earn
under
a
certain
amount,
including
$120,000
or
less
as
a
single
filer.

Regardless
of
their
income,
borrowers
would
be
eligible
for
up
to
$20,000
in
cancellation
on
the
portion
of
their
debt
that
is
unpaid
interest.

Consumer
advocates
have
long
criticized
the
fact
that
interest
rates
on
federal
student
loans
may
exceed 8%,
which
can
make
it
tough
for
borrowers
who
fall
behind
or
are
on
certain
payment
plans
to
reduce
their
balances.

More
than
25
million
federal
student
borrowers
owe
more
than
they
originally
borrowed,
according
to
the
Biden
administration.

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Borrowers
who
have
been
in
repayment
for
20
years
or
longer
on
their
undergraduate
loans,
or
more
than
25
years
on
their
graduate
loans,
would
get
full
debt
cancellation.

The
plan
also
erases
the
debt
of
people
who
are
already
eligible
for
that
relief
but
haven’t
received
it
or
applied
for
it.
Such
stories
are
common.

Lastly,
it
delivers
relief
to
borrowers
who
enrolled
and
took
out
debt
to
attend
low-financial-value
schools
and
programs
or
institutions
that
failed
to
provide
sufficient
financial
value.

The
Education
Department
left
out
from
its
relief
proposal,
for
now,
the
group
of
borrowers
experiencing
financial
hardship.
Previously,
its
plan
was
expected
to
include
people
in
this
situation.

“As
President
Biden
said
last
week,
our
Administration
is
working
as
quickly
as
possible
to
deliver
relief
to
as
many
borrowers
as
possible,”
an
Education
Department
spokesperson
said
in
a
statement.

As
a
result,
while
it
continues
to
create
a
proposal
for
those
struggling
financially,
it
moved
forward “with
these
proposed
rules
today
so
we
can
begin
delivering
relief
to
borrowers
as
early
as
this
fall,”
the
spokesperson
said.

After
the
30-day
public
comment
period,
the
Biden
administration
needs
to
review
the
feedback
it
received
for
its
plan.
It
will
then
release
its
final
rule,
probably
at
some
point
this
summer.
Soon
after,
it
could
begin
reducing
and
eliminating
borrowers’
balances.

However,
legal
challenges
could
disrupt
that
timeline.

After
Biden
first
touted
his
revised
relief
program
on
April
8,
Missouri
Attorney
General
Andrew
Bailey,
a
Republican, wrote
on
X that
the
president “is
trying
to
unabashedly
eclipse
the
Constitution.”

“See
you
in
court,”
Bailey
wrote.