Biden Administration Announces Opt-Out for ‘Plan B’ Student Debt Forgiveness
Credit: Image Credit: Bloomberg / Contributor / Getty Images- President Biden plans to erase federal student loan debt for roughly 25 million borrowers.
- That forgiveness could come as soon as this fall for borrowers who don’t opt out.
- However, legal challenges to the plan could create roadblocks.
Federal student loan borrowers can soon expect an email outlining a new federal student loan debt forgiveness plan, including a call to opt out if they don’t want the relief.
The Department of Education (ED) implied in a Wednesday statement that borrowers can expect relief as soon as this fall through President Joe Biden’s so-called Plan B student loan debt forgiveness plan. However, this plan is not yet finalized, and borrowers should not expect to qualify for forgiveness just because they receive an email, ED said.
A preliminary layout of Biden’s proposal offered relief to the following groups of borrowers:
- Borrowers with only undergraduate loans who have been in repayment for more than 20 years
- Borrowers with at least one graduate loan who have been in repayment for more than 25 years
- Borrowers whose current balance is more than the original amount they borrowed
- Borrowers who attended an institution that led to unreasonably high debt or
unacceptably high
loan default rates - Borrowers who would have qualified for forgiveness under another forgiveness program — including Public Service Loan Forgiveness (PSLF) or a repayment plan — but never applied
ED expects the finalized proposal will cancel some or all debt for over 25 million borrowers.
Borrowers will have until Aug. 30, 2024, to opt out of this debt forgiveness if they would like. Opting out may benefit borrowers seeking debt cancellation through income-driven repayment (IDR) plans or PSLF. ED said borrowers must call their loan servicer to opt out.
Biden’s Plan B proposal follows his previous attempt to cancel up to $20,000 in federal student loan debt for most borrowers, which failed. The U.S. Supreme Court struck down this plan in June 2023.
This Plan B attempt started with negotiated rulemaking sessions in late 2023. Negotiated rulemaking allows agencies like ED to draft regulatory language, and it is a form of governance the department has repeatedly used throughout Biden’s presidency.
Still, many expect this Plan B proposal to be challenged in the courts once it is finalized, similar to Biden’s first attempt at debt forgiveness.
If challenged, the Plan B proposal will face unique obstacles. While negotiated rulemaking was once thought to be a more legally sound method of offering forgiveness, the Supreme Court’s overturning of the Chevron Doctrine in June may substantially limit federal agencies’ power to interpret laws and change regulations. This could leave the Plan B proposal more vulnerable to legal challenges than initially thought when the administration began rulemaking in 2023.
President Biden’s administration has thus far erased $168.5 billion in federal student loan debt for 4.76 million borrowers since taking office, despite his blanket forgiveness plan being struck down. Much of this relief has come through programs like IDR, PSLF, and borrower defense to repayment.