Biden Just Announced His New Student Debt Forgiveness Plan. It Could Help More Than 30M Borrowers.
Credit: ANDREW CABALLERO-REYNOLDS / AFP / Getty Images- A “Plan B” debt forgiveness option has been in the works since the U.S. Supreme Court struck down Biden’s previous proposal.
- His latest attempt at debt forgiveness targets specific groups of borrowers.
- That includes borrowers holding more debt than they originally borrowed due to accrued interest.
- Biden’s new plan would entirely eliminate accrued interest for 23 million borrowers.
President Joe Biden’s “Plan B” student loan debt forgiveness program will reportedly impact as many as 30 million borrowers.
Biden announced Monday that he is moving forward with a new — albeit more limited — plan to wipe federal student loan debt for struggling borrowers. This comes after the U.S. Supreme Court struck down his previous proposal to wipe up to $20,000 in federal student loan debt for many low- and middle-income borrowers.
His second plan, which has been going through negotiated rulemaking since late 2023, aims to provide relief to the following sets of borrowers:
- Borrowers whose current balance is more than the original amount they borrowed
- Undergraduate borrowers who first entered repayment 20 years ago and graduate borrowers who entered repayment 25 years ago
- Borrowers who attended “low-financial-value programs”
- Borrowers who would have qualified for forgiveness under another forgiveness program or repayment plan but never applied
- Borrowers “experiencing hardship“
This plan will fully eliminate accrued interest for 23 million borrowers, according to a Department of Education (ED) statement. It would also wipe remaining federal student loan debt for over 4 million borrowers and provide debt relief of at least $5,000 to more than 10 million.
“Thanks to our unapologetic commitment to provide relief to as many borrowers as possible as quickly as possible, our regulatory efforts would help tens of millions more borrowers find financial breathing room — and help fix our country’s broken higher education system,” ED Secretary Miguel Cardona said in a statement.
Borrowers who owe more now than they originally borrowed stand to benefit most from this proposal.
According to ED, more than 25 million borrowers owe more than they originally borrowed. ED would forgive up to $20,000 of the amount the borrower’s balance has grown due to unpaid interest, regardless of their income.
Low- and middle-income borrowers enrolled in the SAVE repayment plan, meanwhile, may see the entirety of their accrued interest canceled. This relief only applies to single borrowers making less than $120,000 annually or married borrowers who earn less than $240,000.
Biden’s proposal would provide relief to an estimated 2 million borrowers who have held debt for longer than 20 or 25 years, according to reporting from Politico. Another 2 million borrowers will benefit from the part of the plan impacting borrowers who would have seen relief had they been enrolled in another forgiveness or repayment program.
Approximately 200,000 borrowers who attended “low-financial-value programs” will see relief, according to Politico.
ED will reportedly begin offering relief this fall.
Biden’s plan must first finish the negotiated rulemaking process. ED has already met with higher education stakeholders to develop a first draft of the plan, but it must still offer a final draft for public comment. Then it must sift through comments and address concerns before it can move forward with debt forgiveness.
Any debt forgiveness plan is almost guaranteed to face legal scrutiny, which could delay relief past the 2024 election cycle.
The proposal may withstand legal scrutiny in a way that Biden’s initial proposal did not in 2023. This Plan B proposal came about through negotiated rulemaking, which gets its authority through the Higher Education Act. This newer plan also does not offer blanket forgiveness like his previous plan, as Plan B targets specific groups of struggling borrowers.