U.S. President Joe Biden gestures after speaking on student loan debt relief at Madison Area Technical College in Madison, Wisconsin, April 8, 2024.
Andrew Caballero-Reynolds | AFP | Getty Images
The Biden administration released its new student loan forgiveness proposalputting it on track to begin debt settlement for millions of borrowers this fall.
The public has 30 days, until May 17, to comment on the details of the revised aid package.
Ever since the US Supreme Court rejected President Joe Biden’s first attempt at a broad-based debt cancellation last summer, his administration has been working on this liquidation plan.
Biden wants the program to survive legal challenges this time. To that end, the US 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 US is about $1.6 trillion and burdens Americans more than credit card or car debt. More than 40 million people have student loans.
Here’s what you need to know about Biden’s new relief plan.
What does the revised plan require?
While Biden’s previous relief plan forgave student debt for most borrowers, this aid package targets specific groups of people and loan interest.
It requires the cancellation of “the entire amount” of someone’s debt that has increased from their original balance when they first entered repayment. To qualify for this provision, these borrowers must also enroll in one of the Department of Education’s income-based repayment programs and earn below a certain amount, including $120,000 or less as a single user.
Regardless of their income, borrowers will be eligible to have up to $20,000 written off for the portion of their debt that is unpaid interest.
Consumer advocates have long criticized the fact that federal student loan interest rates can exceed 8%, which can make it difficult for borrowers who fall behind or are on specific payment plans to reduce their balances.
More than 25 million federal student loan 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 more on their undergraduate loans or more than 25 years on their graduate loans will receive full debt forgiveness.
The plan also erases the debt of people who are already eligible for this relief but haven’t received or applied for it. Such stories are common.
Finally, it offers relief to borrowers who enrolled and took on debt to attend low-value schools and programs or institutions that failed to provide sufficient financial value.
The Department of Education has left out of its relief proposal, for now, the group of borrowers facing financial hardship. Previously, her plan was expected to include people in this condition.
“As President Biden said last week, our administration is working as quickly as possible to provide relief to as many borrowers as possible,” a Department of Education spokesperson said in a statement.
As a result, while continuing to craft a proposal for those struggling financially, it moved forward “with these proposed rules today so we can begin providing relief to borrowers as early as this fall,” the spokesman said.
And what follows…
After the 30-day public comment period, the Biden administration must review the comments it received on its plan. He will then release his final canon, likely sometime this summer. Soon after, it could start reducing and eliminating borrowers’ balances.
However, legal challenges could disrupt that timeline.
After Biden first touted his revised relief plan on April 8, Missouri Attorney General Andrew Bailey, a Republican, wrote to X that the president “is shamelessly trying to overshadow the Constitution.”
“See you in court,” Bailey wrote.