Introduction
US President Joe Biden has recently unveiled a new, comprehensive student loan forgiveness plan aimed at providing relief to millions of borrowers burdened by student debt. This plan represents a significant step in the administration’s efforts to address the student debt crisis and provide much-needed financial relief to borrowers across the country.
Biden’s Ambitious Plan
President Biden’s new plan consists of five key components designed to target specific categories of borrowers and provide varying levels of debt relief. The plan is set to automatically cancel at least some debt for eligible borrowers who are not already enrolled in existing forgiveness programs. This includes:
- Cancellation of Runaway Interest: More than 25 million borrowers have accumulated more debt due to accrued or capitalized interest. The plan will waive up to $20,000 of this interest.
- Automatic Enrollment in Forgiveness Programs: Borrowers eligible for loan forgiveness but not enrolled in programs like Public Service Loan Forgiveness (PSLF) or the Saving on a Valuable Education (SAVE) plan will be automatically enrolled after a certain period.
- Long-term Repayment Relief: Borrowers who have been repaying their loans for at least 20 years (or 25 years for graduate borrowers) may be eligible for forgiveness, even without being on an income-driven repayment plan.
- Relief for Low-Financial-Value Programs: Borrowers who attended schools that lost their ability to participate in federal student aid programs due to misconduct or closure may qualify for forgiveness.
- Financial Hardship Relief: Borrowers facing financial difficulties that prevent them from repaying loans on time could also receive forgiveness, pending the Department of Education’s criteria for establishing financial hardship.
Focus on Equity
The new forgiveness package places a particular emphasis on providing relief to Black and Latino borrowers, who have disproportionately high debt burdens. This targeted approach seeks to address longstanding disparities in student debt and financial outcomes among different racial and ethnic groups.
Legal Basis and Challenges
Following the Supreme Court’s rejection of Biden’s original student loan forgiveness plan in June 2023, the administration pursued an alternative route through negotiated rulemaking under the Higher Education Act of 1965. This process, which involves developing new rules with input from stakeholders, is still ongoing and will likely face legal challenges.
Conclusion
President Biden’s new student loan forgiveness plan represents a significant effort to provide relief to millions of borrowers struggling with student debt. While the plan is not yet finalized and may face legal challenges, it reflects the administration’s commitment to addressing the student debt crisis and promoting financial equity among borrowers.