Biden announces student loan debt relief plans for millions

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President Biden on Monday announced a large-scale effort to help pay off federal student loans for tens of millions of American borrowers, seeking an election-year boost by returning to a 2020 campaign promise that was blocked by the Supreme Court. last year.

Biden’s new plan would reduce the amount 25 million borrowers still owe on their undergraduate and graduate loans. It would eliminate the entire amount for more than four million Americans. In total, White House officials said, 10 million borrowers would see debt relief of $5,000 or more.

“While a college degree remains a ticket to the middle class, that ticket is becoming too expensive,” Biden said during a speech to a small but enthusiastic audience full of supporters. “Today, many Americans, especially young people, are saddled with too much debt.”

Biden announced the plan in Madison, Wisconsin, the capital of a critical swing state and a college town that symbolizes the president’s promise to make higher education affordability a cornerstone of his economic agenda.

But it’s a promise he has so far failed to keep, largely due to legal challenges from Republicans and other critics. They accuse Biden of illegally using his executive authority to implement a costly transfer of wealth from taxpayers who have not taken out federal student loans to those who have.

Officials did not say how much the new plan would cost in the coming years, but critics have said it could raise inflation and increase federal debt by billions of dollars.

Biden said his new effort would help the economy by removing the burden of massive debt from people who would not otherwise be able to buy a home or seek a more financially sound future.

“We’re giving people the opportunity to get it done,” Biden said. “It is not a guarantee. Just one chance to make it.”

Biden’s announcement was a presidential rerun. In the summer of 2022, he launched A plan to eliminate $400 billion in student debt. for some 43 million borrowers. That was blocked by the Supreme Court, which he said exceeded his authority. In the months since, Biden has forgiven small amounts of debt using existing programs. But now he is attempting a larger effort, closer to the scale of his first attempt.

The original plan was based on a law called the HEROES Act, which the administration said allowed the government to forgive student debt during a national emergency like the Covid pandemic. The justices disagreed after Republican attorneys general and others questioned the debt forgiveness plan.

The new approach is different.

For months, Biden’s Department of Education has been developing regulations using a lengthy process authorized by the Higher Education Act. Instead of blanket debt forgiveness, the new approach targets five groups of borrowers: those whose loans have ballooned due to interest; borrowers who have been paying for decades; those who have financial difficulties; people who qualify for existing debt relief programs but have not applied for it; and people whose loans come from schools that have since been denied certification or lost eligibility for federal student aid programs.

Administration officials said that because the new approach is based on a different law, it is more likely to survive the expected challenges. They said White House and Department of Education lawyers have studied the Supreme Court ruling and have designed the new program to make sure it does not violate principles laid out by the justices.

But lawyers for those who oppose this approach are likely to argue that forgiving debt is unfair to those who have already paid off their loans or never taken out college loans in the first place. That argument helped sway the judges in the latest case.

Neal McCluskey, director of the Cato Institute’s Center for Educational Freedom, called the new plan a “dangerous policy” that is unfair to taxpayers and would cause colleges and universities to raise their prices.

“The Constitution gives Congress, not the president, the authority to make laws, and the Supreme Court has already struck down a massive, unilateral student debt cancellation plan by the Biden administration,” he said. “This would leave taxpayers with bills for debts that other people chose for their own financial advancement.”

The legal challenges are likely to take months to resolve, and that could leave the debt relief plan in limbo as voters go to the polls in November to choose between Biden and former President Donald J. Trump.

Members of the Biden administration fanned out across the country Monday to talk about the new plan, betting that it will rally support among voters who were disappointed that the court blocked the first one, which would have eliminated up to $20,000 in debt for dozens. of people. of millions of borrowers. Vice President Kamala Harris held a roundtable in Philadelphia. Miguel Cardona, Secretary of Education, spoke in New York City.

But beyond the threat of legal action, the president faces major obstacles simply because of the calendar. The new plan has not yet been published in the Federal Register, which will begin a months-long required public comment period before it takes effect. Officials said only Sunday that they expected some of the provisions to begin taking effect in “early fall” of this year.

Administration officials hope the president’s supporters will give him credit for trying, even if many borrowers don’t end up seeing any relief before they head to the polls.

Senator Chuck Schumer, Democrat of New York and the majority leader, said the president’s announcement highlights the difference between Republicans and Democrats when it comes to the issue of economic support for those who struggle the most.

“After the MAGA Supreme Court struck down the most far-reaching student loan debt forgiveness last year and ripped a financial lifeline to those who need it most, this new action by President Biden shows Democrats are committed to fixing the federal program of student loans so that Higher education can finally be a ticket to the middle class for everyone,” he said in a statement.

White House officials have been struggling for months to respond to anger over student loans among the president’s base. In a survey released last month, more than 70 percent of young people said the issue of student loan forgiveness was “important” or “very important” to them as they make their decision in the 2024 election campaign.

Officials said the five groups of people targeted by the new plan will address most of the egregious problems some borrowers have with their student loans.

People whose loans have grown beyond the amount they originally borrowed due to interest would have up to $20,000 of that interest wiped out, leaving them only to pay the amount they originally borrowed. Individuals earning less than $120,000 a year, or couples earning less than $240,000, would qualify to have all of their interest forgiven.

Officials said 23 million people would most likely have all of their interest-related balances exempt from that provision.

About two million borrowers who already qualify to have their student loans forgiven under existing programs have not applied for help. Under the new rules, the Department of Education would be authorized to cancel those people’s debt without them having to apply.

People who took out federal student loans to earn college degrees and began repaying them more than 20 years ago would automatically have their debt canceled under the new plan. Graduate students who borrowed money and began repaying it 25 years ago would have their debt canceled.

Officials said about 2.5 million people would qualify under that rule.

People who borrowed money to attend colleges that have since lost their certification or eligibility to participate in the federal student aid program would have their debt canceled. Authorities did not say how many people this would affect. And people who are especially burdened with other expenses, such as high medical debt or child care, could apply to have their student loans forgiven.

Officials did not estimate how many people might qualify for what they called “hardship” programs.

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