Biden to announce new student loan forgiveness proposals

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President Biden will announce new proposals for partial or full payment. student loan forgiveness Monday in Wisconsin.

The main goal of the latest round of student loan forgiveness proposals is to focus on accrued and capitalized interest on student loans. According to the Biden administration, 25 million Americans who used federal student loans now owe more than they originally borrowed because of interest charges that have accumulated.

However, the president’s new loan forgiveness proposal will have to overcome several hurdles before student loan balances can be reduced.

The plan to target student loan interest will be subject to approvals through the federal rulemaking process, which top officials said will begin in the coming months and would also include a public comment period.

Reporters asked senior administration officials when U.S. student loan recipients could see their interest balances paid off, should this new proposal pass.

Officials would only say that partial loan forgiveness could occur “early this fall.”

If the plan is approved, officials predicted that 23 million U.S. borrowers would likely be forgiven for “all growth in their balance.”

Under the targeted interest loan forgiveness plan, regardless of income, any American with federal student loans would be eligible for a one-time “charge-off.”[ation] up to $20,000 of the amount a borrower’s balance has increased due to unpaid interest on their loans after initiating repayment,” the Department of Education said.

But some low- and middle-income borrowers could see more than $20,000 of specific interest costs waived.

For individual borrowers who earn less than $120,000 per year and who are enrolled in the Department of Education’s income-driven repayment plans, these borrowers “would be eligible for waiver of the full amount their balance has increased since they started payment,” the department said.

The student loan proposals Biden announces also include several other specific options for loan forgiveness.

For example, the Department of Education proposes automating loan forgiveness programs that already exist, such as the public student loan forgiveness plan and the process that forgives the remainder of undergraduate student loan balances after 20 years of Payments. This means that borrowers would no longer have to apply for these forms of loan forgiveness.

And the administration also said it is taking “specific action dedicated to canceling student debt for borrowers who are experiencing difficulties in their daily lives that prevent them from fully repaying their loans now or in the future.” However, officials shared some additional details about this “hardship” proposal.

This series of new loan forgiveness proposals will also have to withstand potential legal challenges.

The president’s original loan forgiveness proposal, which would have canceled about $10,000 for many student loan borrowers, was annulled by the Supreme Court last year. The Department of Education relied on the HEROES Act of 2003 as legal justification for erasing approximately $430 billion in debt. The law authorizes the secretary of education to “waive or modify” student financial assistance programs for borrowers “in connection” with a national emergency, such as the pandemic. But the Supreme Court ruled that the law does not grant that authority to the secretary.

Additionally, several Republican attorneys general are now challenging Biden’s second loan forgiveness process, the “SAVE Plan,” which is based on borrowers’ income and effectively cancels monthly payments for low-income Americans.

When asked about potential legal obstacles, senior administration officials said they were “confident” in the legal basis.

Melissa Quinn contributed to this report.

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