Biden’s Student Loan Forgiveness Plan Explained

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president biden is forging a new path reduce or eliminate federal student loan balances for tens of millions of borrowers, standing firm to a campaign promise to alleviate the burden of college debt.

The proposal sorry plan announced on monday is an alternative to the sweeping $400 billion debt relief program that Biden announced in 2022 and that the Supreme Court blocked last summer. Since that court defeat, the Biden administration has worked through a negotiated rulemaking process to craft regulation that would achieve large-scale debt cancellation, albeit with a much more targeted approach than the previous plan.

The Department of Education will release a draft rule on the forgiveness plan to solicit public comment in the coming months. But the Biden administration is releasing more details about how the proposal will achieve the president’s goal of radically reducing debt.

What does Biden’s student loan relief plan do?

The new plan will expand federal student loan relief to several categories of borrowers. It will eliminate up to $20,000 in accrued interest for borrowers who owe much more than they originally borrowed due to unpaid interest. Borrowers could lose all interest if they are enrolled in an income-driven repayment plan and have an annual income of less than $120,000 for an individual or less than $240,000 for couples. The White House estimates that 25 million people will benefit from this feature of the new plan, including 23 million who could have their unpaid interest completely forgiven.

Once the plan is finalized, another 2 million borrowers could have their loans automatically canceled because they are eligible for existing forgiveness programs, such as Public Service Loan Forgiveness, but it was never applied. The proposed plan will also automatically cancel loans for people who have been paying off college loans for at least 20 years and graduate loans for 25 years or more. It would also forgive debt for borrowers who attended vocational training programs that led them to have high debt loads or low incomes.

A fifth category of borrowers would receive debt relief if are facing difficulties, such as high medical debt or child care expenses, that prevent them from paying their student loans. Specific terms for each category will be developed in the soon-to-be-published formal rule.

The administration plans to roll out the interest education feature this fall, and the remaining features could roll out next summer.

Who is eligible for student loan forgiveness?

Most Americans with federal student loans will qualify for some level of relief under the new plan.

How is this different from the plan rejected by the Supreme Court?

President Biden’s 2022 student loan forgiveness plan was based on the Higher Education Student Aid Opportunities (Heroes) Act of 2003, which allows the secretary of education “alleviate hardships that recipients of federal student loans may suffer as a result of national emergencies.” The president maintained that the coronavirus pandemic created economic hardship for borrowers requiring government intervention of up to $20,000 in loan cancellation for 40 million borrowers. But in knock down the debt planA majority of Supreme Court justices said the Heroes statute was not designed for policies with such “staggering” economic impact.

This time, instead of the 2003 law, the Biden administration anchored its new plan with authority in the Higher Education Act of 1965, which allows the secretary of education to commit, waive or release loans under certain circumstances. Critics of Biden’s plan question whether the 1965 law allows for expansive debt relief envisioned by the administration, noting that Chief Justice John G. Roberts Jr. said in his opinion last year that the law It can be used to pay off debt in “certain limited circumstances.” “

The Biden administration said the new plan is made up of interventions that address specific circumstances in ways covered by the Higher Education Act. The president is confident in acting within the scope of the law, according to the White House.

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