U.S. Secretary of Education Miguel Cardona attends an event at Dartmouth College in January.
Steven Senne/AP
hide caption
toggle caption
Steven Senne/AP
U.S. Secretary of Education Miguel Cardona attends an event at Dartmouth College in January.
Steven Senne/AP
The Biden administration on Monday unveiled a new set of plans that would eliminate student debt for millions of Americans. The administration says that, if fully implemented, it would bring to more than 30 million the number of borrowers who have had some or all of their debt forgiven during the president’s term.
The new plan, which aims to replace an earlier version rejected by the U.S. Supreme Court in June, provides targeted relief to specific groups of borrowers, including those who have been in debt for many years and those who are struggling to make their payments. And many borrowers, regardless of income, could benefit from relief from their high interest balances.
U.S. Education Secretary Miguel Cardona said the new proposals would fulfill a promise the president made while he was a candidate in 2020. The relief offered, he added, will mean “room for maneuver” for many borrowers. “That means no longer feeling like your student loan bills are competing with basic needs like groceries or health care.”
The announcement outlines efforts targeting four groups of borrowers: those who owe more money than when they began repayment, borrowers who started paying more than 20 years ago, those who are already eligible for programs exemption or release of existing loans but who have not done so. These measures have not yet been implemented and borrowers are facing economic difficulties.
Responding to “rampant interest”
According to the administration, more than 25 million borrowers now owe more in student loans than they started with, due to what Cardona called “runaway interest.” The first element of the new plan would allow any borrower, regardless of income, to forgive up to $20,000 in interest.
Additionally, low- and moderate-income borrowers enrolled in an income-driven repayment plan would have all their interest waived. This group of borrowers includes single borrowers earning $120,000 or less per year and married borrowers earning $240,000.
If the plans are adopted as proposed, no application will be necessary.
The administration estimates that this proposal would cancel some interest balances for 25 million borrowers, and that 23 million of them would receive full interest forgiveness. Currently, approximately 43 million Americans have some form of student debt.
Automatic discharge for eligible borrowers
Since Biden took office, several student loan programs have been revamped or renegotiated to help provide debt relief for borrowers, although many still require borrowers to apply. (The programs can be dense, but NPR has previously reported on them and how to navigate them: including the SAVE program, public service loan forgiveness and shuttered school releases.)
As the administration noted in its announcement, not all borrowers eligible for these programs applied, with more than 2 million eligible borrowers failing to do so.
Under the proposed plan, eligible borrowers would no longer need to register to receive the forgiveness. The Department of Education plans to use the data it already has to identify these borrowers and automatically credit their accounts.
Relief for long-term and distressed borrowers
The new proposals would also help borrowers in the long run. According to the Department of Education, more than 2.5 million borrowers have been in debt for more than two decades. Under this plan, borrowers with undergraduate debt would be eligible for forgiveness if they began repaying on or before July 1, 2005. Borrowers with graduate debt would be eligible if they began repaying on or before July 1, 2005. repay no later than the same date in 2000.
Consistent with the theme of these announcements, borrowers would not need to be enrolled in a plan to qualify. The repair would be automatic.
A separate component would help those experiencing economic difficulties. Some of this relief would also occur automatically – for example, if a borrower is at high risk of defaulting on their student loans. Further relief would require an application. The administration says borrowers struggling with medical or child care debt could apply for this program, if it is implemented.
A new legal basis for massive debt relief
The Biden administration has made numerous attempts to pay off student debt since taking office. Perhaps most notably in 2022: the president announced widespread relief of up to $20,000 for eligible borrowers. Millions of borrowers filled out the form to join the program, but the project was suspended due to legal challenges. The Supreme Court overturned this plan in June 2023.
This new approach has been in the works for some time, as the Department of Education has undertaken what is known as “negotiated rulemaking” to develop a new debt relief pathway since the original plan was canceled in June. They heard from stakeholders, advocates and critics before this announcement.
The new proposals are expected to take some time before eligible borrowers can begin to see their debt eliminated. The Department of Education must gather public comments on the proposal before releasing a final version of its plan.
The plan will also likely face legal challenges, although the rulemaking process could put the effort on firmer legal footing than the first debt relief plan.
NPR News
