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 on how the proposal will achieve the president’s goal of radical debt reduction.
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 significantly more than they originally borrowed due to unpaid interest. Borrowers could have all their interest forgiven 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, of which 23 million could see their unpaid interest completely canceled.
Once the plan is finalized, 2 million additional borrowers could have their loans automatically canceled because they are eligible for existing forgiveness programs, such as Public Service Loan Forgiveness, but were never eligible for forgiveness. ‘a demand. The proposed plan will also automatically cancel loans for people who have been repaying their undergraduate loans for at least 20 years and those for graduates for 25 years or more. It would also forgive debt for borrowers who completed job training programs that led to high debt or low income.
A fifth category of borrowers would benefit from debt relief if they face hardships, such as high medical debt or child care costs, that prevent them from repaying their student loans. The specific terms for each category will be specified in the formal rule which will be published soon.
The administration plans to roll out the interest education feature this fall, and the remaining features could be implemented next summer.
Who is eligible for student loan forgiveness?
The majority of Americans with federally held student loans will qualify for some level of relief under the new plan.
How is this different from the project rejected by the Supreme Court?
President Biden’s student loan forgiveness plan for 2022 built on the Higher Education Opportunity Relief for Students (HERO) Act of 2003, which allows the Secretary of Education “mitigates hardship that federal student loan recipients may experience due to national emergencies.” The president argued that the coronavirus pandemic created economic hardship for borrowers that required government intervention of up to $20,000 in loan forgiveness for 40 million borrowers. But in striking down the debt plan, a majority of Supreme Court justices said the Heroes statute was not designed for a policy with such a “staggering” economic impact.
This time, instead of the 2003 law, the Biden administration has anchored its new plan authoritatively in the Higher Education Act of 1965, which allows the Secretary of Education to compromise, waive or release loans in certain circumstances. Critics of Biden’s plan question whether the 1965 law allows for massive debt relief envisioned by the administration, and note that Chief Justice John G. Roberts Jr. said in his opinion last year that the Act could be used to cancel debt in “certain limited circumstances.” »
The Biden administration said the new plan is composed of interventions that respond to specific circumstances in a way covered by the Higher Education Act. The president is confident he is acting within the law, according to the White House.
washingtonpost
