Biden Administration Unveils New Student Loan Forgiveness Proposal

Biden's revised student loan forgiveness plan targets specific groups, offers up to $20,000 in cancellation, and aims for relief by this fall.

The Biden administration has crafted a new student loan forgiveness proposal, with the aim of initiating debt relief for millions of borrowers by this fall. The public has a 30-day window, ending on May 17, to provide feedback on the specifics of the revised aid package. The administration's efforts come after the U.S. Supreme Court turned down President Joe Biden's initial widespread loan cancellation attempt last summer, leading to the development of this revised plan.

President Biden intends for the program to withstand potential legal challenges this time around. In order to achieve this, the U.S. Department of Education has focused on a more targeted relief approach and turned to the regulatory process. This is in contrast to the president's initial attempt to forgive student debt through an executive action. The outstanding federal education debt in the U.S. currently amounts to approximately $1.6 trillion, outweighing the burden of credit card or auto debt and affecting over 40 million individuals with student loans.

Key Features of the Relief Plan

The new proposal is structured to offer relief to specific groups of borrowers and addresses the issue of interest on the loans. Unlike Biden's previous plan, which aimed to forgive student debt for most borrowers, this aid package focuses on targeted groups and the interest on the loans. The proposal seeks to cancel "the full amount" of an individual's debt that has accrued from the original balance upon the commencement of repayment. To qualify for this provision, borrowers must be enrolled in one of the Education Department's income-driven repayment plans and earn a maximum of $120,000 as a single filer. Additionally, borrowers, regardless of their income, could be eligible for up to $20,000 in cancellation on the portion of their debt that represents unpaid interest.

Relief for Long-Term Repayment and Low-Value Institutions

The relief plan extends to borrowers who have been in repayment for 20 years or more on their undergraduate loans, or over 25 years on their graduate loans, entitling them to full debt cancellation. Furthermore, the plan includes provisions to erase the debt of individuals already eligible for relief but have not received it or applied for it. Lastly, it provides relief to borrowers who enrolled in low-financial-value schools or programs or institutions that failed to deliver adequate financial value. Notably, the Education Department excluded, for now, a group of borrowers experiencing financial hardship from its relief proposal, which was initially expected to be included. The spokesperson for the Education Department emphasized that the administration is working diligently to deliver relief to as many borrowers as possible as swiftly as possible.

Following the 30-day public comment period, the Biden administration will review the feedback received for its plan. Subsequently, it will release the final rule, likely during the summer, and could commence the reduction and elimination of borrowers' balances. However, potential legal challenges loom over this timeline. After President Biden announced the revised relief program, Missouri Attorney General Andrew Bailey, a Republican, expressed strong opposition, indicating the possibility of legal action against the administration. Despite the potential legal obstacles, the administration remains committed to providing relief to student loan borrowers.

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