Biden Administration Announces New Student Debt Cancellation Effort – Forbes Advisor – Technologist

President Joe Biden has announced another new broad student loan forgiveness plan that would cancel the debt of millions of borrowers who haven’t already received debt relief under existing programs.

At an appearance in Madison, Wisconsin, on Monday, Biden unveiled the five-pronged plan, which will automatically cancel at least some debt for eligible borrowers who aren’t already enrolled in forgiveness programs. The latest plan is his most ambitious since an earlier student loan forgiveness program—offering up to $20,000 in relief to borrowers struggling to make debt payments—was knocked down by the Supreme Court last summer in a 6-3 opinion.

Biden mentioned the high court’s decision in his speech, telling the crowd, “The Supreme Court blocked us, but that didn’t stop us.”

Plan Targets Borrowers in Certain Categories

Biden’s newly proposed plan expands the qualifications for student debt relief. More than 4 million borrowers could see their full student loan bill canceled. Another 10 million would receive at least $5,000 in debt relief, and 23 million would see excess interest that had accrued on their accounts forgiven. According to the White House, when combined with the administration’s previous efforts, this plan would bring student debt relief to more than 30 million borrowers.

This new plan targets specific borrowers. You may qualify if:

• Your debt has “runaway interest.” More than 25 million borrowers have more debt than they originally started with because of accrued or capitalized interest. The plan will waive up to $20,000 of that so-called “runaway interest.”
• You’re not enrolled in a loan forgiveness program. Borrowers who are eligible for loan forgiveness but haven’t applied for programs—such as Public Service Loan Forgiveness (PSLF) or the Saving on a Valuable Education, or SAVE, plan—will automatically receive debt forgiveness after a certain period.
• You’ve been paying for at least 20 years. Borrowers who started repaying their undergraduate loans at least 20 years ago and graduate borrowers with more than 25 years of repayment history may be eligible for forgiveness, even if they aren’t on an income-driven repayment, or IDR, plan.
• You attended a “low-financial-value program.” If your institution lost its ability to participate in the federal student aid program because it cheated or exploited students, you may receive forgiveness under this plan. Borrowers who attended schools that closed or failed to provide sufficient value might also qualify for relief.
• You’re facing financial hardship. If a borrower has experienced financial difficulties that prevent them from repaying loans on time, they could receive forgiveness. However, the Department of Education hasn’t yet defined or set criteria for establishing financial hardship.

The new forgiveness package has a particular focus on Black and Latino borrowers, according to a White House statement.

“With disproportionately high debt burdens, Black and Latino borrowers will get substantial benefits from this relief,” it said.

Since October 2021, the Biden Administration has made fixes to programs that have canceled $146 billion in student loan debt. That includes an adjustment to the PSLF program that offered $5.8 billion in student loan debt relief to 78,000 public service workers, such as teachers, nurses and firefighters.

New Legal Basis After Supreme Court Rejection

In Biden v. Nebraska, decided in June 2023, the Supreme Court rejected Biden’s original $440 million student loan forgiveness plan, which relied on a provision of the Higher Education Relief Opportunities for Students, or HEROES, Act of 2003. The high court determined that the Department of Education couldn’t forgive student loans without congressional approval or public participation.

Following the court’s decision, the Biden Administration began pursuing another avenue of debt relief through negotiated rulemaking under the Higher Education Act of 1965. This process requires an agency to develop a new rule using a neutral facilitator and a committee of representatives from all affected parties.

Those representatives included borrowers, schools and student loan servicers. The committee met four times to establish guidelines for the program, with the final session concluding in February.

Forgiveness Plan Not Yet Final

This plan still needs to be finalized, a process that can take several months. It will almost certainly also face legal challenges from groups that oppose student loan cancellation.

Meanwhile, some lawmakers are critical of the plan. Rep. Brian Stiel, a Republican from Wisconsin, blasted President Biden after the announcement, describing the proposal as inflationary.

“His student loan debt repayment plan is an unconstitutional abuse of power and is unfair to anyone who did not go to college or paid off their own loans,” Stiel said in a statement.