The Biden Administration published its new student loan relief proposal this week, marking the president’s next move in solidifying federal loan assistance for debt borrowers.
Rather than focusing on a broader base of debt borrowers, the latest aid package consists of nine rules that tailor to specific groups, including those whose debt has grown since first entering repayment.
Specifically, borrowers would be eligible for up to $20,000 of relief on the share of their debt that is classified as unpaid interest.
According to the plan, eligible borrowers must be enrolled in the U.S. Department of Education’s Income-Driven Repayment (IDR) plan and have an annual income of $120,000 or less as a single filer, or $240,000 if they are a married couple that files taxes jointly. If these plans are implemented as proposed, borrowers will not need to file an application to receive relief.
A separate release from the Education Department observes that implementing the package could eliminate interest growth for 23 million borrowers. The Department further estimates that over 75% of borrowers who would benefit from interest relief are Pell Grant recipients, and over two-thirds of borrowers who would gain from the automatic $20,000 in interest relief are Pell recipients. Pell Grants are loans generally offered to students from low-income households.
“Today’s announcement shows that the Biden-Harris Administration is continuing to fulfill our promises to fix a broken higher education system,” said U.S. Secretary of Education Miguel Cardona in commenting on the package. “Student loan forgiveness isn’t only about relief for today’s borrowers. It’s about social mobility, economic prosperity, and creating America that lives up to its highest ideals.”
Additional student loan debt provisions
The new aid package would also provide relief for those who have outstanding debt on old undergraduate loans that span at least 20 years. Borrowers with any graduate school debt would also qualify if their loans are at least 25 years old.
For borrowers who are short on that timeline, Biden’s plan include additional provisions that would cancel debt for borrowers who are otherwise eligible for loan forgiveness, but have not enrolled due to paperwork requirements, bad advice, or other obstacles.
In addition to these rules, President Biden’s plan would also cancel debt for borrowers who were enrolled in programs or institutions that failed to provide sufficient financial value. This includes “institutions or programs that lost access due to high student loan default rates, producing graduates whose debt represents too large a share of their income, graduates whose earnings are no better than those of a high school graduate, or were subject to a final agency action to terminate aid for failing to provide sufficient financial value,” according to the DOE.
More to come
The Department of Education announced a forthcoming rule that will include borrowers who cannot pay back their loans due to financial hardships, including high medical and caregiving expenses. According to the department, this rule will be released in the coming months.
“These distinct forms of debt relief are designed for borrowers struggling with their loans – and that’s a lot of people,” said Under Secretary of Education James Kvaal. “There are 25 million borrowers whose interest is growing faster than they can pay it down. That fact alone shows how badly President Biden’s student loan relief is needed.”
As for what happens now, the public will have 30 days, or through May 17, to comment on the formal student debt relief plan. After that, the Biden Administration is set to review the feedback and ultimately release its final rule for implementation.
Time will only tell whether Biden’s plan will overcome legal challenges. Last year, the conservative majority of the U.S. Supreme Court struck down the president’s forgiveness program in a 6-3 decision.
Republicans have already weighed in on the program. On April 8, Missouri Attorney General Andrew Bailey wrote on X that Biden was “trying to unabashedly eclipse the Constitution with his attempt to ‘cancel’ student loan debt.”
“See you in court,” he concluded.
SEE ALSO:
- Biden Formally Unveils SAVE Plan to Combat Student Loan Debt
- Biden Administration Cancels $39 Billion in Federal Student Loan Debt
- Unforgiven: Supreme Court Strikes Down Biden’s Student Loan Forgiveness Plan
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
