- Biden unveiled new details for his second attempt at student-loan forgiveness.
- The plan would wipe out up to $20,000 in unpaid interest for 25 million borrowers.
- If implemented as proposed, the full plan is expected to benefit over 30 million borrowers.
President Joe Biden’s new plan for student-loan forgiveness would tackle a key issue for many borrowers: surging interest.
On Monday, Biden’s administration unveiled new details for its second attempt at student-loan forgiveness after the Supreme Court struck its first plan down. This new plan would benefit over 30 million student-loan borrowers, according to the White House, while canceling the full balances of about 4 million borrowers if implemented as proposed.
And one of the largest components of the plan addresses the unpaid interest that can build onto a borrower’s balance, making it difficult for them to even touch the original amount they borrowed. According to the administration, this plan would cancel up to $20,000 in unpaid interest for 25 million borrowers, with 23 million of them “likely to have all of their balance growth forgiven,” per the White House fact sheet.
“Now there’s an end to the nightmare of working hard, making loan payments, and still watching your loan balances get bigger and bigger month after month,” Education Secretary Miguel Cardona told reporters on a Sunday press call. “And we’re proud to announce what we’re announcing today.”
According to the White House, this interest provision would apply to any borrower, regardless of income. Low and middle-income borrowers enrolled in an income-driven repayment plan would be eligible for cancellation of the entire amount their balance has grown since entering repayment — that group includes single borrowers who earn $120,000 or less and married borrowers who earn $240,000 or less.
A senior administration official told reporters on the press call that while the interest relief would be a one-time action, borrowers would continue to benefit from provisions in the SAVE income-driven repayment plan, including the plan’s prevention of interest capitalization that will go into effect in July.
Along with the interest relief, the plan proposed debt relief for borrowers who would be eligible for forgiveness through a repayment program, like Public Service Loan Forgiveness, but have not yet enrolled. It would also cancel student debt for borrowers who first entered repayment at least 20 years ago, and it would work to identify relief avenues for borrowers facing financial hardship.
The proposed text for these rules will be released in the coming months, according to senior administration officials, after which there will be an opportunity for public comment. The plan could go into effect as early as this fall.
To be sure, these proposals are still subject to change — and they could also encounter legal challenges from conservative groups. Top Republican on the Senate education committee Bill Cassidy said in a Monday statement that the proposed relief is “an unfair ploy to buy votes before an election and does absolutely nothing to address the high cost of education that puts young people right back into debt.”
Still, administration officials said they believe the proposal is consistent with the Supreme Court’s decision, and they’re confident in the legal authority for implementation. Senate Majority Leader Chuck Schumer said in a Monday statement that “Democrats will continue to be relentless in doing everything we can to lower costs and make college more affordable.”
“After the MAGA Supreme Court struck down the most far-reaching student loan debt forgiveness last year and ripped away a financial lifeline from those who need it most, this new action by President Biden shows Democrats are committed to fixing the Federal student loan program so that higher education can finally be a ticket to the middle class for everyone,” Schumer said.
