WASHINGTON – President Joe Biden will announce Monday the introduction of a student debt forgiveness proposal that the White House says is worded specifically enough to withstand legal challenges.
The plan, if implemented, would include a one-time cancellation of all accrued interest for 23 million borrowers. It would also cancel all of 4 million borrowers’ student loan debt and provide more than 10 million borrowers with at least $5,000 in debt relief.
The president will present the regulations proposed by the Department of Education during a speech in Madison, Wisconsin, White House press secretary Karine Jean-Pierre told reporters in a phone call on Sunday.
The announcement comes seven months before the November election, where student debt relief remains a key issue for voters, especially younger ones. Some of the younger voters who support a ceasefire, were switched off by supporting Israel in the war against Hamas in the Gaza Strip.
The proposed regulation will be published in the coming months and the Biden administration expects that some provisions, such as the interest relief, could be implemented as early as the fall, Jean-Pierre said.
“President Biden will use every tool available to cancel student loan debt for as many borrowers as possible, no matter how many times Republican elected officials try to stand in his way,” she said.
A new legal dispute likely
The proposal is likely to face legal challenges similar to the dispute that rocked Biden’s original plan to forgive student debt. The Supreme Court overturned it last year when it was challenged in court proceedings supported by six Republican-led states — Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina.
Senior administration officials told reporters that the Biden administration has carefully studied the Supreme Court’s opinion last year that rejected the administration’s argument that Education Secretary Miguel Cardona had the legal authority under the HEROES Act to issue one-time student debt forgiveness of up to $20,000 for some borrowers.
A senior government official said the new proposals “address specific situations and specific populations, and we are confident they are covered by the minister’s long-standing authority. [the Higher Education Act] allows him to do so and we are confident that we are acting within the law as laid down by the Supreme Court.”
Following the Supreme Court ruling, Biden directed the Department of Education to pursue a more targeted path to easing student debt through the Higher Education Act in anticipation of potential legal challenges.
“Through the negotiated legislative process, we can change and improve our higher education policies,” Cardona told reporters on Sunday, adding that the Department of Education is working quickly to finalize the proposals.
While the legislative process could take months or years, Cardona has the ability to set provisions for early implementation, a senior government official said.
About 43.5 million people have student loan debt totaling $1.73 trillion. According to the Federal Reserve.
Building on previous plans to pay off student debt
The new plan builds on several student debt relief programs already introduced by the Biden administration, such as the Saving on a Valuable Education Plan, known as SAVE Planor other income-driven repayment plans. Under the SAVE plan, borrowers who make monthly payments are not charged accrued interest; payments are based on the borrower’s income and family size; and the plan forgives remaining balances after a set number of years.
Under the proposed regulations, there would be a one-time cancellation of up to $20,000 of unpaid interest, regardless of the borrower’s income level. Low- and moderate-income borrowers participating in an income-driven repayment plan offered by the Department of Education would be eligible to have the entire accrued interest balance canceled. Eligible borrowers would be single borrowers earning $120,000 or less and married borrowers earning $240,000 or less.
The Biden administration estimates that 25 million borrowers would benefit from some form of interest relief.
“For example, the interest relief is currently designed as a one-time benefit, but in the future borrowers will benefit from much more favorable treatment through the SAVE program,” said a senior administration official.
The plan also provides automatic debt forgiveness for borrowers who are eligible for such forgiveness under SAVE, Public Service Loan Forgiveness or other programs such as closed student loan forgiveness but have not yet applied for those programs.
The Department of Education could also employ its own data to identify borrowers who would be eligible for student loan debt forgiveness but have not yet applied for it. The Biden administration estimates that this would relieve debt for about 2 million borrowers.
20 years of loan repayments
Under the proposed plan, borrowers who began repaying their student loans 20 years ago and borrowers who began repaying their student loans 25 years ago would have their student loan debt forgiven. These borrowers would have to be on an income-driven repayment plan to qualify for this relief.
The plan also provides debt forgiveness for borrowers who participated in low-financial-value programs where the total cost of participation exceeded the financial benefit.
Borrowers who attended institutions or programs that lost eligibility for the federal student aid program or were denied readmission would be eligible to have their student loans canceled. And borrowers who attended institutions that either closed or no longer offered “sufficient value” would be eligible for relief.
Cardona added that this could also affect some job training programs that have “taken advantage” of borrowers or institutions that have an unusually high default rate on student loan repayments.
The plan would also provide relief to borrowers who face difficulties in their daily lives that prevent them from repaying their loans. These financial difficulties would include things like medical debt or child care.
While the government is seeking immediate debt relief, a senior government official said some additional information is needed about borrowers who will qualify for the hardship provision.
“Our goal is to have the vast majority of things like interest, older loans or borrowers who participated in programs that did not add financial value be resolved automatically,” the senior administration official said.
