by Bria Overs
It has been nearly seven months since President Biden’s sweeping student loan forgiveness was struck down by the Supreme Court. Now the administration is preparing to take another go at relief for borrowers. Instead of blanket forgiveness of $10,000 or $20,000 for students based on whether they received federal Pell Grants, the new proposal is more like an expansion of the existing avenues for forgiveness.
In a December statement, the Department of Education wrote the new and updated proposals “build on the Biden-Harris Administration’s actions to date to provide student loan borrowers with much-needed breathing room.”
“Student loans are supposed to be a bridge to a better life, not a life sentence of endless debt,” U.S. Secretary of Education Miguel Cardona said in the press release. “This rulemaking process is about standing up for borrowers who’ve been failed by the country’s broken student loan system and creating new regulations that will reduce the burden of student debt in this country.”
Here are borrowers proposed to be eligible for student loan forgiveness in the future.
Have balances greater than what they owed since starting repayment
Interest can make it more difficult to pay down debt. The administration proposes to provide relief of up to $10,000 “to all borrowers who have experienced balance growth due to interest.” And those enrolled in the Saving on a Valuable Education (SAVE) plan have a version of this through an “interest benefit,” where the government pays part of the remaining interest after a monthly payment.
The benefit under the SAVE Plan prevents balances from growing because of unpaid interest.
Have loans that entered repayment for the first time 20 years ago or more
Borrowers with undergraduate loans who have repaid for at least 20 years would receive a one-time relief through forgiveness. All other borrowers with loans that entered repayment 25 years ago or more would receive forgiveness.
This proposal could have the most considerable impact on Black student loan borrowers. A report from the Institute on Assets and Social Policy (IASP) at the Heller School for Social Policy and Management at Brandeis University found that Black student loan borrowers who started college in the 1995-1996 academic year still owed 95% of their debt after 20 years. In contrast, white student loan borrowers owed 6% of their debt.
Have loans eligible for forgiveness through Income-Driven Repayment Plans or Public Service Loan Forgiveness
Since the beginning of his presidency, Biden has focused on fixing the student loan system, including Income-Driven Repayment Plans and the Public Service Loan Forgiveness program. In December 2023, the administration approved another $4.8 billion in student debt cancellation for 80,300 people, bringing the total number of those who have received some form of forgiveness to $132 billion for over 3.6 million Americans.
Those who have been in repayment for 20 years and enrolled in the Public Service Loan Forgiveness program “but didn’t accurately get credit for student loan payments” received the relief they were “entitled to.” The proposal would continue this work in the long term.
Have loans from schools that failed to ‘deliver sufficient financial value’
The Borrower Defense Loan Discharge program, launched in 2022, recently forgave millions of dollars in student debt for former University of Phoenix and Ashford University students. The intention is to forgive student loans for borrowers whose schools defrauded them or closed before they could complete their degrees.
According to the updated text, “This policy would provide relief to borrowers who are left repaying loans where the Department has taken action to terminate future borrowing at an institution or program because the institution or program is leaving students with unaffordable debts, or where such actions are cut off by closure.”
The Department of Education also proposes including instances where schools or programs lost access to federal student aid because of previous actions that harmed students and would apply to institutions retroactively.
Biden’s Next Steps
The Department and non-Federal negotiators like the NAACP, State Attorneys General offices, public and private institutions, Minority-Serving Institutions, and student loan borrowers are in discussion over these ideas. The drafted rules will be released to the public for comment sometime this year.
Not all student loan borrowers will be eligible for forgiveness under these proposals, and in an election year, there is little time to act. According to the Brookings Institute, the earliest the relief would go into effect is July 2025 if the Department of Education follows its rulemaking schedule.
