President Joe Biden on February 21, 2024 visiting a library in Culver City, California.
Irrfan Khan | Los Angeles Times | Getty Images
The news comes less than a year after the Supreme Court rejected his first attempt to cancel up to $20,000 of student debt per borrower. Conservative justices ruled that effort unconstitutional in June.
Although Biden’s Plan B for student loan forgiveness will be narrower than his initial efforts, tens of millions of borrowers could still see their balances wiped out or reduced if the program survives legal challenges this time around.
“These historic steps reflect President Biden’s determination that we cannot allow student debt to leave students worse off than before they went to college,” U.S. Under Secretary of Education James Quall said in a statement.
Quall added that Biden had ordered the department “to end these programs as quickly as possible, and that’s exactly what we’re going to do.”
Biden’s revised plan targets specific borrowers, including those who:
- You’re already eligible for debt cancellation under an existing government program, but you haven’t applied
- Have paid off 20 years or more on their student loans or 25+ years on student loans
- Attends schools of questionable value
- They are experiencing financial difficulties
It’s not yet entirely clear how financial hardship will be defined, but it could include those burdened by medical debt or high child care costs, the Biden administration said.
The president is also expected to discuss a plan to “cancel runaway interest rates” for millions of borrowers.
Consumer advocates have long criticized the fact that interest rates on federal student loans can exceed 8 percent, which can make it harder for borrowers who are behind or on certain payment plans to reduce their balances. Some end up owing more than they borrowed, even after years of repayment.
The Biden administration estimates that if its new plan is enacted as proposed, borrowers would have up to $20,000 in unpaid interest on their federal student debt forgiven, regardless of their income. Some low- and moderate-income borrowers may have all the interest accrued on their debt since they entered repayment written off.
The Biden administration believes its updated plan will withstand legal challenges this time around for several reasons.
In addition to the fact that this effort is a more targeted aid program, the Department of Education is also using a different law—the Higher Education Act—as its legal justification. Biden’s initial clemency efforts were based on the Heroes Act of 2003.
The HEA was signed into law by President Lyndon B. Johnson in 1965 and allows the Secretary of Education to have the authority to waive or discharge borrowers’ education debt.
The Heroes Act was passed after the 9/11 terrorist attacks and gives the president broad powers to review student loan programs during national emergencies. The Biden administration tried to use this law in its first pardon effort, as the country was under a national emergency due to the Covid-19 pandemic at the time.
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However, the conservative justices did not accept this argument.
“Can the Secretary use his authority to eliminate $430 billion in student loans, completely canceling loan balances for 20 million borrowers as the pandemic winds down?” Chief Justice John Roberts wrote in the majority opinion for Biden v. Nebraska. “We can’t believe the answer is going to be yes.”
Finally, the Biden administration has now turned to the rulemaking process to provide its relief. The president has previously tried to cancel the debt through executive action.
Biden probably wants to start forgiving student debt before voters go to the polls in November.
Nearly half of voters in a recent survey, or 48 percent, say student loan debt cancellation is an important issue to them in the 2024 presidential and congressional elections. SocialSphere, a research and consulting firm, polled 3,812 registered voters, including 2,601 respondents of Gen Z and millennials, in mid-March.
Student debt relief could especially help Biden with young voters, a demographic he struggles with. About 70 percent of Gen Z respondents said student debt cancellation was important to them in the election, the same survey found. More than half (53%) of respondents in this generation said they or someone in their household had student debt.
Biden’s plan is estimated to reach more than 30 million borrowers when combined with his other ongoing debt relief efforts, his administration said.
Mainly by improving current loan relief programs, the Biden administration has already cleared the education debt of 4 million people, totaling $146 billion in aid.
This is breaking news. Please check back for updates.
