President Joe Biden is again trying to secure widespread student debt forgiveness, with a a new plan was unveiled Monday that could help about 30 million borrowers erase some or all of their college loans.
The latest attempt at broad debt relief comes less than a year after the Supreme Court blocked Biden’s previous attempt to help student borrowers when the court Decision from June 2023 denied up to $20,000 in forgiveness to about 40 million Americans.
Biden, who has made student loan relief a major campaign promise, unveiled the new plan on Monday, describing it as potentially “life-changing” for millions of Americans. About 43 million people carry $1.7 trillion in student debt, a burden that some borrowers and their advocates say is hindering their ability to buy a home or meet other financial goals.
“Although a college degree is still a ticket to the middle class, that ticket is becoming very expensive. Very expensive,” Biden said at an event at Madison College in Madison, Wisconsin. “The ability for working and middle-class people to pay off their student loans has become so difficult that many can’t pay it off even decades after they’ve been in school.”
Here’s what you need to know about Biden’s new plan and who would qualify.
How is this plan different from the one rejected by the Supreme Court?
The new plan relies on a different law for student borrower debt relief.
The previous plan relied on the Omnibus Health and Economic Recovery Emergency Solutions Act, or HEROES Act, a pandemic-era stimulus package. The Supreme Court ruled that the law did not give the Biden administration the power to forgive student debt.
The new plan addresses an older law, the Higher Education Act, which allows the secretary of education to “compromise, cancel or discharge” federal student loans. Through this mechanism, the Biden administration is embarking on its new debt relief program.
Who will be eligible for debt forgiveness under the new plan?
There are 5 main groups of borrowers who can benefit from the new plan.
- 2.5 million borrowers who have paid for 20 years or more.
The Biden administration said people with only undergraduate debt can qualify for forgiveness if they first started paying off their loans at least 20 years ago or on or before July 1, 2005. Borrowers with debt from higher education would be eligible if they first began repaying their loans 25 years ago or on or before July 1, 2000.
Borrowers do not have to be enrolled in an income-driven repayment plan to qualify, the White House said. Both direct loans and direct consolidation loans will be covered.
- People with debt who attended “low financial value programs”
College is supposed to equip its graduates with the skills to achieve higher paying careers, but there are some programs that have left people in debt but without a marketable degree, such as some offered by for-profit colleges like now defunct Corinthian Colleges.
The new plan would cancel student loan debt from colleges or programs that lost eligibility for the federal student aid program or were denied recertification because they defrauded students, the White House said. Borrowers who also attended colleges that don’t provide “sufficient value,” such as leaving graduates without the ability to earn more than a high school graduate, will also be eligible for relief.
- People having difficulty repaying their loans.
Borrowers who experience hardships that impede their ability to repay their loans may also be eligible for forgiveness. While the White House did not specify the financial threshold to qualify for this pathway, it said it could cover borrowers at high risk of defaulting on their student loans or struggling with issues such as medical debt.
- 25 million borrowers whose balances increased due to interest.
Some borrowers have seen their balances grow due to a financial problem called “negative amortization,” where a person’s loan balance continues to grow despite making consistent payments. Under the plan, approximately 25 million people who have experienced this problem can have up to $20,000 of their interest canceled.
- 2 million low- and moderate-income borrowers who are eligible for forgiveness but haven’t applied.
The plan would also provide debt relief to about 2 million low- and moderate-income borrowers who are eligible for programs such as public service loan forgiveness or income-based repayment plans but have not applied for them.
“No application would be necessary for borrowers to receive this relief if the plan is implemented as proposed,” the White House said.
What are the next steps for plan approval?
The Department of Education said it plans to release a formal proposal in the “coming months”. This will usually be followed by a public comment period of 60 days. Then, if the rule is finalized by Nov. 1, it would typically go into effect the following July — in this case, July 2025.
But the Higher Education Act authorizes the Secretary of Education to expedite “early application” rules in some cases. The Biden administration recently used that authority to speed up student loan cancellation offered through a new federal repayment plan. Invoking that authority could allow Biden to begin canceling debt later this year.
When can the new plan go into effect?
That’s not yet known, as the plan needs to clear some additional hurdles before it becomes effective, as noted above. Asked by reporters when U.S. loan recipients’ interest balances might be written off, officials said forgiveness could happen “as early as this fall.”
Can the plan be challenged in court?
Yes, conservative opponents are expected to challenge Biden’s plan in court.
Republicans have repeatedly opposed Biden’s plan to cancel student loans, saying it is an unfair benefit taken by taxpayers who have paid off their loans or not gone to college. Opponents say the Supreme Court has been adamant that widespread loan cancellations must come from Congress.
If Biden’s plan faces a lawsuit, courts could order the administration to halt the repeal until the legal issues are resolved. This scenario could hold the plan until after the presidential election in November. Even if it survives court challenges, a Donald Trump victory would spell almost certain doom for Biden’s plan.
– With a report from the Associated Press.
