The Biden-Harris administration is launching a targeted debt relief plan, aiming to alleviate the burden for 25 million student loan borrowers.
His initiative follows a Supreme Court setback and faces continuing legal battles, but it promises significant financial relief for those most affected by runaway interest and long-term repayment struggles. Borrowers yet again have a short window to get some relief from crippling student debt.
New Debt Relief Options Announced
The Department of Education will email Americans with student debt on Wednesday, detailing how 25 million people could see their debt canceled this fall. This marks the first step of the Biden-Harris administration’s new debt relief proposal announced in April.
Biden’s Plan B for Student Debt
Following the Supreme Court’s rejection of President Biden’s initial debt cancellation plan, a narrower, targeted relief plan is now being finalized. If implemented and upheld, this could bring debt relief to 25 million borrowers.
Potential Lawsuits Loom
The proposed rule faces potential lawsuits from Republicans, but it could still provide relief to millions if it survives legal challenges. This new plan comes in addition to the nearly 4.8 million who have already had their debts canceled under Biden’s administration.
Pathways to Relief
Education Secretary Miguel Cardona will outline in the email the ways borrowers can seek debt relief, focusing on those with high interest or long repayment histories. Borrowers will have until August 30 to decide if they want to opt-out of the relief program.
Notifying Borrowers
The Education Department is finalizing eligibility criteria for the debt relief program. Borrowers are being informed in advance so they can quickly benefit once the rules are set.
Swift Implementation is Key
President Biden emphasized the importance of notifying borrowers early about the upcoming debt relief programs. The administration aims to act quickly to provide relief amidst ongoing legal challenges.
Commitment to Debt Relief
Biden reiterated his commitment to fighting for student loan borrowers despite Republican opposition. The administration continues to push for reform and relief in the student loan system.
Legal Challenges to SAVE Plan
Biden’s SAVE Plan, which ties payments to income and offers relief after 10 years for small loan balances, has been halted by a court. Republicans argue that the plan oversteps administrative authority, but the fight for affordable loan repayment continues.
Relief for Those with Runaway Interest
The new debt relief plan primarily targets borrowers with runaway interest, a group that makes up more than half of all borrowers. About 25 million people owe more now than their original loan amount due to accumulated interest.
Interest Reduction or Cancellation
Under the draft rule, loans won’t be entirely canceled, but the accumulated interest will be significantly reduced or eliminated. Borrowers could see up to $20,000 of interest canceled, with full interest cancellation for those earning below $120,000 (single) or $240,000 (married).
Major Impact on Borrowers
The Department of Education estimates that over 90% of affected borrowers, roughly 23 million people, will see their debt reset to the initial loan amount. This significant relief will help many regain control of their finances.
Long-Term Borrowers Benefit
The second-largest group includes those who have been repaying their loans for over 20 years without full repayment. Around 2.6 million borrowers could benefit, provided they have been paying on loans since or before specific dates in 2005 for undergraduate loans and 2000 for graduate loans.
Additional Relief for Qualifying Programs
Debt relief will also extend to hundreds of thousands who qualify for programs like Public Service Loan Forgiveness but haven’t applied. Additionally, relief will be provided to those who attended schools that failed to deliver promised financial security.
Evaluating Borrower Hardship
A broader aspect of the rule, which would consider borrower hardship as a criterion for relief, is still being developed. This component is expected to be finalized later than the current timeline.
