President Biden released details on Monday of his new student loan debt forgiveness plan for nearly 30 million borrowers.
The proposal still needs to be finalized and will have to withstand expected legal challenges, like the ones that doomed Mr. Biden’s first attempt to wipe out student debt on a large scale last year.
Biden administration officials said they could begin handing out some of the debt relief — including the canceling of up to $20,000 in interest — as soon as this fall if the new effort moves forward after the required, monthslong comment period.
Here’s what is known so far about the program:
Who would benefit from the new plan?
The plan would reduce payments for 25 million borrowers and erase all debt for more than four million Americans. Altogether, 10 million borrowers would see debt relief of $5,000 or more, officials said.
The groups affected include:
— Borrowers whose loan balances have ballooned because of interest would have up to $20,000 of their interest balance canceled. The plan would waive the entire interest balance for borrowers considered “low- and middle-income” who are enrolled in the administration’s income-driven repayment plans.
The interest forgiveness would be a one-time benefit, but would be the largest relief valve in the plan. The administration estimates that of the 25 million borrowers that could see relief under this waiver, 23 million would see their entire interest balance wiped out.
— Borrowers who are eligible for, but have not yet applied for, loan forgiveness under existing programs like Public Service Loan Forgiveness or the administration’s new repayment program, called SAVE, would have their debts automatically canceled.
— Borrowers with undergraduate student debt who started repaying their loans more than 20 years ago, and graduate students who started paying their debt 25 or more years ago, would have their debts canceled.
— Borrowers who enrolled in programs or colleges that lost federal funding because they cheated or defrauded students would have their debts waived. Students who attended institutions or programs that left them with mounds of debt but bleak earning or job prospects would also be eligible for relief.
— Borrowers who are experiencing “hardship” paying back their loans because of medical or child care costs would also be eligible for some type of relief. The administration has not yet determined how these borrowers would be identified, but is considering automatic forgiveness for those at risk of defaulting.
