Biden wants to cancel student debt for 25 million borrowers - here's his new plan

By Jillian Berman

Proposals the president is announcing Monday are likely to face legal challenges; administration officials say they want to start forgiving loans by early fall

President Joe Biden will announce a proposal Monday that, if implemented, will cancel at least some student debt for an estimated 25 million borrowers.

The new proposal comes less than a year after the Supreme Court struck down the Biden administration's initial plan to forgive a maximum of $20,000 in student debt for up to 43 million borrowers. Hours after the court's decision last June, Biden vowed to take a second stab at mass student-debt relief.

The proposal Biden plans to announce Monday is focused on ameliorating challenges that borrowers and advocates have long complained makes student debt particularly pernicious. It would target borrowers with ballooning interest, those who have been in repayment for decades and those who are eligible for debt cancellation under existing programs.

The plan Biden is announcing Monday is different from the $146 billion in debt relief for roughly 4 million borrowers that the administration already approved over the past several months. When that previously approved relief is combined with what the president is announcing Monday, the administration expects its student-debt-relief efforts could impact more than 30 million student-loan borrowers.

Secretary of Education Miguel Cardona said that when he took over the Department of Education, Biden told him the student-loan system was broken and instructed him to fix it. These proposals mark the administration's latest attempt to do so, he said on a call with reporters.

"It bears repeating, we're delivering as much relief as possible for as many borrowers as possible as quickly as possible," Cardona said.

Implementation is far from assured

It's far from assured that the administration will be able to implement the plan Biden is announcing Monday. But senior administration officials said their goal is to start cancelling debt under some of the proposals by early fall. That would likely mean some borrowers would see relief ahead of the presidential election in November.

Despite the administration's efforts on debt cancellation so far, they've struggled to resonate with the youngest voters. More than 40% of Gen Z swing-state voters said in a poll late last year that Biden wasn't doing enough on student debt. The administration is looking to put the issue in front of the American public.

In addition to Biden's speech in Madison, Wis., on Monday where he will outline these plans, Cardona, Vice President Kamala Harris and second gentleman Douglas Emhoff will be heading out across the country Monday to tout the administration's debt-relief efforts and speak with borrowers who have been impacted by them.

"President Biden will use every tool available to cancel student-loan debt for as many borrowers as possible no matter how many times Republican elected officials try to stand in his way," Karine Jean-Pierre, the White House press secretary, told reporters.

Latest step in a regulatory process

The announcement marks the latest step in a regulatory process the administration launched following the Supreme Court's decision last June. The Department of Education will release proposed rules in the coming months outlining the contours of the debt-relief plan, a senior administration official told reporters. Officials will then take feedback from the public. They'll incorporate that feedback into a final rule.

Once the final rule is released, the proposal will likely face legal challenges, though it may not necessarily face the same fate as the plan the court declared illegal last year. For that proposal, the Biden administration said the HEROES Act, a law which allows the Secretary of Education to waive and modify student debt in the case of a national emergency, gave them the authority to cancel student debt. The court's conservative majority didn't buy that the HEROES Act authorized officials to forgive student debt as part of a pandemic relief plan.

The plan Biden is announcing Monday is grounded in the Higher Education Act, which advocates have long said grants the secretary of education the power to cancel student debt. The Department of Education has used it in one-off cases to provide debt relief to borrowers.

A senior administration official told reporters that officials "have studied the Supreme Court's decision carefully." The proposal they're announcing is targeted towards specific populations of borrowers "in ways that we feel very confident," are covered by the secretary's authority, the official said.

"This isn't the same plan," the official said. "We feel confident going forward."

Here are the different types of borrowers who could be impacted by the plan:

Borrowers whose balances have grown beyond what they originally borrowed: All borrowers in this category, regardless of income, would have up to $20,000 of their unpaid interest cancelled under the proposal.

Borrowers who are earning $120,000 a year ($240,000 for a married couple) or less and are enrolled in an income-driven repayment plan will have all of their accrued interest cancelled under the plan. The administration estimates that about 25 million borrowers would be impacted by this provision and, of that, 23 million borrowers would have all of the growth in their balance cancelled.

Borrowers who are eligible for existing relief programs, but aren't enrolled: For years, borrowers and advocates have complained that technicalities, paperwork and interactions with servicers have made it difficult for borrowers to access relief they're entitled to. Under the plan Biden is announcing Monday, borrowers who are eligible for Public Service Loan Forgiveness, income-driven repayment plans and borrowers whose schools closed precipitously would have their debt discharged even if they aren't enrolled in those programs.

Borrowers who have been paying for decades: Borrowers with only undergraduate loans who entered repayment on or before July 1, 2005 will have their remaining debt wiped out under the plan. Borrowers with any loans from graduate school who entered repayment on or before July 1, 2000 would qualify for this benefit.

Borrowers who attended programs that didn't provide them with a good value: These are borrowers who attended programs that may have lost their eligibility for federal financial aid or were denied recertification in the federal student-aid program. In addition, borrowers who attended programs or schools that closed and provided former students with poor outcomes would also be eligible.

Borrowers who are experiencing financial hardship: This category could apply to borrowers who are very likely to default. In addition, borrowers who are struggling with their student loans because they are facing high expenses in other areas, like medical debt or child care, could apply for relief under this provision.

"It means breathing room, it means freedom from feeling like your student-loan bills compete with basic needs like groceries or health care," Cardona said of the Biden administration's initiatives on student-debt cancellation. "There's an end to the nightmare of working hard, making loan payments and still watching your loan payments get bigger month after month."

-Jillian Berman

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04-08-24 0854ET

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