Biden administration approves $7.4 billion in student-debt relief for 277,000 borrowers

By Jillian Berman

The announcement comes days after the president touted a new plan aimed at a wider swath of borrowers

More than a quarter of a million student-loan borrowers who have been in repayment for at least a decade will have their debt cancelled, the Biden administration announced Friday.

The 277,000 borrowers who will have $7.4 billion in debt wiped out will receive emails starting today indicating they've been approved for debt cancellation. The borrowers eligible for this relief have been in repayment on their student debt for at least 10 years, and some have been repaying their loans for more than two decades.

The relief announced Friday comes days after Biden touted a different, mass student-loan cancellation plan earlier this week. That plan would impact more than 25 million borrowers through a series of new policies that won't take effect until later this year at the earliest.

Friday's announcement, on the other hand, marks the latest round of debt relief that's coming through changes made by the Biden administration to existing programs. Officials have approved $153 billion in debt cancellation for 4.3 million people through these efforts so far. It comes amid court challenges from Republican-led states looking to block some of the debt cancellation that Biden officials have approved through these efforts.

"From day one of my administration, I promised to fight to ensure higher education is a ticket to the middle class, not a barrier to opportunity," President Joe Biden said in a statement announcing the debt cancellation. "I will never stop working to cancel student debt - no matter how many times Republican elected officials try to stop us."

What do you think of the Biden administration's student debt forgiveness efforts? Email us: jberman@marketwatch.com.

Borrowers who are eligible for the debt forgiveness announced Friday fit into three different categories. The first is made up of borrowers who are public servants who have been paying on their debt for at least 10 years and are receiving their debt cancellation as part of the Public Service Loan Forgiveness program. This initiative, which was signed into law in 2007, allows borrowers who work for the government or certain nonprofits for at least 10 years to have their remaining federal debt wiped out, but for years borrowers struggled to actually get their debt erased under the law. The Biden administration made fixes to the program aimed at making it easier for borrowers to actually access the relief.

The second category is borrowers who have been paying on their loans for at least 20 years. The federal student-loan program is designed so that borrowers shouldn't be paying back their loans for more than 25 years, and yet recently as many as 2 million borrowers had been in repayment for more than 20 years due to paperwork challenges and servicer errors. The Biden-era Department of Education has taken steps to adjust borrowers' accounts so those in repayment for decades can have their debt cancelled.

The final category includes borrowers who are enrolled in SAVE, the Biden administration's new repayment program. Through this plan, borrowers who took on $12,000 in student debt or less can have their debt cancelled after 10 years of payments. For each $1,000 originally borrowed, a year gets added to that timeline (for example, borrowers with $13,000 in loans have to pay for 11 years) with a maximum of 20 years for borrowers with only undergraduate debt and 25 years for borrowers with loans from graduate school.

Court challenges could put relief at risk

The Biden administration is facing two lawsuits from Republican-led states over SAVE, aiming to stop the program. One case rests in part on an argument similar to one that found favor at the Supreme Court last year in the case that invalidated Biden's initial plan to wipe out up to $20,000 in student debt for a wide swath of borrowers.

When asked whether borrowers approved for debt cancellation through SAVE should be worried about the relief being clawed back because of the litigation, senior administration officials said they're confident in their legal authority to carry out the plan.

"It's a political attack, it's an attack without merit," a senior administration official told reporters. "It's an attempt to take away relief that people deserve and need."

Friday's announcement comes just days after Biden and other surrogates pitched their plan for broader debt relief in swing states. Under that proposal, borrowers who owe more than they originally took on in debt would have up to $20,000 in interest cancelled. In addition, borrowers who have been in repayment for decades would be eligible for relief, as would borrowers who qualify for certain existing debt-forgiveness programs, but haven't applied.

Experiencing financial hardship because of student-loan payments could also qualify borrowers for relief under the new plan. The White House has said they'd like to start cancelling debt under these new rules by early fall, presumably ahead of the November presidential election. Still, the proposals are likely to face litigation that could stymie the administration's efforts.

-Jillian Berman

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04-12-24 0915ET

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