The Biden administration plans to give as many as 30 million Americans a second shot at student-loan forgiveness.
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The new regulations, which will be detailed in coming months, would provide relief to struggling borrowers whose loan balances have ballooned because of unpaid interest. The relief would apply to those who have been making payments for decades but haven’t yet paid off their balances.
The new plan is different from the earlier version the Supreme Court overturned in June 2023, which would have canceled up to $20,000 in student debt for borrowers making less than $125,000 a year.
When that failed, President Biden ordered his Education Department to write regulations laying out an alternate path for debt relief using a different legal authority than the one the Supreme Court rejected. The administration contends that it has the authority to forgive student debt on a massive scale through executive action without explicit approval from Congress.
Who gets debt forgiveness under the new plan?
The core of the plan is a proposal to provide relief for those whose balances have increased beyond the amount they initially borrowed. The administration proposes to cancel up to $20,000 in unpaid interest for borrowers who owe more than their initial loan amount. Individual borrowers who earn $120,000 or less and married couples who earn $240,000 or less would be eligible to have that interest wiped from their balance.
The proposal would cancel debt for borrowers who have been making payments for decades. It applies to undergraduate debt that borrowers have been paying back for 20 years and graduate-school debt that has been in repayment for 25 years or more. Federal loans, including consolidated loans, would qualify for relief, according to the White House.
Debt would also be canceled for borrowers who took out loans to attend what the White House calls “low-financial-value programs.” That includes institutions that were deemed ineligible to participate in federal student loan programs or were denied recertification. The program would forgive student debt for borrowers facing financial hardship, including those who are at risk of defaulting on their loans, according to the White House.
Do I need to apply?
No. Most of the relief will go into effect automatically, according to Biden administration officials, though in some cases the Education Department might ask for additional information to prove that a borrower is facing financial hardship.
Borrowers are eligible for forgiveness even if they didn’t apply for earlier student-loan programs, such as a loan-forgiveness program for public-service workers or a new income-driven repayment plan that offers a path to loan forgiveness.
How many borrowers are eligible?
As many as 25 million borrowers would be eligible for relief from the interest provisions, according to the White House. Almost all of them—23 million—would see the entirety of their interest-related balance growth forgiven.
Two million borrowers would qualify for debt cancellation under the provisions that automatically offer loan relief to borrowers who are eligible, but haven’t yet applied. Roughly 2.5 million people who have been in repayment for 20 or more years could see relief.
In total, the new proposal would cancel student debt for over four million people and provide more than 10 million borrowers with at least $5,000 in debt relief, according to the White House.
I was eligible for Biden’s initial loan-forgiveness program. Do I qualify this time?
Not necessarily. The new program includes a different, but in some cases overlapping, set of eligibility requirements that are based on many factors, not just income.
When will the new program go into effect?
The Biden administration will roll out the new proposals in phases over the coming months, and it might not be finalized for several additional months after that. Officials said the plan to slash accrued interest could go into effect in the fall, and some in the administration hope that millions of people will see loan relief before the November presidential election.
Will the Supreme Court kill this plan, too?
Republican state attorneys general have said they are planning to challenge the new proposal, once it is finalized, with a goal of overturning it. They argue that Biden is overstepping his authority and misinterpreting the Higher Education Act, the 1965 law that the administration is using as a basis for the new proposal.
What else has the Biden administration been doing on student loans?
In addition to this new effort, the Biden administration has separately moved forward with more narrow student-debt forgiveness for four million Americans totaling more than $145 billion.
Loans have been canceled for nearly 900,000 public-service workers. Debts were also canceled for more than 930,000 borrowers who had been in repayment for at least 20 years. The administration also canceled $22.5 billion in debt for students who were misled by for-profit institutions, those whose schools abruptly closed, or who were covered by related court settlements. Debts were also canceled for more than half a million borrowers with disabilities.
The administration launched the Saving on a Valuable Education plan, or SAVE, an income-driven repayment program aimed at making debt payments more affordable for low- and middle-income borrowers. Nearly eight million borrowers have enrolled in the plan so far, and about half of them now have a monthly payment of $0. An additional million borrowers pay less than $100 monthly.
This explanatory article may be periodically updated.
Write to Andrew Restuccia at andrew.restuccia@wsj.com and Oyin Adedoyin at oyin.adedoyin@wsj.com
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