President Biden will be announcing new proposals for partial or complete student loan forgiveness on Monday in Wisconsin. The main focus of these new proposals is to target accrued and capitalized interest on student loans, as 25 million Americans who used federal student loans now owe more than they originally borrowed due to accumulated interest charges. However, these proposals will need to go through the federal rulemaking process and a public comment period before any student loan balances can be lowered.
The plan to target interest on student loans will start the federal rulemaking process in the coming months, with a prediction that partial loan forgiveness could happen by early fall if approved. Under this plan, 23 million American borrowers may have all of their balance growth forgiven, with eligibility for up to $20,000 of interest-specific costs being waived for borrowers with federal student loans. Low and middle-income borrowers, as well as those making under $120,000 per year and enrolled in income-based repayment plans, could see their entire balance growth waived since entering repayment.
In addition to interest-specific loan forgiveness, the Education Department is proposing to automate existing loan forgiveness programs like the Public Student Loan Forgiveness plan and forgiveness of undergraduate student loan balances after 20 years of payments. Borrowers would no longer need to apply for these forms of loan forgiveness, and the administration is also pursuing a specific action dedicated to canceling student debt for borrowers experiencing hardship. However, few details were shared about this proposal. These new loan forgiveness proposals may face potential legal challenges, as the president’s original loan forgiveness proposal was struck down by the Supreme Court last year.
The Department of Education’s legal justification for the original loan forgiveness proposal relied on the 2003 HEROES Act, which authorizes the education secretary to waive or modify student financial assistance programs for borrowers in connection with a national emergency. The Supreme Court ruled that this law does not grant the secretary that authority. Republican attorneys general are also challenging Mr. Biden’s second loan forgiveness process, the “SAVE Plan,” which is based on borrowers’ income and cancels monthly payments for low-income Americans. Despite potential legal hurdles, senior administration officials expressed confidence in the legal basis for these new loan forgiveness proposals.
Overall, these new student loan forgiveness proposals aim to address the growing issue of student loan debt in America. By targeting accrued and capitalized interest, automating forgiveness programs, and providing relief for borrowers experiencing hardship, the Biden administration is working to provide much-needed assistance to millions of Americans burdened by student loan debt. If approved, these proposals could have a significant impact on borrowers’ financial situations and help alleviate the economic strain caused by student loan debt.
