President Joe Biden on February 21, 2024, visiting a library in Culver City, California.
Irfan Khan | Los Angeles Times | Getty Images
President Joe Biden will announce a sweeping new student loan forgiveness plan on Monday that could benefit tens of millions of Americans.
Biden will share details of the relief package at an event in Madison, Wisconsin.
The news comes less than a year after the Supreme Court rejected his first attempt to cancel up to $20,000 in student debt per borrower. Conservative judges ruled that effort was unconstitutional in June.
While Biden’s Plan B for student loan forgiveness will be narrower than his initial effort, tens of millions of borrowers could still see their balances canceled or reduced if the program survives legal challenges this time.
“These historic steps reflect President Biden’s determination that we cannot allow student debt to leave students worse off than before they went to college,” U.S. Under Secretary of Education James Kvaal said in a statement.
Kvaal added that Biden has directed the department to “complete these programs as quickly as possible, and we will do just that.”
Who can benefit from the new forgiveness plan
Biden’s revised plan targets specific borrowers, including those who:
- They are already eligible for debt relief under an existing government program but have not applied
- I have been in repayment for 20 years or more for undergraduate loans or 25+ years for graduate loans
- He attended schools of questionable value
- They are going through financial difficulties
It’s not yet entirely clear how financial hardship will be defined, but it could include those burdened by medical debt or high child care expenses, the Biden administration said.
The president is also expected to discuss a plan to “erase the runaway interest” of millions of borrowers.
Consumer advocates have long criticized that interest rates on federal student loans can top 8%, which can make it difficult for borrowers who fall behind or are on certain payment plans to reduce their balances. Some end up owing more than they originally borrowed, even after years of repayment.
The Biden administration estimates that if its new plan is implemented as proposed, borrowers will receive up to $20,000 in unpaid interest on federal student debt, regardless of their income. Some low- and moderate-income borrowers may have the entire amount of interest accrued on their debt canceled since they made their repayment.
A smaller aid package that Biden hopes will survive
The Biden administration believes its updated plan will survive legal challenges this time for several reasons.
In addition to this effort being a more targeted aid program, the Department of Education is also using a different law – the Higher Education Act – as a legal justification. Biden’s initial pardon effort relied on the Heroes Act of 2003.
The HEA was signed into law by President Lyndon B. Johnson in 1965 and allows the Secretary of Education some authority to waive or discharge borrowers’ educational debt.
The Heroes Act was passed in the aftermath of the September 11 terrorist attacks and grants the president broad powers to review student loan programs during national emergencies. The Biden administration sought to use this law in its first pardon attempt because at the time the country was under a national state of emergency due to the Covid-19 pandemic.
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However, the conservative justices did not accept this argument.
“‘Can the Secretary use his powers to abolish $430 billion in student loans, completely wiping out loan balances for 20 million borrowers, as a pandemic draws to a close?’” Chief Justice John Roberts wrote in the opinion of the majority for Biden v. Nebraska. “We can’t believe the answer would be yes.”
Finally, the Biden administration has now turned to the regulatory process to provide its relief. The president had previously attempted to cancel the debt through executive action.
Canceling student debt is an important issue for voters
Biden will likely want to begin forgiving student debt before voters vote in November.
Nearly half of voters in a recent poll, or 48%, say student loan debt relief is an important issue for them in the 2024 presidential and congressional elections. SocialSphere, a research and consulting firm, surveyed 3,812 registered voters, including 2,601 Gen Z and millennial respondents, as of mid-March.
Forgiving student debt could help Biden especially with young voters, a demographic he has struggled with. According to the same survey, about 70% of Gen Z respondents said student debt cancellation was important to them during the election. More than half (53%) of respondents from that generation said they or someone in their family has student debt.
Biden’s plan is estimated to reach more than 30 million borrowers when combined with other ongoing debt relief efforts, his administration said.
Primarily by improving existing loan relief programs, the Biden administration has now paid off the education debts of 4 million people, for a total of $146 billion in aid.
This is breaking news. Please check back for updates.