The plan announced by the Biden administration will provide relief to various groups of borrowers, including:
— Borrowers with ballooning loan balances due to interest could have up to $20,000 of their interest balance forgiven. The plan would completely waive the interest balance for “low- and middle-income” borrowers enrolled in income-driven repayment plans.
This interest forgiveness would be a one-time benefit, with an estimated 23 million out of 25 million borrowers seeing their entire interest balance eliminated.
— Borrowers eligible for loan forgiveness under existing programs like Public Service Loan Forgiveness or SAVE would have their debts automatically canceled if they have not yet applied.
— Borrowers with undergraduate debt from over 20 years ago or graduate debt from over 25 years ago would have their debts canceled.
— Borrowers from programs or colleges that lost federal funding due to fraud or cheating, as well as those with high debt and low earning prospects, would qualify for debt forgiveness.
— Borrowers facing financial hardship due to medical or child care costs could also receive relief, with potential automatic forgiveness for those at risk of default.
How is this different from the last plan?
Initially, Mr. Biden proposed $400 billion in debt relief for 40 million borrowers under the HEROES Act, but the Supreme Court blocked this move citing exceeding authority.
The new plan targets specific groups under the Higher Education Act to forgive some or all loan debt for nearly 30 million borrowers, ensuring compliance with legal boundaries.
The administration, after studying the Supreme Court ruling from last year, designed the new program to align with the principles set by the justices.
