How Millions of Borrowers Could Benefit From Biden's Student Debt Relief Plans

The Biden administration unveiled a new set of plans on Monday that would eliminate student debt for millions of Americans. The administration says that, if fully implemented, it would bring the number of borrowers who’ve seen some or all of their debt forgiven during the president’s term to more than 30 million.

The new plan, aiming to supplant an earlier version that was rejected by the U.S. Supreme Court in June, offers targeted relief to specific groups of borrowers, notably those who’ve carried debt for many years, and those struggling to make payments. And many borrowers, regardless of income, could see relief from high interest balances.

U.S. Education Secretary Miguel Cardona said the new proposals will fulfill a promise the president made while a candidate in 2020. The relief offered, he added, will mean “breathing room” for many borrowers. “It means freedom from feeling like your student loan bills compete with basic needs like grocery or health care.”

The announcement spelled out efforts aimed at four groups of borrowers: those who owe more money than they did at the start of their repayment, borrowers who started paying more than 20 years ago, those already eligible for existing loan forgiveness or discharge programs but haven’t yet applied, and borrowers facing economic hardship.

Addressing ‘runaway interest’

More than 25 million borrowers, the administration said, owe more in student loans now than they took out originally, due to what Cardona called “runaway interest.” The first element of the new plan would allow any borrower, regardless of their income, to cancel up to $20,000 in interest.

In addition, low- and middle-income borrowers who are enrolled in an income-driven repayment plan would have all of their interest forgiven. This group of borrowers includes single borrowers earning $120,000 or less a year, and married borrowers who make $240,000.

If the plans go through as proposed, there would be no application necessary.

The administration estimates that this proposal would forgive some interest balances for 25 million borrowers, with 23 million receiving full forgiveness on their interest. Currently, about 43 million Americans have some form of student loan debt.

Automatic discharge for eligible borrowers

Since Biden took office, several student loan programs have been revamped or re-negotiated to help ease borrowers’ debt, though many still require borrowers to apply. (The programs can be dense, but NPR has previously reported on these programs and how to navigate them: including the SAVE program, public service loan forgiveness, and closed schools discharge.)

As the administration noted in its announcement, not every borrower who qualifies for these programs has applied, with more than 2 million eligible borrowers who have not done so.

Under the proposed plan, qualifying borrowers would no longer have to enroll to receive forgiveness. The Education Department plans to use use data it already has to identify those borrowers, and automatically credit their accounts.

Relief for long-time borrowers and those experiencing hardship

The new proposals would also help long-term borrowers. According to the Education Department, more than 2.5 million borrowers have carried student loan debt for more than two decades. Under the plan, borrowers carrying undergraduate debt would qualify for forgiveness if they started repayment on or before July 1, 2005. Borrowers with graduate school debt would qualify if they started repayment on or before the same date in 2000.

In keeping with the theme of these announcements, borrowers would not need to be enrolled in any plan to qualify. The relief would be automatic.

A separate component would help those experiencing economic hardship. Some of this relief would be also happen automatically — for example, if a borrower is at a high risk of defaulting on their student loans. Other relief would require an application. The administration says borrowers who are struggling with medical debt or child care could apply for this program, if it is implemented.

A new legal foothold for sweeping debt relief

The Biden administration has made multiple attempts at discharging student loan debt since taking office. Perhaps most notably in 2022: The president announced widespread relief of up to $20,000 for qualifying borrowers. Millions of borrowers filled out the form to opt-in to the program, but the project was put on hold due to legal challenges. The Supreme Court struck down that plan in June of 2023.

This new approach has been in the works for some time, as the Education Department has been undergoing what’s called “negotiated rule-making” to develop a new avenue for debt relief since the original plan was overturned in June. They’ve been hearing from stakeholders, advocates, and critics in advance of this announcement.

It’s expected the new proposals will take some time before eligible borrowers can begin to see their debt eliminated. The Education Department must gather public comment on the proposal before issuing a final version of its plan.

The plan will likely face legal challenges as well, though though the rulemaking process may put this effort on stronger legal ground than the first debt-relief plan.

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