President Joe Biden is taking another shot at reducing student loan debt, 10 months after the Supreme Court rejected an earlier $400 billion plan to forgive loans for roughly 40 million borrowers.
The White House on Monday announced a new proposal to forgive student debt for borrowers who have seen their loan balances increase due to accrued interest, even if they had made payments for years. Under the proposed plan, all such borrowers would be eligible for forgiveness of as much as $20,000 in accrued interest. In addition, borrowers earning less than $120,000 a year ($240,000 for couples) would be eligible to have all accrued interest forgiven if they are enrolled in an income-driven repayment plan.
The plan would also eliminate student loan debt for borrowers who have been making payments for more than 20 years on undergraduate loans and 25 years on graduate loans. Borrowers who were students at institutions that failed to meet certain quality standards or offered “low-financial value” programs would also see relief. And borrowers facing certain economic hardships, such as medical debt or high child-care expenses, could also be eligible for loan forgiveness.
The administration did not provide an estimate of the cost of the plan, which would operate automatically, without requiring beneficiaries to apply for forgiveness.
According to the White House, the proposals released today would benefit about 25 million borrowers. Combined with existing loan forgiveness programs, which have provided $146 billion in student debt relief, the total number of people gaining some level of student loan forgiveness under the Biden administration would come to roughly 30 million.
The political angle: Speaking to reporters on his way to a rally in the college town of Madison, Wisconsin, Biden pitched his proposal as a matter of fairness and opportunity. Saying he wanted to “give everybody a fair shot” and the “freedom to chase their dreams,” Biden criticized the soaring cost of higher education.
“Even when they work hard and pay their student loans, their debt increases and not diminishes,” Biden said. “Too many people feel the strain and stress, wondering if they can get married, have their first child, start a family, because even if they get by, they still have this crushing, crushing debt.”
But student debt relief is also an important political issue. Biden pledged to provide student debt forgiveness when he was running for office in 2020, and his failure to provide comprehensive relief has hurt him with some of the younger voters he will need at the ballot box in his rematch with former President Donald Trump this fall.
In an effort to avoid a political fight over the new plan, the Biden administration will introduce the proposal as a rule put forth by the Education Department in the coming weeks. This approach will bypass congressional input, but it still leaves the program open to potential legal challenges. The administration has reportedly spent months anchoring the new plan in the 1965 Higher Education Act, in the hope that, unlike its previous effort, the loan forgiveness plan will pass muster with the courts.
