The Biden administration announced new student loan plans Monday that would provide relief to millions of Americans if finalized.
The proposed plans would largely affect those with “runaway interest,” as well as borrowers who have been paying on loans for 20 years, qualify for forgiveness under income-driven repayment (IDR) plans and those experiencing hardship.
The plans would give borrowers $20,000 in loan forgiveness for balances that have grown due to unpaid interest since entering repayment, regardless of income. Those who qualify for the SAVE IDR plan would get the full balance of their unpaid interest forgiven.
This would result in 25 million Americans getting relief from balance growth that was garnered by unpaid interest, with 23 million seeing their full balance growth canceled.
The administration is also aiming for automatic debt relief for those who qualify under the SAVE plan, Public Service Loan Forgiveness program and other loan forgiveness programs but have hit red tape in receiving their relief. It is estimated 2 million Americans would get full loan forgiveness through this option.
Lastly, the administration wants to give relief to those who were enrolled in low-financial-value education programs that have been deemed insufficient by the Department of Education, and borrowers who are experiencing hardship in paying back loans, such as those at high risk of defaulting on loans and families burdened with other debt, such as medical debt.
“The Biden-Harris Administration plans to release proposed rules on these plans over the coming months. If these plans are finalized as proposed, this fall the Administration would begin canceling up to $20,000 in interest for millions of borrowers and full loan forgiveness for millions more,” the administration said in its announcement.
The administration said the White House estimates more than 30 million Americans would have benefited from loan forgiveness from the plans during the past three years.
The administration is also emphasizing how its action will help Black and Latino borrowers and those who went to community college, who are more likely to struggle with student loan debt.
“These actions are expected to provide significant relief to Black and Latino borrowers, borrowers who attended community college, and borrowers who are financially vulnerable because they took out debt but never had the chance to complete their degree,” the administration said.
It will be months until it is known if these plans will be finalized. If the plans are approved, they will almost certainly be challenged in court.