Apr 8, 2024
President Joe Biden is set to unveil his new student debt relief plans today in Madison, Wisconsin — which could rally more support amid election season.
Other members of the Biden administration are traveling to important swing states to announce the plan as well, with Vice President Harris speaking in Philadelphia, Pennsylvania, Second Gentleman Douglas Emhoff in Phoenix, Arizona and Secretary of Education Miguel Cardona in New York City.
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“Today’s announcement shows that we are continuing to fulfill our promises,” Miguel Cardona, the secretary of education, told reporters. “We’re delivering as much relief as possible, for as many borrowers as possible, as quickly as possible.”
The White House says its newly proposed plan would completely wipe away the accrued interest for 23 million, cancel the student debt burden for over 4 million and provide more than 10 million borrowers with at least $5,000 in relief.
New plans for student debt relief
More than 25 million borrowers — even those who have made years of payments — owe more than what they originally borrowed on their student loans thanks to hefty interest rates. Many are grappling with capitalized interest, as their unpaid interest gets added to their principal balance, which means their balances keep snowballing.
The White House’s newest plan aims to tackle that by canceling up to $20,000 in debt for certain borrowers who’ve seen their balances grow thanks to this “runaway interest.” These borrowers, regardless of income, would then be left with just the amount they’d originally borrowed to repay.
As for low- and middle-income borrowers enrolled in the SAVE plan or another income-driven repayment (IDR) plan, they’d see all of their interest forgiven.
The proposed new rules would also grant automatic relief to around 2 million borrowers who already qualify for forgiveness under existing programs, but have yet to apply for it.
Another 2.5 million individuals who took out federal loans for their undergraduate degrees and began repaying them over 20 years ago and graduate student borrowers who began repaying their debts 25 years ago would also automatically see their debts cleared.
Biden’s plans include borrowers who attended colleges that have since lost their certification or eligibility to participate in the federal student aid program, or “programs that closed and failed to provide sufficient value,” like leaving graduates with hefty debt and earnings comparable or less than someone with a high school diploma earns, would also qualify for relief.
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And, finally, borrowers experiencing “hardship” — at high risk of defaulting on their student loans or burdened with medical debt or child care — could be eligible for relief as well.
In total, the White House estimates it would forgive some interest balances for 25 million borrowers, with 23 million likely to receive full forgiveness.
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Will Biden’s plans be approved?
The White House says this new plan, along with the administration’s previous actions to cancel student debt over the past three years, would bring the total of American borrowers it has provided with relief to 30 million.
It plans to release specific terms on these plans over the coming months.
However, as part of the process, the Education Department will first seek out public comment on the proposal, reports NPR. And the forgiveness plan is likely face opposition from Republicans, which could further delay the approval process or even prevent it from passing entirely.
Sen. Bill Cassidy blasted Biden’s plans in a recent statement.
“These loan schemes … transfer the debt from those who willingly took it on to the 87% of Americans who decided to not go to college or already worked to pay off their loans,” Cassidy wrote.
“This is an unfair ploy to buy votes before an election and does absolutely nothing to address the high cost of education that puts young people right back into debt.”
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Serah Louis is a reporter with Moneywise.com. She enjoys tackling topical personal finance issues for young people and women and covering the latest in financial news.
