Biden Announces Student Loan Forgiveness Plan: A Second Wind for Millions

New initiative on the forgiveness of student loans by the administration of President Joe Biden is going to change the face of such efforts targeting as many as 30 million Americans, which are in sharp contrast with an earlier proposal struck down this June 2023 by the Supreme Court; targeting long-time borrowers' ballooning loan balances.

Under the new plan, borrowers who make up to $120,000 and married couples who make up to $240,000 could wipe out up to $20,000 in unpaid interest if their outstanding loan balances exceed what they initially borrowed. The relief would go to those who have been making steady payments on undergraduate and graduate debts for 20 and 25 years, respectively. It also promises to write off debts for those borrowers who have taken loans for "low-financial-value programs" and those experiencing severe financial hardship.

The amazing thing about this broad forgiveness is that much of it will be automatic, though some borrowers may have to submit additional information. The goal of offering debt relief would be to make it more available even to those who haven't applied for earlier loan forgiveness programs.

All the same, estimates by the White House show that there would be 25 million persons whose estimated benefits can be derived. The White House projections on what the numbers would be purely on behalf of the interest relief provisions almost 23 million balances which shall have the full accrual completely wiped out; about 4 million persons may enjoy complete debt cancelation, and upwards of well over 10 million being booked a minimum of $5,000.

While the Biden administration is getting ready to start implementing the plans over the coming months, hurdles are still ahead: Republican state attorneys general plan to file lawsuits against the new plan on the grounds that it exceeds presidential authority and improperly interprets the Higher Education Act of 1965.

Also, the timeline is tight with the fast-approaching presidential election. A reduction in accrued interest could thus be hopefully put in place this fall for the administration, reaching millions before the November polls. The fate of the plan will be in a complex process of regulations and probable court litigations that could further delay its execution.

But all this is the ambitious part of Biden's bigger push in providing relief on student debt. To date, it has wiped out more than $145 billion in loans to four million Americans, including about 900,000 public-service workers and over 930,000 long-term borrowers. Roughly eight million borrowers have enrolled already under SAVE-an income-driven repayment plan designed to make payments on debt more affordable to low-and middle-income people.

While laudable, Biden's efforts are not without their own legal and political roadblocks. As the administration wades its way through these challenges, the future of this game-changing student-loan forgiveness plan has yet to be observed-especially with potential opposition in Congress and the election results yet to come.