The Biden administration is poised to introduce a new student loan forgiveness plan this October that could benefit at least 25 million borrowers. The program aims to provide relief to four groups of borrowers, including those experiencing runaway interest, those eligible for forgiveness under other programs but have not enrolled, undergraduate borrowers who entered repayment at least 20 years ago, and graduate school borrowers who entered repayment at least 25 years ago, and those who enrolled in low-financial-value programs. Education Department officials anticipate that up to 25 million borrowers could qualify for forgiveness under the runaway interest category alone.
The final rule for the new program is expected to be published in October, with early implementation to potentially kick in before July 2023. The plan includes automatic forgiveness for many borrowers, meaning they would not have to submit an application to receive relief. This streamlined process could significantly expedite the delivery of student loan forgiveness to millions of borrowers, eliminating the need for individual reviews of separate applications. Additionally, the administration is considering providing a fifth pathway for hardship-based student loan forgiveness, but this relief may not be available by October as the regulations for this category are still in draft form.
Legal challenges are expected to arise once the final rules for the new student loan forgiveness program are published. Biden’s first attempt at mass student debt relief faced legal challenges that led to the program being blocked before any borrowers received forgiveness. The Supreme Court ultimately ruled against that initiative, raising concerns about the legal foundation of Biden’s latest plan. The administration is hoping to rely on a provision of the Higher Education Act that allows the Secretary of Education to compromise or waive federal student loan obligations, but challengers may argue that this provision does not authorize mass loan forgiveness. The upcoming election will also play a crucial role in determining the fate of the new forgiveness program, as a return of former President Donald Trump to the White House could potentially halt the initiative.
Despite the potential for legal challenges and political hurdles, the new student loan forgiveness program could offer significant relief to millions of borrowers burdened by student debt. If successfully implemented, the initiative could provide much-needed financial assistance to individuals who have struggled to repay their loans. By targeting specific groups of borrowers and implementing automatic forgiveness where possible, the program aims to streamline the forgiveness process and provide relief to those in need. As the Biden administration moves forward with its plans, borrowers will need to stay informed about the developments and potential challenges facing the student loan forgiveness program.
