Written By Adam S. Minsky, JD
The Biden Administration approved $9 billion in student loan forgiveness for at least 125,000 borrowers this week. This is just the latest wave of student debt relief, bringing the Administration’s total student loan cancellation to at least $127 billion since President Biden took office.
“For years, millions of eligible borrowers were unable to access the student debt relief they qualified for, but that's all changed thanks to President Biden and this Administration's relentless efforts to fix the broken student loan system,” said Secretary of Education Miguel Cardona in a statement released on Wednesday. “The Biden-Harris administration's laser-like focus on reducing red tape, addressing past administrative failures, and putting borrowers first have now resulted in a historic $127 billion in debt relief approved for nearly 3.6 million borrowers. Today's announcement builds on everything our administration has already done to protect students from unaffordable debt, make repayment more affordable, and ensure that investments in higher education pay off for students and working families.”
Here's what borrowers need to know.
Who qualifies for student loan forgiveness under latest Biden Administration authorization
According to the Education Department, this week’s student loan forgiveness is tied to three primary initiatives:
- Public Service Loan Forgiveness (PSLF), which can provide federal student loan forgiveness to borrowers who work for 10 years or longer in qualifying nonprofit or government employment, while meeting other program criteria. The Biden Administration instituted several temporary “fixes,” such as the Limited PSLF Waiver and the IDR Account Adjustment, to allow borrowers to receive retroactive PSLF credit that previously had not counted toward loan forgiveness. The Education Department also implemented new regulations on July 1 that will make it easier for many borrowers to qualify for PSLF going forward. This week, the Administration announced it has approved $5.2 billion in student loan forgiveness under the PSLF program for 53,000 borrowers.
- Income-Driven Repayment (IDR), which allows borrowers to repay their loans based on formulas applied to their income and family size. After 20 or 25 years in IDR, borrowers would qualify for student loan forgiveness. But IDR plans have been poorly administered for years, resulting in millions of borrowers losing credit toward loan forgiveness. The Biden Administration’s IDR Account Adjustment is designed to remedy these past problems by awarding borrowers with IDR credit for prior loan periods that normally wouldn’t have counted. The $9 billion in student loan forgiveness announced this week includes $2.8 billion in debt cancellation approved for 51,000 borrowers under the IDR Account Adjustment. This is on top of another $39 billion in student loan forgiveness initially announced in July under the same program.
- Total and Permanent Disability (TPD) Discharge, which is a program that can cancel the federal student loan debt for borrowers who are unable to maintain substantial, gainful activity due to a longstanding, disabling medical condition. Historically, the TPD program has required borrowers to jump through a number of bureaucratic hoops in order to request and maintain student loan forgiveness. However, the Biden Administration has implemented several reforms including a data-sharing initiative between the Social Security Administration and the Education Department, to allow for automatic approvals for borrowers receiving disability benefits, as well as new regulations designed to ease access and remove barriers during a three-year post-discharge monitoring period. The Administration has already approved $10 billion in student loan forgiveness under the TPD program. This week, the Education Department announced another $1.2 billion in debt relief for 22,000 borrowers.
Get Started With Our New IDR Calculator
Republicans oppose Biden's student loan forgiveness initiatives
Shortly after the Biden administration’s announcement, congressional Republicans announced their opposition.
“The Department still refuses to share with Congress what statutory authority they are claiming to justify this expenditure of taxpayer dollars,” said Senator Bill Cassidy (R-LA), ranking member of the Senate Health, Education, Labor, and Pensions (HELP) Committee, in a statement. “This is part of a pattern of the Biden administration illegally acting without congressional approval, costing the American people hundreds of billions of dollars.”
President Biden quickly countered. “We are doing everything we can to deliver student debt relief to as many as we can as fast as we can,” he said in a tweet on Thursday. “Contrast this with House Republicans who helped block the previous debt relief plan and nearly shut down the government over extreme demands that would have hurt families.”
Congressional Republicans are also undertaking an effort to repeal Biden’s SAVE plan, a new IDR option designed to be more affordable than prior repayment programs. However, even if the repeal legislation passes both the House and Senate, Biden would effectively kill the measure through his veto. Congress could only overturn the expected veto with a two-third supermajority in both chambers; given near-even control of Congress, this is highly unlikely.
Biden working on other student loan forgiveness initiatives
In addition to the SAVE plan and the targeted student loan forgiveness initiatives announced this week, the Biden administration is also working to develop a new student debt relief plan, after this summer’s Supreme Court ruling struck down Biden’s initial program.
“In the wake of the Supreme Court decision on the Administration's original student debt relief plan, President Biden announced his Administration was pursuing an alternative path to debt relief through negotiated rulemaking under the Higher Education Act,” said the Department in a statement this week. “The Department of Education took an important step forward in the negotiated rulemaking last week – announcing individuals who will serve on the negotiating committee and releasing an issue paper to guide the first negotiating session. The paper asks the committee to consider how the Administration can help borrowers, including borrowers whose balances are greater than what they originally borrowed, who would be eligible for relief under existing repayment plans but have not applied, and who have experienced financial hardship on their loans that the current loan system doesn't address.”
The new plan could be made available sometime in 2024. However, it will almost certainly face legal challenges.
Not sure what to do with your student loans?
Take our 11 question quiz to get a personalized recommendation for 2024 on whether you should pursue PSLF, Biden’s New IDR plan, or refinancing (including the one lender we think could give you the best rate).
