Written By Adam S. Minsky, JD
The Biden administration’s student loan relief agenda is in full swing.
Despite the Supreme Court’s rejection in 2023 of President Biden’s mass student loan forgiveness plan (which would have wiped out up to $20,000 in student debt for many Americans), the Education Department has been erasing student debt through a combination of regulatory changes, temporary initiatives, and new programs.
To date, borrowers have seen nearly $140 billion in student loan forgiveness.
Regular announcements by the administration of new relief measures happen nearly every month. During the week of February 19, 2024, three major loan forgiveness programs are at the center of major developments. Here’s the latest.
153k borrowers benefit from student loan forgiveness under SAVE plan
The Biden administration announced the first wave of accelerated student loan forgiveness under the Saving on a Valuable Eduction (SAVE) plan, a new income-driven repayment (IDR) plan first released in the fall of 2023.
SAVE has a higher poverty exclusion limit, a more beneficial repayment formula, and a unique interest subsidy. Taken together, the plan can dramatically lower a borrower’s monthly payment compared to other IDR plans in most cases.
SAVE also can allow for faster student loan forgiveness. While most IDR plans (including SAVE) provide loan forgiveness after 20 or 25 years in repayment, borrowers can receive loan forgiveness under SAVE in as little as 10 years if they have relatively small initial balances. The Biden administration implemented this feature of SAVE in February 2024, benefiting an initial wave of 153,000 borrowers.
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Celebrating early victories
President Biden highlighted this achievement in a statement on Wednesday, February 21, 2023, “Starting today, the first round of folks who are enrolled in our SAVE student loan repayment plan who have paid their loans for 10 years and borrowed $12,000 or less will have their debt canceled,” said President Biden. “That’s 150,000 Americans and counting. And we’re pushing to relieve more.”
“…folks who are enrolled in our SAVE student loan repayment plan who have paid their loans for 10 years and borrowed $12,000 or less will have their debt canceled.”
President Biden
This initial relief is geared toward low-income borrowers, those who attended community colleges and other two-year programs, and borrowers of color.
“Today’s announcement from the Biden Administration is welcome news for those fighting a battle that is far from over,” said NAACP National Director of Youth & College, Wisdom Cole, in a statement. “The Administration must continue this work and make relief a reality for those whose tireless work has brought us here… The NAACP will not stop until Black America receives the relief we deserve.”
Republican leaders were critical of the loan forgiveness announcement, suggesting it served as a distraction for the administration’s botched rollout of the new FAFSA form earlier this year.
“The Biden Department of Education has been unable to fulfill their basic responsibilities mandated by Congress and essential to families like implementing FAFSA. Instead, they have spent a considerable amount of time prioritizing their student loan schemes to shift someone else’s debt onto taxpayers that chose not to go to college or already paid off their loans,” said U.S. Senator Bill Cassidy (R-LA) in a statement. “This is unfair, manipulative and a cynical attempt to buy votes.”
A new forgiveness framework for specific borrower categories
Moving forward, the Biden administration is also holding public hearings to finalize a process to develop a new student loan forgiveness plan targeting specific borrower categories.
This plan — which officials are working to finalize by the spring — will consider the amount of time borrowers have been in repayment, the school attended, eligibility for existing loan forgiveness plans, and their experiences with negative amortization.
Officials are now considering a broad fifth category for student loan forgiveness under the new plan based on hardship. According to draft regulations released, the Education Department could consider a variety of factors in determining whether a borrower qualifies for student loan forgiveness based on hardship under the new plan.
Among other indicators, factors can include the borrower’s:
- Income, assets and other financial obligations
- Age and disability
- Public means-tested benefits
- Educational attainment
“[We] applaud the Department of Education for the proposed hardship rule that could provide millions of borrowers with vital economic opportunity and reprieve,” said Satra D. Taylor, Director of Higher Education and Workforce Policy and Advocacy at Young Invincibles, in a statement. “We are eager for discussions to ensure young adults are not a forgotten group for future relief. We look forward to continuing working with the Biden Administration to finish the job and find an equitable solution to this crisis.”
Hardship-based forgiveness hearing and future planning
The Education Department held a negotiated rulemaking hearing on the details of hardship-based student loan forgiveness under the new plan. A committee of individuals representing key stakeholders will try to come to an agreement on the regulatory language. There will also be an opportunity for public comment.
The department is expected to release final regulations for the new program in the spring of 2024. After that, the administration could make the new program available as early as the fall of 2024. However, most observers anticipate legal challenges.
IDR account adjustment awards nearly $5 billion in forgiveness for borrowers
Meanwhile, the Biden administration continues to implement relief under the IDR Account Adjustment. This temporary program credits borrowers with time toward their 20- or 25-year loan forgiveness term under IDR plans for periods that might not have previously counted.
In February 2024, another 30,000 borrowers received nearly $5 billion in student loan forgiveness under the initiative. This is just the latest wave of approvals, which have been ongoing since July 2023. As of February 2024, the administration has green-lit $45.6 billion in student loan forgiveness for 930,500 borrowers, according to data released by the Education Department.
Looking ahead: Continued efforts to expand relief
The department will continue implementing the IDR Account Adjustment until July 2024, when officials expect it to be completed. The department will publish IDR payment counts for borrowers who have not yet reached the point where they qualify for loan forgiveness. They will be able to continue in an IDR plan to get the rest of the way to a discharge. Officials expect most borrowers to shave off an average of three years in repayment as a result of the adjustment.
Borrowers with commercially-owned FFELP loans and other federal student loans not held by the Department of Education would need to consolidate their loans through the federal Direct consolidation program before April 30, 2024, to benefit from the adjustment, according to published guidance.
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