Another student loan relief plan is being proposed by the Biden administration. If it's implemented, more than 25 million borrowers could get their remaining loan balances forgiven as early as this fall.
The plan proposes two major changes, along with new efforts to assist borrowers already eligible for relief:
- Canceling student debt for borrowers who first entered repayment 20 or more years ago.
- Wiping out up to $20,000 in unpaid interest on loans that have entered repayment, regardless of income. Low- and middle-income borrowers could be eligible for even more.Â
The administration's newest plan, announced Monday, avoids the more sweeping forgiveness of last year's proposal, which was set to forgive up to $20,000 in federal student loans for all borrowers before it was blocked by the Supreme Court in June.
President Joe Biden introduced the new plan at a speech in Madison, Wisconsin, while Vice President Kamala Harris will travel to Philadelphia to promote the plan. Both Wisconsin and Pennsylvania are expected to be battleground states in the upcoming presidential election in November.Â
So far, the administration has approved $146 billion in student debt relief for 4 million Americans through various efforts. But millions are still holding onto hope that their balances will be lowered or forgiven altogether.Â
Here's what the new plan could mean for you.Â
Read more: Student Loan Forgiveness Deadline: Only 1 Day Left to Consolidate Your Student Loans
What the proposal means for borrowers
Under the Biden-Harris proposal, you may be eligible for lower student loan payments and you could see your balance reduced. For some, student loans may be forgiven altogether.Â
But keep in mind that this is still a proposal, and last year proved that a plan is no guarantee that loans will necessarily be wiped out. You'll still need to make your student loan payments on time. If you believe you qualify for an income-driven repayment plan, find out if you do. Many of the debt cancellation proposals fall under this type of plan for forgiveness. Here's a breakdown.Â
'Runaway interest' would be canceledÂ
What's different this time is the Biden administration is targeting what it refers to as "runaway interest." Over 25 million borrowers currently owe more than they borrowed because of unpaid interest accruing on federal student loans.
The plan would allow forgiveness for up to $20,000 of each borrower's balance that has grown due to unpaid interest on their loans after entering repayment, regardless of income.Â
Low- and middle-income borrowers enrolled in income-driven repayment plans, including the newest Saving on a Valuable Education plan, would be eligible to have their entire balances forgiven. That includes single borrowers making less than $120,000 and married borrowers earning less than $240,000. No application would be needed.Â
Combined, the plan would forgive the balances of 23 million borrowers, according to the administration.
Under the SAVE plan, if you make your full monthly payment, the government covers any remaining interest accrued that month. So far, 8 million are enrolled.Â
Student loan relief for those in repayment for over 20 yearsÂ
Borrowers who started repaying loans 20 years ago will have the remaining balances on student loans forgiven under this plan. You would qualify if you started paying undergraduate debt on or before July 1, 2005, or graduate school debt 25 or more years ago (on or before July 1, 2000). However, you must be enrolled in an income-driven repayment plan to qualify.
More than 2.5 million borrowers have held student loans for two decades or longer, according to the announcement.
Automatic cancellation for those already eligible who haven't gotten relief
One of the problems the administration pointed to was that too many eligible borrowers haven't received cancellation or lower payments due to hurdles like paperwork and bad advice. The plan proposes to automatically cancel debt for those eligible through the SAVE plan, Public Service Loan Forgiveness plan or other forgiveness like closed school loan discharges, but have been unsuccessful so far.Â
The plan also proposes cracking down on colleges that offer low-value programs and debt relief for those with programs or schools that closed and didn't provide value post-college.Â
There's a chance for relief due to hardshipsÂ
The Biden administration briefly mentioned that plans are in the works to help offer relief for those facing financial hardships and are at risk of defaulting on their student loans due to other priorities -- such as covering medical debt or child care. No specific details were shared for how this part of the plan would be implemented.Â
