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Over 30 million student-loan borrowers would see some — or all — of their balances wiped out in Biden's newly released plan for debt relief

Ayelet Sheffey   

Over 30 million student-loan borrowers would see some — or all — of their balances wiped out in Biden's newly released plan for debt relief
  • The White House released new details for Biden's second attempt at broader student-debt relief.
  • If implemented as proposed, it could benefit over 30 million borrowers.

President Joe Biden's second attempt at student-loan forgiveness is taking a key step forward.

On Monday, the White House and Education Department released details on the administration's plan to cancel student debt for millions of borrowers after the Supreme Court struck down its first attempt in June of last year.

According to a White House fact sheet, the new plan — if implemented as proposed — would provide debt cancellation to over 30 million borrowers when combined with prior debt relief actions. It would "fully eliminate" any accrued interest for 23 million borrowers, give more than 10 million borrowers at least $5,000 in relief, and cancel 4 million borrowers' entire balances.

"These historic steps reflect President Biden's determination that we cannot allow student debt to leave students worse off than before they went to college," Undersecretary of Education James Kvaal said in a statement. "The President directed us to complete these programs as quickly as possible, and we are going to do just that."

The plan has been a work in progress for months. Since the Education Department seeks to implement this relief under the Higher Education Act of 1965, it must conduct a series of negotiation sessions with stakeholders to help determine the final plan for relief. The final negotiation session concluded in February, and Monday's announcement offered new details about which borrowers will benefit this time around.

Specifically, borrowers whose balances have grown because of unpaid interest would see up to $20,000 in debt cancellation, regardless of their income. The plan also aims to cancel student debt for borrowers eligible for relief under certain repayment plans, like Public Service Loan Forgiveness or the SAVE income-driven repayment plan, but have not yet enrolled.

"Too many borrowers eligible for relief — including immediate cancellation — have not been able to overcome paperwork requirements, bad advice, or other obstacles," the fact sheet said.

Additionally, the plan would cancel student debt for borrowers who first entered repayment at least 20 years ago — and it would also provide relief to borrowers who attended "low-financial-value programs" that left them with too much debt compared to post-graduation earnings.

The fact sheet also appears to answer advocates who pushed for a relief category for borrowers experiencing hardship. While it did not outline specific categories to determine financial hardship, it said the relief could benefit "borrowers who are at high risk of defaulting on their student loans, who could be eligible for automatic relief, or families who are burdened with other expenses like medical debt or child care who can apply for relief in the future."

A senior administration official told Business Insider on a Sunday press call that the goal is for the majority of the relief to be automatic, meaning borrowers will not need to take any action on their part to become eligible. However, the administration needs to finalize more details when determining hardship relief.

These plans are not yet set in stone — senior officials said the administration would release the proposed text for the rules "over the coming months." Upon being finalized, borrowers could begin seeing relief as early as this fall. The public will also have an opportunity over the next few months to comment on the proposals, and the administration could choose to amend its plan depending on the responses it receives.

Although this is a narrower scale for relief than the initial plan struck down by the Supreme Court, it's likely to face legal challenges from conservative groups that could hinder or block its final implementation. Still, senior administration officials told reporters the new plan is consistent with the Supreme Court's decision and can be implemented within the law.

Biden is expected to officially announce the new plan during remarks in Wisconsin on Monday afternoon.