Biden’s Second Attempt at Student Debt Cancellation Gets an “Initial” Outline

By Hugh T. Ferguson, NASFAA Senior Staff Reporter

Following an unsuccessful first attempt at implementing widespread student debt forgiveness and a monthslong regulatory negotiating process President Joe Biden on Monday unveiled “initial” details on his administration’s new attempt to implement student debt cancellation through five separate plans.

According to the administration, when combined with previous actions made to the student loan portfolio, Monday’s announcement would stand to benefit over 30 million Americans.

The president, in a speech delivered on Monday highlighting the impact of various actions that the administration has taken on the student loan portfolio, outlined five new opportunites for  borrowers to qualify for debt forgiveness, developed through a series of negotiated rulemaking sessions over the last year after the United States Supreme Court blocked Biden’s plans for more widespread forgiveness. The administration noted that the new framework, as outlined, is contingent on the proposed regulations being finalized as proposed. While a Notice of Proposed Rulemaking is still forthcoming and will be subject to public comment before final rules are issued, the administration outlined some main components that will be found in the regulatory text.

Under the first provision the administration will seek to waive accrued and capitalized interest by canceling up to $20,000 of the amount by which a borrower’s balance has grown in unpaid interest on their loans after entering repayment. There will be no income cap on this relief.

Borrowers enrolled in the SAVE program, or another income-driven repayment (IDR) plan, will be eligible for a waiver of the entire amount their balance has grown due to interest accumulation since entering repayment. This relief would be limited to single borrowers earning less than $120,000 and married borrowers who file joint tax returns earning $240,000 or less.

This plan would not require an application.

The second provision would automatically discharge debt for borrowers who are “determined to be eligible” for loan forgiveness under SAVE; closed school discharge; Public Service Loan Forgiveness (PSLF); or “other forgiveness programs,” but have not enrolled. According to the administration no application would be required, ED would instead use its own available data to identify eligible borrowers.

Under the administration's third proposed loan forgiveness provision, the Department of Education (ED) would eliminate student loan debt for borrowers who have been in repayment for 20 years or more if they only hold undergraduate debt. Borrowers who hold graduate school debt would qualify if they entered repayment 25 years ago. Neither of these groups would need to be enrolled in an IDR plan and both Direct Loans and Direct Consolidation Loans would qualify for relief.

The fourth provision concerns borrowers who enrolled in low-financial-value programs or institutions that either lost their eligibility to participate in the federal student aid programs, were denied recertification due to misconduct or misrepresentation, or closed and failed to provide “sufficient value.”

The final plan is the broadest program, which seeks to assist borrowers experiencing financial “hardship” in their daily lives that is preventing them from repaying their loans.

This plan, which the administration says it is still pursuing, could include automatic forgiveness for borrowers predicted to be likely to default on their loans, or include an application for borrowers to detail their hardship — like child care or medical expenses — preventing them from being able to fully repay their loans.

Back in February, members of the negotiated rulemaking committee reached consensus on the drafted financial hardship regulatory text. The committee did not reach consensus on the other four provisions. Once the Notice of Proposed Rulemaking is published in the Federal Register, there will be a public comment period before a final rule is issued. If the final rule is issued before Nov. 1, 2024, the rule will take effect July 1, 2025.

ED does have the ability to early implement provisions of the framework like it did with its SAVE repayment plan by using its authority under the Higher Education Act (HEA). Either way, it will do so through an announcement in the Federal Register.

Sen. Bill Cassidy (R-La.), ranking member of the Senate Health, Education, Labor, and Pensions (HELP) Committee, accused the administration of playing politics with the timing of the announcement.

Cassidy argued that the action does nothing to solve the affordability crisis of higher education and went on to criticize the administration’s efforts to implement and roll out the 2024-25 FAFSA.

“The Department of Education’s implementation of FAFSA is in shambles after repeated blunders by the administration,” Cassidy said. “It seems the reason students don’t know what schools they can afford this year is because Biden’s Department of Education is spending its time concocting student loan schemes instead of fixing the mistakes they’ve already made on FAFSA.”

Meanwhile, Democrats who have been pushing the administration to implement student loan forgiveness praised the president’s announcement.

“These new rules from the Biden admin to #CancelStudentDebt will increase the number of people helped to 30 MILLION,” Senate Majority Leader Chuck Schumer (D-N.Y.) wrote. ”I’m proud I’ve been pushing @POTUS since day one of his admin to cancel as much student debt as possible, and we’ll keep going!”


Publication Date: 4/9/2024

David S | 4/9/2024 1:28:32 PM

All I'll say to Senator Cassidy's claim that this does nothing to solve higher ed's affordability crisis is that it solves it for those people who are going to be able to get out from under debt that's snowballed out of control not because they or their schools did anything wrong, but because Congress created a very bad student loan system. It's also going to continue to solve it for those whose schools never belonged in Title IV programs to begin with.

I look forward to the Senator's solution for the higher ed affordability crisis; so far I haven't heard one, only criticism of every action taken and suggestion offered by those who aren't members of his party.

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