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The Biden administration’s new plan to tackle student loan debt may provide relief to borrowers via forgiveness and or repayment options.
The new plan relies on the Higher Education Act, which was last reauthorized in 2022. Former President Lyndon B. Johnson initially signed off on the law in 1965 to help ensure that higher education was more accessible to the American masses by governing financial assistance, according to CBS News.
In a document outlining the potential of the new student loan forgiveness plan, the Department of Education highlighted the type of borrowers the Biden administration is interested in helping with its latest effort.
The five types of borrowers listed in the “issue paper” included the following:
- Those who’ve “seen their balances grow due to the accrual of unpaid interest,” leaving them with “overall balances higher than what they originally borrowed.”
- Those “eligible for forgiveness under programs such as income-driven repayment” but haven’t applied.
- Borrowers with debts from programs that didn’t provide “a minimum level of financial value sufficient to make loans affordable.”
- People who borrowed or entered repayment before Congress and the Department of Education established programs that could’ve reduced their debt.
- And borrowers who experience hardship “in ways that the current student loan system does not adequately address.”
The Biden administration’s potentially new student loan forgiveness plan comes after the Supreme Court’s move in June to block a previous proposal. That plan “would have provided forgiveness for up to 43 million borrowers,” according to the Department of Education.
The original plan would’ve swept away up to $20,000 for Pell Grants recipients and up to $10,000 of educational debts for other individual borrowers.
Forbes noted that the new plan “should be finalized by sometime next year.”
The source detailed that since the legislation relies on the Higher Education Act, it shouldn’t face the same roadblocks as its predecessor.
Still, the new plan does have its potential constraints.
The issue paper pointed out that there will only be four instances wherein the Department of Education can exercise the “compromise” of a borrower’s student loan debt. The circumstances include if the government cannot collect the full amount of the debt because:
- The debtor is unable to pay the full amount in a reasonable time, based on financial information;
- The government is unable to collect the debt in full within a reasonable time by enforced collection proceedings
- The cost of collecting the debt does not justify the enforced collection of the full amount; or
- There is significant doubt concerning the government’s ability to prove its case in court.
On Oct. 4, the Biden administration announced that it had been approved to provide over $9 billion in student debt relief to 125,000 Americans. The announcement highlighted that the new sign-off brought the administration’s total approved debt cancellation to $127 billion for nearly 3.6 million Americans.
In a piece published in June 2023, Politico highlighted that the amount of student loan debt Black women face on average can’t be discussed without also addressing the the racial wealth and wage gaps they face.
According to the American Association of University Women, the population graduates owing almost $22,000 in student debt on average, while men do so with $18,880. However, Black female graduates end up with an average of $37,558 in debt.
Moreover, the source noted that women took around two years longer to pay off their student loans and were “more likely to struggle economically as they do so” compared to men.
