Biden Announces Second Attempt at Widespread Student Loan Forgiveness
On Monday, President Joe Biden announced a second attempt at federal student loan forgiveness. The new plan, which is estimated to affect over 30 million borrowers when combined with earlier efforts, aims to enact widespread loan cancelation primarily by expanding existing forgiveness programs and targeting borrowers with high balances due to accumulating interest.
The Biden administration’s first attempt at large-scale federal student loan forgiveness was struck down by the Supreme Court last year in Biden v. Nebraska. The plan, unveiled in 2022, sought to provide up to $20,000 in federal student loan forgiveness for borrowers earning less than $125,000 a year and couples earning less than $250,000 annually.Â
Last June, the Court ruled in a 6–3 decision that Biden’s original plan was unconstitutional, finding that the HEROES Act, the 9/11-era law used to justify the loan forgiveness, did not give the Education Department the authority to forgive over $400 billion in federal student loans.
In contrast, the Education Department’s new plan is much less ambitious—though it is still likely to cost taxpayers hundreds of billions of dollars. The plan has five major provisions, detailed in a Monday press release.
First, the plan takes aim at borrowers who have seen their balances climb due to unpaid interest, seeking to cancel up to $20,000 of accrued interest for all borrowers. For borrowers enrolled in an income-driven repayment plan (IDR) making up to $120,000 a year, or $240,000 a year for couples, the Education Department plans to forgive all accrued interest.Â
Biden’s plan would also automatically cancel debt held by people who are eligible for loan forgiveness under an existing plan but haven’t yet enrolled. Considering that all borrowers are eligible to enroll in Saving on a Valuable Education plan (SAVE), an IDR plan that provides forgiveness after 10 years for those with balances under $12,000, this new change could effe
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