President Biden said on Friday that 74,000 more borrowers would have their student loans forgiven for an additional $5 billion. After the Supreme Court invalidated his more expansive debt forgiveness plan last year, this is the most recent round of student debt cancellations. John Yang learns more about Biden’s efforts by speaking with Danielle Douglas-Gabriel, a Washington Post reporter who focuses on the economics of higher education.
Relief would be targeted
Far fewer would qualify under Plan B. Strict eligibility requirements for the proposed relief are intended to identify the most vulnerable borrowers.
Negotiation notes made public in early November state that the Education Department seeks the cancellation of student loans for the following four categories:
- Borrowers with balances greater than what they originally borrowed. The government would erase any amount over what you initially borrowed if the interest on your loan increased to be greater than your principal balance.
- Borrowers who’ve been in repayment for at least 25 years. By July 1, 2025, if you have been in repayment for at least 300 months—including times when you have defaulted, deferred, or forbeared—your remaining balance may be erased.
- borrowers who participate in programs that don’t offer enough financial return Your loans may be forgiven if you attended a career-training program that resulted in excessive debt loads or inadequate earnings, or if the school you attended had unacceptable rates of student loan default.
- Borrowers who are eligible for relief programs but have never applied Even if you never applied, you may still be eligible for relief if you meet the requirements for targeted loan forgiveness programs like Public Service Loan Forgiveness (PSLF) or could have met the loan forgiveness threshold for an income-driven repayment (IDR) plan. Quantities of forgiveness would be determined by the requirements of the program that you qualify for.
The fifth borrower category, those going through “financial hardship,” may also be eligible for the relief, according to the Education Department. ” This definition is not yet set in stone. The following requirements might be necessary for borrowers to be eligible for this group:
- Attended a school that closed.
- Received a Pell Grant.
- Have parent loans and student loans of their own.
- Are enrolled in Medicare.
- Did not finish their program.
- Face major medical or childcare costs.
- Are over a certain age.
- Have declared bankruptcy.
In contrast, Biden’s initial relief plan qualified 43 million borrowers. Students who received a Pell Grant to assist with their educational expenses could have been eligible for up to $20,000 in student debt cancellation; anyone making less than $125,000, or $250,000 for married couples, would have been eligible for up to $10,000 in student debt cancellation.
Higher Education Act justifies Plan B
The Higher Education Act, or HEA, is being used by the White House to advance Plan B. The 1965 legislation laid the foundation of the modern U. S. college funding system. It created and oversees grants, federal loans, and other student financial aid programs, and it gives the education secretary the authority to “compromise, waive, or release” federal student loans.
Under Biden’s plan A, the Heroes Act of 2003 would have eliminated debt. The Secretary of Education may “waive or modify” student loan obligations for borrowers impacted by a war, military operation, or national emergency under this law, which was passed by Congress in the wake of the 9/11 attacks. The Supreme Court finally declared that the White House’s interpretation of the pandemic as a national emergency that warranted loan cancellation was unconstitutional.
While the HEA does not contain any special conditions, such as a national emergency, it does permit the secretary to waive federal student loans.
The government has previously requested that the HEA waive student loan debt in certain circumstances. The PSLF and IDR programs, which erase student debt after qualified borrowers make payments for a predetermined number of years, were made possible by the HEA. According to the Education Department’s October report, the Biden Administration has been in charge of 715,000 borrowers who have been granted loan forgiveness under the PSLF program totaling nearly $51 billion. The HEA is also behind the $6 billion Sweet v. Around 300,000 deceived borrowers will have their debt discharged and past-due loan payments reimbursed under the terms of the Cardona settlement in 2022.
Forgiveness would occur in 2025
By using the HEA’s “compromise and settlement authority,” the Department of Education is able to issue new regulations through a procedure known as negotiated rulemaking. Beginning on June 30, this back-and-forth between regulators, negotiators, and the general public could take up to a year to finish.
As of late September, the Education Department had received 26,000 public comments.
The relief plan was first discussed by a committee made up of a representative from the Education Department and non-federal negotiators from organizations like the National Consumer Law Center, The Pennsylvania State University, and the NAACP on October 10 and 11. A second negotiation occurred on Nov. 6-7, with a third round slated for December.
Draft rules are expected next year. The Education Department may implement forgiveness in the summer of 2025 if the plan is successful.
What we still don’t know
Biden’s Plan B still comes with a long list of unknowns, as regulators iron out the details in negotiated rulemaking. Sign up for Education Department alerts to keep up with the latest announcements.
Here are the key outstanding questions:
How much relief will borrowers get?
The amount of forgiveness under the current version of Plan B is contingent upon the borrower’s eligibility for relief; however, the exact figures are still pending.
The initial plan provided relief of up to $20,000 for each individual borrower.
How will the relief be administered?
Negotiators have left open the possibility that the majority of relief would be automatic for qualified borrowers as of early November, but that could change.
Borrowers had to apply for the debt cancellation under Biden’s initial plan. Approximately 26 million debtors filed applications prior to litigation stopping the distribution.
What will the final rules be?
Concrete details will become available in 2024. We only have notes from the negotiated rulemaking process at this time; neither draft nor final rules are available. Some details are undecided or subject to change.
For instance, the Education Department seeks to forgive interest balances that exceed the borrower’s initial loan amount. They haven’t yet decided, though, how long a borrower must have been making payments in order to be eligible for this relief.
What will the ‘financial hardship’ definition be?
The Education Department is thinking about providing borrowers who are having financial difficulties with relief. But this is still subject to change, and authorities haven’t decided what exactly constitutes a “financial hardship.” The range of possibilities is as follows: having childcare expenses up to earning less than 400% of the federal poverty line.
Will the plan succeed?
We have no idea if this plan will be successful, and we won’t find out until it begins to be implemented for borrowers.
Lawsuits or lawmakers could freeze or kill the plan, even if it makes it through negotiated rulemaking. Moreover, Congress has the authority to intervene and halt the regulation by using the Congressional Review Act (CRA), a tool it uses to overturn regulations made by federal agencies.
A CRA can be vetoed by the president, but Biden is up for reelection in 2024. If the White House withdraws its support, the relief may not succeed. Remember that pardon is scheduled for 2025, following the conclusion of the election.
Don’t count on the Plan B yet
Don’t base any financial choices on the possibility that this backup plan will materialize. Rather, consider the actual options that are currently in front of you.
For instance, a one-time IDR account adjustment has already resulted in the cancellation of millions of long-term borrowers’ outstanding debt. And for others, there’s no need for plan A or B because alternatives like PSLF and a new IDR plan called SAVE can reduce monthly payments and forgive your outstanding debt after 10 to 25 years of repayment.
Call your federal student loan servicer to discuss your options.
FAQ
Has student loan forgiveness been approved?
With today’s announcement, the Biden-Harris Administration has authorized $136 in total loan forgiveness. 6 billion for more than 3. 7 million Americans.
How will I know if my student loan will be forgiven?
How can I find out if my student loans are forgiven? You will receive a notification letter from the loan servicer or Department of Education if you are eligible for loan forgiveness under PSLF, Teacher Loan Forgiveness, or IDR discharge. Your account settings will determine whether you receive the letter by mail or electronically.
Is it too late for student loan forgiveness?
Student Loan Forgiveness Considerations As Student Loan Payments Resume. The Education Department states that borrowers must use the federal Direct consolidation program to combine their loans in order to be eligible for student loan forgiveness under the IDR Account Adjustment by December 31, 2023.
Should I pay off my student loans or wait for forgiveness?
It might be prudent to simply continue making your regular student loan payments and maybe wait to see if this new program can eventually result in some of your balances being forgiven. This is a great excuse to prioritize other investments or payments that are more important than paying off your student loans quickly.
Read More :
https://www.ed.gov/news/press-releases/biden-harris-administration-announces-additional-49-billion-approved-student-debt-relief
https://www.axios.com/2023/12/16/student-loan-forgiveness-where-it-stands