The affected groups are:
— Borrowers whose loan balances have ballooned due to interest will have up to $20,000 of their interest balances canceled. Under the plan, all interest balances will be forgiven for borrowers who are considered “low- and moderate-income” and enrolled in the government's income-driven repayment plan.
The interest waiver would be a one-time benefit, but it would be the plan's biggest relief valve. The government estimates that of the 25 million borrowers who will see relief under this exemption, 23 million will have their entire interest balances erased.
—Borrowers who qualify for loan forgiveness under existing programs like Public Service Loan Forgiveness or the government's new repayment program called SAVE but have not yet applied will have their debt automatically canceled.
— Borrowers with undergraduate student debt who started paying off their loans more than 20 years ago, and graduate students who started paying off their loans more than 25 years ago, will see their debt canceled.
— Borrowers enrolled in programs or colleges that defrauded or defrauded students and lost federal funds would have their debts forgiven. Relief will also be available to students who attended educational institutions or programs with large debts and poor prospects for income or employment.
– Borrowers who are having difficulty repaying their loans due to medical or childcare costs may also be eligible for some relief. The administration has not yet decided how to identify these borrowers, but it is considering automatically forgiving those at risk of defaulting.
How is it different from the previous plan?
Mr. Biden initially sought to use the Higher Education Relief and Opportunity Act for Students (Heroes Act) of 2003 to grant $400 billion in debt relief to 40 million borrowers, but his administration , argued that this law would allow the government to forgive student debt during the 2003 national emergency. COVID-19 pandemic.
The Supreme Court blocked the move, saying Biden overstepped his authority.
Under the new plan, about 30 million borrowers would have some or all of their loan debt forgiven under the Higher Education Act, the federal law that regulates student loan and grant programs. The administration believes it can act within the law's narrower scope by targeting specific groups of borrowers rather than providing broad loan forgiveness.
The Biden administration said White House and Education Department lawyers studied last year's Supreme Court decision and designed the new program to avoid violating the principles outlined by the judge.
