Student Loans: Biden Pushing New Rules to Forgive Debt for 31M Borrowers

What’s New

In the final days of his administration, President Joe Biden is pushing to approve new rules that would forgive student debt for 31 million more borrowers.

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Why It Matters

While federal courts ruled against Biden’s sweeping student debt forgiveness plans the first time, the president is again looking to implement another broad-based student loan forgiveness program through “Plan B.” This would affect 23 million borrowers who have outstanding loan balances and high interest payments.

He’s also looking to help borrowers facing financial hardship. That would apply to 8 million whom the Education Department considers unlikely to pay off the loans based on predictive data.

“Rather than forgiving debt for most borrowers, the plan calls for helping those in the most difficult positions, such as the borrowers whose balance has grown to be far more than what they originally borrowed,” Michael Lux, an attorney and founder of the Student Loan Sherpa, told Newsweek.

What To Know

Altogether, if approved, Biden will see student loan forgiveness for 31 million more borrowers.

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The new student loan forgiveness plans will need to be formally reviewed by the Office of Management and Budget before going into effect.

Biden’s previous attempts to forgive student loans on this wide of a scale was blocked by the Supreme Court, which ruled it was a violation of the executive branch’s authority under the Constitution.

What People Are Saying

Republican Representative Virginia Foxx of North Carolina, chair of the House Committee on Education and the Workforce, said Biden’s attempts were a “Band-Aid that forces taxpayers to shoulder the responsibility of paying off someone else’s debt.”

“If this administration spent half as much time working to address the root causes of our broken student loan system as peddling this illegal free college agenda, college costs would be lower,” she said in a letter to the Biden administration.

“The proposed rules would provide significant relief to struggling borrowers, potentially easing the burden of student loans,” Kevin Thompson, finance expert and founder/ CEO of 9i Capital Group, told Newsweek. “However, approval seems unlikely due to Republican control of both the House and Senate, as many have previously opposed Biden’s debt relief initiatives.”

Alex Beene, financial literacy instructor for the University of Tennessee at Martin, told Newsweek, “These are last ditch efforts at debt relief before the Trump administration begins, and unless they’re designed to withstand multiple legal and legislative hurdles, the odds of them lasting if they do take effect are very small.”

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“It will be hard to fully know the ramifications until the plans are actually introduced in writing as to how and if they’ll be able to help millions of borrowers for years to come or just a few weeks,” Beene added.

What’s Next

While the Biden administration will be in its final days soon, the president is also looking to pass a new rule that would help borrowers apply for income-driven student debt repayment plans like SAVE.

In changing the original income driven repayment plan offered, Biden is hoping to protect these plans from further legal challenges and open them up to borrowers again.

President-elect Donald Trump could reverse some of Biden’s student loan forgiveness policies once in office as he brings in new leadership for the Department of Education.

“His influence may shape ongoing debates around debt relief, particularly among Republican lawmakers, given his administration’s past stance on such policies,” Thompson said.

Ultimately, for most borrowers, Biden’s move is unlikely to make a difference, Lux said.

“To block the relief, Republican AGs simply need to find a federal judge willing to sign off on a preliminary injunction,” Lux said. “Once the Trump administration takes office, they can unwind the forgiveness provisions before any borrowers see any relief.”