Biden closes in on student loan forgiveness plan and extension of repayment pause

The White House is likely to announce a student loan relief plan as early as Wednesday that would forgive up to $10,000 for some borrowers and further extend the current freeze on loan repayment, according to several people familiar with the plan.

The details of the highly anticipated plan remain in flux, those people cautioned. The White House has been considering for months canceling $10,000 for borrowers who make $125,000 or less annually.

But the intense internal deliberations over debt relief resumed in recent days as the Biden administration stared down a self-imposed deadline for addressing the issue. The pandemic-related moratorium on interest and payments, which started in March 2020 in the Trump administration and has been extended four times by President Joe Biden, is set to expire Aug. 31.

The administration is widely expected to, at a minimum, extend the student loan freeze to avoid having tens of millions of borrowers receive bills just before the midterm elections. A wide swath of congressional Democrats has urged the White House to continue the freeze until at least the end of the year.

The White House has struggled for more than a year over the issue of student debt cancellation. During his campaign, Biden promised to forgive up to $10,000 for all federal student loan borrowers and has been under immense pressure from progressives to stick with that pledge.

Many of the key parts of the student debt cancellation plan appear to be undecided, including which loans and borrowers would qualify. White House officials have debated an income cap of $125,000 as a way to blunt criticism that a forgiveness policy helps higher-earning individuals. But it was not clear exactly where the final threshold will be set.

Education Department officials, awaiting a final decision from the White House, have developed plans to implement whatever Biden ultimately decides. The department has been studying ways to automatically provide as much relief as possible without requiring borrowers to fill out an application form.

The White House declined to comment Tuesday on the planning.

The White House’s indecision has frustrated progressives and other groups urging Biden to go as big as possible on widespread loan relief to tens of millions of people before they head to the polls this fall.

The uncertainty around whether monthly payments were going to restart also sparked sharp criticism from the loan servicing companies that manage federal student loans.

The Student Loan Servicing Alliance, which represents federal student loan servicers, warned the Education Department on Monday that the administration’s indecision was risking “operational disruptions” to the repayment system.

Education Department officials have previously told loan servicers to hold off on sending borrowers bills about their payments resuming in September. But the companies say that the uncertainty so close to the deadline is pushing the repayment system to the brink of major problems. That includes the possibility that automated messages may send incorrect information to borrowers in the coming days, even if the administration decides to extend the relief.