White House details draft plans for next student debt relief plan

President Joe Biden is considering canceling student debt for borrowers whose balances have ballooned because of interest accrual, those who’ve been trying to repay for 25 years and students who attended low-performing colleges, administration officials said on Monday.

The Education Department on Monday unveiled for the first time the text of proposals for how it plans to construct Biden’s next student debt relief program in the wake of the Supreme Court decision in June striking down his first attempt at mass loan forgiveness.

The draft regulatory plans outline what are essentially four separate student debt relief programs targeted at different categories of borrowers. Some of the proposals are for one-time debt cancellation while others sketch out new programs that would provide student debt relief on an ongoing basis.

Under the proposals, the Education Department would cancel debts owed by borrowers who have seen their balances balloon to greater than what they originally borrowed because of years of interest accrual. It would also wipe away loans that have been in repayment for 25 or more years.

The proposals also call for new student debt relief programs that provide forgiveness to borrowers who attended institutions that leave students with “unreasonable debt loads” or have high student loan default rates. The Education Department also wants to automatically provide loan forgiveness to borrowers who are eligible under existing debt relief programs but haven’t applied.

The categories of borrowers are aimed at “providing relief to as many borrowers as possible where the system has failed,” Robert Gordon, deputy director for economic mobility at the White House Domestic Policy Council, told reporters on Monday.

The Education Department said it also wants to cancel the debts owed by borrowers facing a “financial hardship,” but it has not yet developed proposals to define what that means. Officials said on Monday that they would solicit ideas from a rulemaking panel on how to structure that fifth plank of the relief program.

The draft proposals, which will be presented to a federal rulemaking committee next week, reflect the Biden administration’s strategy of breaking down its next student debt relief program into discrete populations of borrowers rather than its previous, across-the-board program.

It’s not yet clear if the total number of borrowers who would qualify under the draft proposals is greater or less than the roughly 40 million Americans who were estimated to be eligible for up to $10,000 or $20,000 of debt relief under the program Biden announced in August of 2022.

After the Supreme Court in July struck down that program, which was based on pandemic-related emergency powers, Biden quickly announced that his administration would craft a new student debt relief program using a different legal authority.

Education Department officials have focused on a provision of the Higher Education Act that gives the secretary of education the power to “waive” federal student loan debts and a separate federal law that governs when agencies can stop collecting on debts they are owed.

The Education Department did not release any data about how many borrowers would be eligible under each of the draft proposals. Biden has directed his administration to provide relief to “as many borrowers as possible as quickly as possible.”