Biden Administration Details Plan for Broader Debt Relief

The Education Department is proposing to cancel some or all of the outstanding student loans for certain categories of borrowers, including those who have spent more than 25 years in repayment or those who attended career-training programs that didn’t pay off, according to a draft proposal released Monday evening.

The announcement is the first look at specific debt-relief proposals since the Supreme Court struck down President Biden’s plan to forgive up to $20,000 in student loans for Pell Grant recipients and eligible borrowers earning less than $125,000 a year. After the court’s decision, Biden vowed to try again to provide some form of student loan forgiveness.

“Today’s announcement builds on the progress we’ve made so far, which has included approving $127 billion in loan forgiveness for nearly 3.6 million borrowers to date,” Education Under Secretary James Kvaal said on a call with reporters Monday. “We know that there are still so many Americans out there who have been failed by the broken systems of the past, and we’re committed to helping as many of them as possible.”

The scope of relief likely will vary depending on which category a borrower falls in. The proposed categories are:

• Those whose balances have increased beyond what they originally borrowed.
• Borrowers who would be eligible for forgiveness under an income-driven repayment plan and other targeted relief programs but who didn’t apply.
• Borrowers who have been making repayments for 25 years and still have a balance.
• Those who attended a program that would fail the gainful-employment regulation as outlined in the department’s new rule that takes effect July 2024, or who went to an institution with high student loan default rates.

The department didn’t provide a specific number of how many people would be affected by the draft plan. Biden’s initial plan would have provided some relief to 43 million borrowers.

“We do think these are large categories of borrowers that would provide significant amounts of relief,” a senior department official said Monday during a call with reporters.

A negotiating committee will discuss the draft proposals when it meets Nov. 6 and 7. The draft regulatory text spells out the eligibility criteria for the designated categories, though the department wants more feedback from the committee on which requirements should be considered.

The Education Department has been working its way through a complex and lengthy process known as negotiated rule making, which is required when drafting regulations related to federal financial aid. The committee’s meeting next week is the second of three sessions scheduled for this fall, with the goal of reaching consensus on the proposal by the third round of meetings in December.

At the first set of meetings earlier this month, the 16-member advisory committee offered feedback on which categories should be considered and how much relief should be offered, including for borrowers facing hardship.

At next week’s meetings, the department aims to build on that conversation to better define how to determine the degree of hardship borrowers face, according to an issue paper released Monday that will guide the discussion. Borrowers facing hardship could form a fifth category of those who would be eligible for relief.

“This discussion paper reflects our commitment to continuing that thoughtful conversation,” Kvaal said. “We agree that there are struggling borrowers who are not yet reached by existing loan forgiveness programs and repayment options. Additional discussion and evidence is needed to define those groups and any possible policy solutions with more precision.”