The Biden administration has taken significant steps towards student debt relief, revealing plans to cancel loans for over 800,000 borrowers, amounting to a total relief of $39 billion. Which is equivalent to $48,750 per borrower on average. This development follows the recent Supreme Court ruling that blocked President Biden’s initial student loan forgiveness efforts, which aimed to provide relief to approximately 37 million borrowers.
Undeterred, the President unveiled an alternative approach, emphasizing the administration’s determination to employ all available means to advance the debt relief agenda
How Does This Benefit Borrowers?
Under the revised relief plan announced today, modifications will be made to the existing income-driven repayment scheme. Depending on their initial agreement, borrowers become eligible for debt forgiveness after making payments for either 20 or 25 years.
The Biden administration intends to invoke the 1965 Higher Education Act (HEA) as the legal foundation to support the new plans. Despite making regular payments, the Department of Education attributes previous administrative failures to borrowers’ inability to progress towards debt-free status.
Education Secretary Miguel Cardona commented, “For far too long, borrowers have been let down by a flawed system that inaccurately tracked their journey towards loan forgiveness.”
While the debt relief plan is expected to bring much-needed respite to numerous borrowers notified in the coming days, it may not end legal challenges. Some proponents of the Supreme Court’s decision to block relief measures argue that it reduces the risk of students accumulating further debt or colleges raising tuition fees.
Nonetheless, legal experts suggest that the HEA plan stands on firmer legal ground since it is not directly linked to the pandemic-related Heroes Act, unlike the initial relief effort. However, they also caution that the President must implement the new program by the end of 2025 to avoid potential tax implications associated with debt relief.
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