Biden To Forgive $7.4 Billion In Student Loan Debt For 277,000 Borrowers. Who Will Benefit?

This latest initiative extends the scope of debt relief introduced by President Biden, following a setback last year when the Supreme Court blocked his administration's broader plan for student loan forgiveness. With this recent wave of loan cancellations, the White House proudly announced that approximately $153 billion in debt has been forgiven, benefiting a staggering 4.3 million student borrowers.

President Biden, who had pledged to address the issue of student loan relief during his campaign, is now tackling a challenge that affects an estimated 43 million Americans grappling with a collective $1.7 trillion in student debt. This financial burden has hindered many borrowers' ability to save for essential milestones such as homeownership, echoing sentiments expressed by Education Secretary Miguel Cardona during a recent conference call with reporters.

Cardona illustrated the profound impact of student debt, recounting the story of a New York teacher burdened by ballooning debt despite years of diligent payments. "We are fixing a broken system," Cardona emphasized, highlighting the administration's unwavering commitment to reforming a system that has long troubled individuals nationwide.

Who Qualifies for Student Loan Relief?

According to the White House, three distinct groups stand to benefit from the latest round of debt relief:

SAVE Plan Enrollees: A staggering $3.6 billion will be forgiven for nearly 207,000 borrowers enrolled in the Saving on a Valuable Education (SAVE) plan. This income-driven repayment program, established by the Biden administration last year, targets borrowers with smaller loans incurred during their college education. Under SAVE, individuals who originally borrowed $12,000 or less for their studies become eligible for forgiveness after a decade of payments.

Administrative Adjustments Recipients: Approximately $3.5 billion will be allocated to 65,700 borrowers enrolled in income-repayment plans. These borrowers, who have diligently made payments over time, faced obstacles in qualifying for relief due to administrative and servicing failures. The administration's intervention ensures that these individuals, who fulfilled the terms of their loan agreements, receive the debt forgiveness they deserve.

Public Service Loan Forgiveness (PSLF) Participants: A sum of $300 million has been earmarked for 4,600 borrowers through the Public Service Loan Forgiveness (PSLF) program. Established in 2007, PSLF aims to aid public servants, including teachers and government employees, in achieving debt forgiveness after a decade of repayment. Despite facing complexities and challenges in the past, the Biden administration's commitment to streamlining the program has resulted in substantial debt relief for numerous participants.

Legal Challenges and Uncertainties

Despite the administration's efforts, legal challenges loom large. Republican attorneys general from 18 states have initiated lawsuits seeking to invalidate the SAVE plan and halt further student debt cancellation. They argue that the plan exceeds President Biden's authority and undermines existing state recruitment efforts and separate cancellation programs.

The outcome of these lawsuits remains uncertain, with implications for loans already forgiven under the Biden administration's initiatives. Nevertheless, as the Kansas Attorney General's court document suggests, the prospect of clawing back forgiveness granted during litigation appears bleak.