Biden Unveils Another Plan to Wipe Up to $20,000 in Student Loan Debt

The Biden administration officially unveiled new rules it plans to use to wipe out millions in debt for student loan borrowers by tackling ballooning interest rates. President Biden first announced his latest proposals to cancel student loan debt during a visit to Madison, WI more than a week ago after his original plan was blocked by the Supreme Court.

In all, the administration believes his combined efforts could cut debt for more than 30 million borrowers, including the 4.3 million who have already seen their debt forgiven. The new rules, which will be officially published on Wednesday. The public then has 30 days to comment on the proposals. The Ministry of Education will then finalize the rules to start forgiving debts in the autumn.

It comes as Republicans have accused President Biden of trying to ‘buy votes’ as he runs for re-election. 18 Republican-led states have already sued over another plan released by the president, the SAVE plan. The administration has erased $153 billion in student loan debt since Biden took office and expects new rules to cancel billions more.

The Penn Wharton Business Model estimates that the new rules, along with the president’s latest SAVE plan, will cost about $559 billion over a decade. The first of the proposed rules focuses on erasing interest for borrowers who have more debt now than when they originally took out the loan due to rising interest rates. It would allow the Education Department to automatically cancel up to $20,000 in debt for borrowers on the amount they currently owe that exceeds what they owed when they began repaying loans.

It will apply to all types of student loans held by the Ministry of Education, including parental loans, consolidated loans and loans that are in default. Another rule would allow the Education Department to cancel the full amount of debt that borrowers saw their balances grow by after signing up for income-driven repayment plans. To qualify, borrowers must have an annual income of $120,000 or less if single and $240,000 or less if married.

The Biden administration estimates that 25 million borrowers now owe more than they originally borrowed because of federal student loan interest rates. The new rules would wipe out the entire increase in balances of 23 million borrowers.

The Department of Education also released a draft rule that addresses debt forgiveness for borrowers who have made payments for 20 or more years. This applies to students who started repaying loans on or before 1 July 2005. Graduate school borrowers can see debt canceled after repaying loans for 25 years or since July 1, 2000.

The administration estimates the one-time move will affect 2.6 million borrowers who have outstanding debt on old loans that are still being repaid. But officials are asking the public for feedback on ways to help borrowers who are close but don’t quite meet the timeline’s qualifications. Other rules advanced include those dealing with debt forgiveness for borrowers who are eligible under other programs but have not yet applied because of paperwork requirements, poor advice or other obstacles. The Department of Education will publish another rule focused on providing relief to borrowers experiencing hardship in the coming months.

The steps this week are ones that move the Biden administration closer to canceling debt for millions. But critics of President Biden have blasted the president’s efforts to cancel debt, calling it unfair to Americans who didn’t take out loans, go to college or already repay debt. Republicans have criticized the effort as shifting the debt rather than eliminating it, since the effort could help increase the national debt if less money came in.

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