President Biden announced on Monday his proposal for a new path to student loan forgiveness.

The proposal was developed through a still-ongoing negotiated rulemaking process, which the Biden administration began after the Supreme Court struck down Biden’s original large-scale forgiveness program last summer. While markedly different from Biden’s first initiative, this new plan would deliver relief for millions of borrowers — provided it survives any potential legal opposition. 

Inside the new plan

While Biden’s original plan for forgiveness was aimed at widespread impact, the new plan is intended to provide relief for specific groups that have been especially disenfranchised by the flawed federal student loan system. Black and Latino borrowers make up a significant portion of those groups, an intersection that the White House says is an opportunity to “help address the disproportionate debt burden on communities of color and advance racial equity.”

If finalized as proposed, these populations will benefit from the new plan:

  • Borrowers who currently owe more now than they did when they first began repayment. Borrowers whose federal student debt balance has grown due to so-called “runaway” interest will be eligible to have up to $20,000 of that interest forgiven, regardless of their income. Borrowers may be eligible to have all unpaid interest forgiven if they’re enrolled in an income-driven repayment plan (including the SAVE Plan) and earn less than $120,000 (or $240,000 for married borrowers). 
  • Borrowers who already qualify for forgiveness, but haven’t yet applied. The plan proposes allowing the Department of Education (ED) to identify borrowers who meet the eligibility criteria for forgiveness through an existing federal program — such as Public Service Loan Forgiveness (PSLF) or the Saving on A Valuable Education (SAVE) Plan — but have not yet successfully applied. Forgiveness would be granted to these borrowers automatically, without requiring them to apply for any relief program. 
  • Borrowers who have been in repayment for over two decades. Forgiveness would be granted to borrowers with only undergraduate loans who have been in repayment for 20 or more years, and to borrowers with graduate loans who have been in repayment for 25 or more years. 
  • Borrowers who enrolled in low-financial-value programs. The Biden administration wants to cancel federal student loans taken out to fund enrollment in certain programs that failed to provide sufficient financial value, thus leaving these borrowers in debt and unable to reap the promised benefits of their education.
  • Borrowers experiencing financial hardship.  Under the new proposal, borrowers experiencing a hardship that prevents them from being able to make loan payments could be eligible for forgiveness. While it’s not yet clear what would qualify as a hardship or how eligibility would be determined, a White House press release suggests that eligible borrowers could include those who are at higher risk of loan default and those who are burdened by expenses such as medical debt or child care. 

What comes next

If the initiative is executed as proposed, 25 million borrowers could see all or some of their interest balances forgiven, four million borrowers could see their federal student debt balance canceled in full, and more than 10 million borrowers could receive at least $5,000 in debt relief.

But before that can happen, the proposal must first clear the remainder of the negotiated rulemaking process — starting with a public comment period. After reviewing insights collected in that period, ED will publish a final version of the plan, a milestone that the Biden administration says will be reached “over the coming months.” Then, the White House says it hopes to start administering forgiveness this fall. That timeline is still subject to change, especially if the proposal is met with legal opposition, as was the case with Biden’s original forgiveness plan.

No matter how long it takes, the finalization of the forgiveness plan is sure to be eagerly awaited by borrowers — and there are other initiatives that can offer support and relief in the meantime:

  • Improvements to PSLF. ED last week announced that it will soon transition PSLF away from MOHELA, the servicer currently contracted to administer PSLF, and instead manage the program through its website. This change comes after criticism of MOHELA’s practices, and promises to deliver a streamlined application and tracking experience for borrowers. To allow ED to complete the transition, processing of PSLF form submissions will be paused beginning May 1 through July. During this time, borrowers won’t be able to access their PSLF history on MOHELA’s website, but are advised to continue making required monthly payments.
  • The next phase of SAVE. Many borrowers enrolled in the SAVE Plan will soon see their monthly payments drop. Starting in July, monthly payments for undergraduate loans will drop to just 5% of a borrower’s discretionary income, or 10% of discretionary income for graduate loans; if a borrower has both undergraduate and graduate loans, their monthly payment amount will be a weighted average between 5 and 10% of their income, based on their original loan balance. This key benefit is in addition to the plan’s other borrower-friendly terms, which include a full interest subsidy and a potentially shorter forgiveness timeline.