'Plan B' to Cancel Interest for Half of Those in Student Debt

Biden administration's revamped plan will test the 1965 Higher Education Act
By Arden Dier,  Newser Staff
Posted Apr 8, 2024 7:41 AM CDT
23M Could See Student Debt Interest Wiped Under 'Plan B'
Students demonstrates about student loan debt outside the Supreme Court, June 30, 2023, in Washington.   (AP Photo/Jacquelyn Martin, File)

More than 25 million people with student debt could see some of that debt forgiven under new plans laid out Monday by the Biden administration. Narrower than the effort struck down by the Supreme Court as unconstitutional, "Plan B" targets the 25 million borrowers who owe more money now than at the start of their repayment period, the 2.5 million who started paying more than 20 years ago, some 2 million who are eligible for loan forgiveness under an existing government program but have not applied, as well as those facing economic hardship, including borrowers at high-risk of defaulting, NPR reports. Under the proposal, most borrowers wouldn't have to apply for debt forgiveness at all.

Eligible borrowers would have up to $20,000 in interest forgiven automatically, regardless of income, while single borrowers earning no more than $120,000 per year (or married borrowers earning no more than $240,000 per year) who are enrolled in income-based repayment plans would have all interest forgiven, NPR reports. An estimated 23 million borrowers, out of the 43 million Americans with some form of student debt, would see all interest canceled as a result. Those at risk of defaulting on loans could also see automatic relief, though some borrowers would need to make a case for economic hardship as part of an application, NPR reports, noting medical debt and child care costs will be considered.

If the plans are fully implemented, the administration said more than 30 million people will have had at least some student debt forgiven under President Biden. Some 48% of voters see student debt forgiveness as a key issue in the upcoming election, per CNBC. However, the plans will need to undergo public comment before being implemented. They're also likely to face legal challenges. But officials say they're "confident" they can bring relief "early this fall," per CBS News. The plan struck down in June was based on the 2003 Heroes Act, which gave the president powers to revise student loan programs during national emergencies. Plan B instead cites the 1965 Higher Education Act, which grants the education secretary "some authority to waive or release borrowers' education debt," per CNBC. (Meanwhile, some colleges cost $95,000 this year.)

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