Student Debt Relief: Biden Wants These 5 Types of Borrowers To Qualify

The resumption of student loan payments in October — after a three-year hiatus — has put a dent in millions of Americans’ budgets. This follows the Supreme Court’s striking down of President Joe Biden’s forgiveness program in June of 2023, which affected millions of borrowers.

Total student loan debt, currently $1.76 trillion, continues to climb as a number of borrowers do not have access to debt relief, according to the Education Data Initiative. Notably, 47.9 million U.S. borrowers hold student loan debt.

Now, the Biden administration is working to draft a new plan — one which has been dubbed “Plan B” by experts, and which could allow certain borrowers to be eligible for relief.

According to the White House, more than 40 million borrowers would have qualified for the now-defunct debt relief program, with nearly 90% of the benefits of the relief going to borrowers earning less than $75,000 per year.

The new Plan B will be narrower than the original one. Higher education expert Mark Kantrowitz told CNBC that it’s possible somewhere between 4 million and 10 million borrowers will be eligible for the revised forgiveness program.

Under the new proposal, borrowers who meet one or more of the following criteria would be eligible.

Borrowers with federal student loan balances that have ballooned and are now exceeding the original amount borrowed may qualify.

Nadine Chabrier, a senior policy and litigation counsel at the Center for Responsible Lending, told CNBC there are a variety of reasons this may be the case — and that, “Unfortunately, it is very common.”

Another group of borrowers that might be eligible under the new proposal are those who have been repaying their loans for more than 20 years. This could help a lot of seniors who are still burdened by their student loans.

Indeed, federal debt among borrowers aged 62 and older has increased by 36.8% since 2017 — and among borrowers aged 62 and older, the average debt is $41,778, according to the Education Data Initiative.

According to the Department of Education, this would apply to borrowers who“took out loans to attend career-training programs that created unreasonable debt loads or provided insufficient earnings for graduates, as well as borrowers who attended institutions with unacceptably high student loan default rates.”

This includes borrowers eligible for forgiveness under repayment plans such as the Saving on a Valuable Education Plan (SAVE) or targeted relief programs, or closed school loan discharges, except they have not applied for such relief as yet, according to the Department of Education.

This is the most recent group added under the proposal, and would address a category of borrowers with hardship “that is not otherwise addressed by the existing student loan system.”

“The proposal outlines a set of factors that could be used to identify hardship, such as a borrower’s total student loan balance and required payments relative to household income, and whether a borrower has high-cost burdens for essential expenses like healthcare or childcare,” according to the Department of Education.

The administration held another session to address the question of hardship and came to a consensus on the issue at its final session on Feb. 23.

As CNBC reported, the proposed draft regulatory text will soon head to the Federal Register where the public will have the opportunity to comment and provide feedback before the new legislation goes into effect.