4 Updates on Biden’s New Student Loan Forgiveness Plan

This week, the Biden administration is taking a big step forward in developing a new student loan forgiveness plan. 

The program, which officials hope will be a more legally sound replacement for Biden’s initial student loan forgiveness plan that was struck down by the Supreme Court in June, is going through a process called negotiated rulemaking. During negotiated rulemaking, a committee of stakeholders (which includes individuals representing the interests of borrowers, students, schools, loan servicers, and others) convenes to discuss how the plan should work, who it should benefit, and how eligibility for relief should be determined.

This week is the second public negotiated rulemaking hearing. The committee had its first meeting in October, after which the Education Department published draft regulations outlining the initial vision for the program, as well as questions and problems for the rulemaking committee to tackle during subsequent meetings.

Here are the latest updates on the negotiated rulemaking process for Biden’s new student loan forgiveness plan.

4 Categories of borrowers could qualify for student loan forgiveness

The new program will differ from Biden’s initial student loan forgiveness plan. That program would have provided a fixed amount of student loan forgiveness — $10,000 or $20,000, depending on whether the borrower received a Pell Grant — to most federal student loan borrowers who earned within certain income guidelines. The program would have been sweeping in scope, although limited in terms of the amount of forgiveness per borrower. 

Biden’s new plan will be more targeted in nature. The Education Department identified four groups of borrowers who could qualify for student loan forgiveness under the new plan. This includes:

• Borrowers who have been in repayment for longer than 25 years
• Those who owe more now than the original amount borrowed because of accrued interest and fees
• Borrowers who qualify for student loan forgiveness programs that currently exist but they haven’t yet applied
• Former students who attended institutions that did not provide sufficient value

The Education Department released draft regulations for student loan forgiveness eligibility for these four categories of borrowers – essentially, a “rough draft” of rules governing the program, which the negotiated rulemaking committee is discussing this week.

5th Group of borrowers could qualify for student loan forgiveness based on hardships

In addition to the four initial categories of borrowers identified as potentially eligible for student loan forgiveness under Biden’s new plan, the Education Department is eyeing a fifth group who could qualify based on hardship.

Hardship is, of course, difficult to define. But the Department released a memorandum last week summarizing possible hardship categories. These include:

• Medical hardships
• Borrowers with high healthcare, dependent care, or caregiving expenses
• Individuals who receive public benefits such as Social Security, Medicare, or Affordable Care Act subsidies
• Elderly borrowers

The Department has not yet released draft regulations for the hardship category. Instead, officials have tasked the negotiated rulemaking committee with trying to reach a consensus on defining qualifying hardships. The Department will then work on draft regulations for this group. 

Other key takeaways for Biden's new student loan forgiveness plan

The Education Department has indicated that it is considering how to provide expansive relief under the new student loan forgiveness plan while also trying to stay within the legal parameters of the Higher Education Act, the statute that officials have concluded provides the legal authority for this new program. Possible features of the new plan include the following:

• Eligibility for both Direct federal student loan borrowers and FFEL-program loan borrowers. Biden’s first student loan forgiveness plan was limited to Direct loan borrowers only.
• No income limits or means testing for the first four categories of borrowers, although income could factor into hardship-based determinations. 
• Depending on the program category and a borrower’s circumstances, someone could be eligible for partial or complete student loan forgiveness. But it won’t necessarily be limited to a strict dollar amount, unlike Biden’s first loan forgiveness plan.
• Automatic student loan forgiveness where possible based on available Education Department loan data (i.e., officials could fairly easily determine a borrower’s current loan balance relative to the initial disbursement or whether someone has had a student loan for longer than 25 years).

Next steps for Biden's new plan

The negotiated rulemaking committee is meeting this week to discuss the five categories of borrowers who could qualify for student loan forgiveness. 

While only select individuals are on the rulemaking committee, the public can participate, and the Education Department encourages people to submit comments. “Those of you who want to influence @usedgov ‘s debt relief policies, listen up. [The Education Department] was crystal clear on what you need to do,” said a New America Twitter account that focuses on the negotiated rulemaking process on Monday. “GET SPECIFIC! The Department wants your proposed regulatory text (REDLINES) by NEXT TUESDAY.”

The rulemaking committee will meet once again for two days in early December to try to finalize and reach consensus on the remaining details of the program. After that — likely in early 2024 — the Education Department will publish final regulations for the new student loan forgiveness plan. The public will have an opportunity to submit comments on those final rules.

Technically, the program may not go live until July 2025. Notably, this is after the 2024 national elections, and this means that if President Biden loses reelection, a new administration could scrap these plans. 

However, the Higher Education Act does provide authority for early implementation of regulations in certain circumstances. In fact, the Biden administration exercised this early implementation power to make aspects of the new SAVE plan available for borrowers as the student loan pause ended in August, even though technically the SAVE regulations don’t go live until July 2024. Thus, it is possible – although not guaranteed – that Biden’s new student loan forgiveness plan could be available for borrowers before July 2025 – potentially, sometime during 2024.