Education Dept. circulates latest draft of Biden’s next student debt relief plan

The Biden administration on Monday released an updated draft of its plan for a new, more targeted student debt relief program, but officials punted on a key question of how to provide loan forgiveness to borrowers experiencing financial hardship.

The updated proposals, which will be debated by a rulemaking panel next week, continue to reflect the administration’s narrower approach to mass student debt relief after the Supreme Court earlier this year struck down its first attempt at canceling large amounts of debt.

Unlike Biden’s first plan — which offered up to $10,000 or $20,000 of debt relief to the vast majority of loan borrowers — the administration now looking at providing relief only to specific groups of borrowers.

Those categories of borrowers largely remain the same from what the White House announced earlier this fall: borrowers whose balances have ballooned because of interest; borrowers who still owe debt 20 or 25 years after leaving school; borrowers who are eligible for debt relief under existing federal programs but who never applied; and borrowers who attended low-value programs.

Notably, Education Department officials did not release any plan for providing debt relief to borrowers experiencing financial hardship, an additional category of borrowers whom officials say they want to make eligible for some type of relief. The department said it was continuing to work on proposals to provide relief to those borrowers.

The revised draft plans do offer some new details about how relief for the distinct categories of borrowers would be structured. In some cases, the Education Department added additional eligibility requirements, specific relief amounts or more detailed income thresholds that borrowers must meet.

For example, the administration is looking at canceling up to $10,000 of the amount of a borrower’s current balance that is above their initial balance. That benefit would be available to all borrowers whose loans are greater than what they initially owed.

Some borrowers who are enrolled in an income-driven repayment plan and whose income is below 225 percent of the poverty line would be able to get $20,000 knocked off the amount of their loan balance that is greater than what they initially owed after first leaving school and entering repayment.

The Education Department has not released any data on how many borrowers it expects might qualify for the various paths to forgiveness under the new approach. Biden’s now-defunct initial plan would have provided relief to more than 40 million borrowers.

In a statement on Monday, Education Secretary Miguel Cardona said that his agency’s “rulemaking process is about standing up for borrowers who’ve been failed by the country’s broken student loan system and creating new regulations that will reduce the burden of student debt in this country.”

What’s next: The department’s rulemaking committee will hold its final round of negotiations next Monday and Tuesday. The Biden administration is then expected to formally propose a regulatory package to carry out its debt relief plans.