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On May 22, 2024, President Biden announced that he is cancelling $7.7 billion in student loan debt for an additional 160,000 people, bringing the Biden administration's total cancelled student loan debt to about $167 billion for 4.75 million borrowers.
The $7.7 billion announced in late May will be distributed among borrowers in three categories:
$5.2 billion for approximately 67,000 borrowers eligible for debt cancellation through the Public Service Loan Forgiveness Plan (PSLF)
$613 million for approximately 54,000 borrowers enrolled in Biden's Saving on a Valuable Education (SAVE) Plan who are eligible for the shortened time-to-forgiveness benefit
$1.9 billion for approximately 39,200 people who are receiving forgiveness through the income-driven repayment (IDR) plan
This latest round of forgiveness means that one in 10 federal student loan borrowers have now been approved for debt relief. The loan forgiveness will lift crippling financial burdens from millions of people, allowing them the opportunity to flourish.
In April of 2024, the Biden administration rolled out a new proposal for student loan forgiveness aimed at providing debt relief to tens of millions of Americans through various expansions to loan waivers. Public comments on the proposal are closed, and the Department of Education is now reviewing those comments. The Biden administration hopes to publish a final rule that delivers relief this fall.
Here’s what you need to know about the proposal and how it will affect American families:
Forgiveness Will Be More Targeted
The new proposal is more targeted than previous versions, forgiving the debts of those who:
Were already eligible for debt cancellation but had not applied
Have been repaying loans for over 20 years (25 for graduate loans)
Attended non-accredited schools
Are suffering from financial hardship
The more clearly-defined definitions of eligibility may provide the proposal with better standing in front of courts, should it be challenged. On top of being more viable, the targeted scope of the proposal ensures that aid will go to those most in need.
Young Families Will Benefit
It is believed that one of the criteria for meeting the definition of financial hardship will be high childcare costs, meaning the plan would aid millions of American families, allowing them to focus their money on providing for their children. Alleviating loan payments for those taking care of young children would lead to reduced rates of child poverty, giving children better lives and leading to more positive performances in school.
On top of being morally correct, reducing child poverty also has massive economic benefits. The increased healthcare costs and correctional facility spending that comes as a result of child poverty costs the US Government an estimated 1 trillion dollars annually, much of which comes as a detriment to the American taxpayer. It is estimated that each dollar spent on reducing child poverty would save $7 on future economic costs.
Better Economic Outcomes
Consumer debt in America is at 4.8 trillion dollars as of 2023. High consumer debt leads to lower consumer spending, which was one of the leading causes of the Great Recession. But Biden’s forgiveness plan would erase hundreds of billions of dollars in consumer debt, which would increase spending and stimulate our economy.
The bill will also target loan interest rather than the loan itself. This means that borrowers will be eligible for forgiveness on up to $20,000 of unpaid interest, helping alleviate financial hardship for working Americans while still allowing loan companies to receive back the money they lent, creating positive economic outcomes for both parties.
The policy would promote spending, be fair to loan companies, and save taxpayers billions on future costs.
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