The Biden administration has released new details on an upcoming student loan forgiveness initiative expected to benefit millions of borrowers. The latest plan, anticipated to launch this fall, is a second attempt at mass student debt relief after President Biden’s first plan was struck down by the Supreme Court last year. Following nearly a year of negotiated rulemaking, the Education Department announced that the new program is in its final stages.
The updated guidance clarifies the four categories of borrowers who may be eligible for loan forgiveness as the department continues to finalize the program’s rules. A fifth category based on hardship is expected to launch next year. One primary group potentially eligible for forgiveness includes those affected by significant interest accrual and capitalization.
This can occur, for example, when a borrower’s income-driven repayment plan results in payments that are less than the interest accumulation, leading to a scenario where they owe more than they originally borrowed. A borrower is eligible for partial forgiveness if their current loan balance exceeds the balance when it entered repayment. Another qualifying group is borrowers who first entered repayment at least 20 to 25 years ago.
Borrowers with undergraduate debt may qualify if they began repayment on or before July 1, 2005. Those with graduate or mixed debt may qualify if they started repayment on or before July 1, 2000.
Biden’s new loan forgiveness categories
Loans meeting these criteria could be fully forgiven. A third eligibility category is for borrowers who attended “low-value” institutions. To qualify, the school must have lost eligibility or closed while at risk of losing eligibility to distribute federal student loans.
This could be due to high student loan default rates or failing to provide sufficient financial value. Eligible borrowers could receive complete forgiveness for covered loans when the school failed accountability standards. Borrowers who qualify for relief under other programs but have not applied or enrolled may also be eligible under the new plan.
This includes those eligible for income-driven repayment plans or closed-school discharge but who have not applied for those benefits. The Education Department’s updated guidance also includes information on an opt-out deadline. Borrowers have until August 30 to opt out if they do not wish to receive debt relief.
“If you don’t want to receive debt relief for any reason, you need to inform your loan servicer by August 30, 2024,” the guidance states. Notably, receiving an email regarding this plan does not automatically indicate eligibility for forgiveness, and non-receipt of such an email doesn’t signify ineligibility. Borrowers are encouraged to contact their loan servicer to verify their eligibility and ensure their contact information is up to date.
