Personal finance

Biden administration releases draft text of student loan forgiveness plan. Here’s what borrowers need to know

U.S. President Joe Biden speaks as he announces a new plan for federal student loan relief during a visit to Madison Area Technical College Truax Campus, in Madison, Wisconsin, U.S, April 8, 2024. 
Kevin Lamarque | Reuters

The Biden administration on Tuesday released the draft text of its new student loan forgiveness proposal, which could reduce or eliminate the balances of millions of borrowers.

The proposed rules should be formally published in the Federal Register on Wednesday and will be followed by a 30-day comment period.

“Today’s announcement shows that the Biden-Harris Administration is continuing to fulfill our promises to fix a broken higher education system,” said U.S. Secretary of Education Miguel Cardona in a statement.

The regulatory text comes about a week after President Joe Biden revealed the details of his Plan B for student loan forgiveness.

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The administration has been working on that do-over since the U.S. Supreme Court rejected Biden’s first attempt at loan cancellation last summer.

After the U.S. Department of Education reviews comments from the public, it hopes to finalize the new rules and start canceling borrowers’ debts in the fall, it said.

What’s changed in the draft rules

At an April 8 event in Madison, Wisconsin, Biden said his new relief plan targets specific borrowers, including those who:

  • Are already eligible for debt cancellation under an existing government program but haven’t yet applied.
  • Have been in repayment for 20 years or longer on their undergraduate loans, or over 25 years on their graduate loans.
  • Attended schools of questionable value.
  • Are experiencing financial hardship.

The Biden administration also said that, if its new plan is enacted as proposed, borrowers will get up to $20,000 of unpaid interest on their federal student debt forgiven, regardless of their income.

The draft text echoes much of that announcement. However, the Education Department left out from its relief plan, for now, the group of borrowers experiencing financial hardship.

The department said it will release a second draft rule concerning people in this situation “in the coming months.”

This is breaking news. Please check back for updates.

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