Biden announces new plan to cancel student loans for 30m borrowers

President Joe Biden is set to announce a new initiative aimed at providing significant student debt relief to more than 30 million Americans. This ambitious plan comes as a strategic move to address the burgeoning student loan crisis that has been a point of contention in the United States for years. The announcement is scheduled for Monday, and it is expected to kick off an election year sprint to deliver on a promise that faced legal hurdles the first time around.

The new student debt relief plan is a recalibrated effort following the Supreme Court's rejection of Biden's initial proposal, which sought to cancel up to $20,000 in student debt for borrowers earning less than $125,000 per year. The revised plan takes a more targeted approach to loan forgiveness, focusing on specific groups of borrowers who have been significantly impacted by student loan debt.

Under the new proposal, the administration aims to forgive unpaid interest for approximately 25 million Americans who have seen their loan balances balloon beyond the original amounts borrowed. This move is expected to reset the borrowers' balances back to their initial principal, providing a fresh start for those who have been diligently making payments for years.

In addition to addressing unpaid interest, the plan will offer relief to around 2 million borrowers who have been repaying their debts for decades, as well as another 2 million who attended for-profit colleges that the administration has deemed "low-value." These institutions have been criticized for leaving students with unaffordable debt relative to their post-graduation earnings.

The Biden administration is also pursuing efforts to provide relief to "millions" of borrowers experiencing financial hardship, although specific details on the number of beneficiaries and the criteria for eligibility have not been disclosed. The plan includes provisions to cancel debt for borrowers who are eligible for loan forgiveness but have not yet applied, further expanding the reach of the relief measures.

To promote the new student debt relief plan, top administration officials will be dispatched across the country. Vice President Kamala Harris will be in Pennsylvania, and Second Gentleman Douglas Emhoff will travel to Arizona. Education Secretary Miguel Cardona will visit New York to highlight the plan's benefits.

The announcement comes at a critical time for the Biden administration, which is seeking to make clear to voters in battleground states the actions taken to improve the lives of everyday Americans. Early polls in 2024 have shown Biden lagging in garnering the support of young voters, many of whom were initially galvanized to vote for him in 2020 because of his debt relief promises.

The latest plan relies on a separate legal authority, the Higher Education Act, rather than the Covid-related emergency powers that formed the basis for the administration's first attempt at debt cancellation. A senior administration official expressed confidence that the new proposal would withstand legal scrutiny, having carefully studied the Supreme Court's decision that struck down the previous plan.

The economic implications of the student loan crisis have been a topic of much debate. Some analysts argue that the resumption of student loan payments could slow economic growth, as borrowers will have less disposable income to spend on goods and services. The total annual cost of student loan payments for consumers is estimated to be in the region of $70 billion, which, while a small percentage of the overall consumer spending, could still have a noticeable impact on the economy.

The Supreme Court's decision to invalidate the initial student loan forgiveness plan was met with disappointment from borrowers and advocates for debt relief. However, the new proposal represents a renewed effort by the Biden administration to address the student debt burden and provide financial relief to millions of Americans. As the plan is set to be formally proposed for public comment in the coming months, the administration is working against the clock to finalize and implement the regulations before the November election.