President Joe Biden recently announced a new student loan forgiveness plan that aims to provide relief to millions of borrowers. The plan, currently in the works, represents Biden’s second attempt to cancel student debt on a mass scale. While the plan has not been finalized or made available yet, it is expected to target specific groups of borrowers for relief. When officially launched, many borrowers may not need to submit an application and could receive student loan forgiveness automatically.
The new student loan forgiveness program has undergone several rounds of negotiated rulemaking where key stakeholders discuss regulatory text governing the program. During these sessions, advocates and the Education Department have agreed on the need to automate student loan forgiveness wherever possible. With five categories of borrowers who could qualify for forgiveness under the plan, some may not require applications, streamlining the program and expediting debt relief. The program could automatically cancel debt for borrowers eligible for loan forgiveness under existing plans but have not applied or enrolled, as well as for borrowers who entered repayment many years ago.
The plan also includes forgiveness of accrued and capitalized interest for borrowers who have experienced negative amortization. Similarly, borrowers who attended “low-financial-value programs” could also be eligible for automatic student loan forgiveness. The Education Department already has the data needed to make determinations for these categories of borrowers, potentially eliminating the need for applications. However, for some borrowers, an application may be required, particularly for those experiencing financial hardship. In such cases, borrowers would need to submit a formal application for consideration, potentially causing delays in receiving relief.
The new student loan forgiveness plan is still in the process of finalization and must undergo additional steps before becoming available to borrowers. These steps include the publication of the final version of governing regulations and a period for public comment. The program is expected to be officially launched closer to the fall, and the department will update its guidance to reflect any application requirements. While Biden’s first plan had an online application, the latest program may also face legal challenges that could potentially block relief. The administration has been cautious with its guidance, using qualifying phrases to describe potential benefits, indicating an awareness of possible legal interventions.
