Here's who could be eligible for student-loan forgiveness under the Biden administration's latest plan

By Jillian Berman

The details are far from final, but borrowers who owe more than when they entered repayment could benefit

The Biden administration provided the most detail yet about who could be eligible for relief under its latest plan for student-loan forgiveness.

The categories of borrowers who may qualify for debt cancellation are far from certain. The Department of Education is in the midst of a rulemaking process that will ultimately determine the scope of any debt-relief plan. The details released Monday are part of an agency proposal that will be finalized over the next several months.

But if the eligibility criteria for relief the Department is proposing remain intact, the debt forgiveness will likely be more targeted than the administration's initial plan, which the Supreme Court struck down in June. Under that plan, borrowers earning less than $125,000 would have had up to $20,000 in debt forgiven.

Still, in some ways, the proposal appears to incorporate elements of the initial plan of mass-debt forgiveness. It also gets at some of the systemic issues with the student-loan program that borrower advocates have complained about for years.

Here's who could be eligible:

Certain borrowers on income-driven repayment plans who owe more than when they entered repayment: Under income-driven repayment, the government provides borrowers with the ability to repay their debt as a percentage of their income and have the remainder forgiven after at least 20 years of payments. Historically, because monthly payments on these plans are tied to income, some borrowers' payments were so low that they didn't touch the loan principal and borrowers watched their balances grow.

Under the Department of Education's proposal released Monday, borrowers enrolled in one of these plans would be eligible for up to $20,000 in debt relief, if they have an income that is below 225% of the poverty line and a balance that is larger than when they initially entered repayment. The agency is proposing to waive up to $20,000 of the gap between what a borrower owes currently and what they owed when they entered repayment.

Borrowers who are earning less than $125,000 as a single individual and less than $250,000 as a married couple, and are also enrolled in SAVE, would be eligible to have up to $20,000 of the amount they owe above their balance when entering repayment canceled. SAVE is the version of income-driven repayment that the Biden administration launched earlier this year.

Other borrowers who owe more than when they started paying back their loans: All other borrowers who don't fit into one of these categories would have up to $10,000 of the amount they owe above their balance when they enter repayment waived.

Under the Department's proposal, a borrower earning less than 225% of the poverty line, who is in a repayment plan other than income-driven repayment and who owes more than their balance when they entered repayment would be eligible for an additional $10,000 in cancellation.

Borrowers who entered repayment decades ago: Borrowers with only undergraduate loans who have been in repayment for at least 20 years would receive a one-time debt cancellation. All other borrowers would be eligible for cancellation on loans that entered repayment 25 years ago, the agency said.

Borrowers eligible for forgiveness in other programs, but that haven't applied: For years, borrowers and advocates have complained that borrowers face challenges accessing relief under Public Service Loan Forgiveness, an initiative that allows borrowers who work for the government and certain nonprofits to have their debt cancelled after at least 10 years of payments. Under the Department's proposal, borrowers who are eligible to have their debt canelled under PSLF, but haven't applied for the relief would have their debt wiped away.

In addition, borrowers who are eligible for cancellation under income-driven repayment, which wipes away debt after at least 20 years of payments, would have their debt forgiven even if they didn't apply for the relief.

Borrowers who attended programs that didn't provide them with financial value: Recently, the Department of Education announced rules aimed at pushing career schools out of the federal financial aid program if they don't adequately prepare students to land a job. Under the Department's proposal released Monday, borrowers who attended schools or programs that closed precipitously or where the agency has taken steps to stop students from borrowing to attend that institution in the future would have their debt cancelled.

Proposal could face litigation but not for at least several months

The release of the proposal is the latest step in a process that will determine who is eligible for debt cancellation. After the Supreme Court struck down the Biden administration's initial plan, the president vowed to take another stab at debt relief. But as part of this second attempt, the agency has to go through negotiated rulemaking, a process that includes taking feedback from stakeholders on any proposal.

These stakeholders are meeting for their last session next week. After that, the Department will develop a proposal based on their feedback that the agency will publish for public comment. Once the Department digests the public comments, they'll release a final rule.

Like the Biden administration's initial plan, the proposal is likely to face legal challenges. Still, it's doubtful that any opponents will sue over the plan until the final rule is released.

The plan for debt forgiveness released Monday is separate from the $127 billion in debt cancellation that the Biden administration has been announcing over the past several months. That relief covers borrowers who were already eligible for debt forgiveness under existing programs, but due to technicalities and paperwork challenges struggled to actually have their balances wiped away.

-Jillian Berman

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12-04-23 1601ET

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