Biden set to announce another new student-debt-forgiveness plan next week

 It's unclear how many borrowers would be impacted, but officials have said they want to get relief to as many borrowers as possible, as fast as possible

President Joe Biden could announce a proposal for mass student-debt relief as early as next week, the Wall Street Journal reported, the latest development in his effort to take a second stab at student-debt forgiveness after the Supreme Court struck down his initial plan last year.

The announcement would come a little bit less than a year after the Supreme Court's conservative majority rejected the administration's plan to cancel up to $20,000 for a wide swath of borrowers. In the hours after the court blocked his plan, Biden vowed to try another route for achieving mass debt relief.

The proposal, which Biden is planning to outline on Monday, according to the Journal, would be the next step in that effort. The plan will likely be different from the one the Supreme Court struck down in some key ways; over the past several months, the administration has outlined what's likely to be included in the proposal.

Here's what you need to know:

Who could it impact?

Previously, the administration has said plans to target borrowers who have been particularly impacted by student debt in a few key ways. Some categories officials have signaled would be eligible for relief under the new plan include borrowers who entered repayment decades ago and are still paying; borrowers who owe more than when they borrowed; borrowers who are eligible for debt relief under existing programs, but haven't applied for forgiveness, and more.

In addition, the administration has also said that borrowers whose student-loan payments are causing them financial hardship could be eligible for relief. Signals of hardship may include things like whether a borrower receives certain public benefits, whether they pay high monthly health care, housing or caretaking costs and more.

How many borrowers might be affected?

Officials haven't indicated how many borrowers could be affected by the new student-debt-relief plan. Still, they have said many times over the past several months that their goal is for the student-debt forgiveness efforts to impact as many people as possible as quickly as possible.

The plan that was struck down by the Supreme Court last year would have impacted up to 43 million borrowers.

When will borrowers start seeing relief?

Any relief under the new rule likely wouldn't come for at least several weeks. After the administration announces its proposed rule, which the Journal is reporting will come next week, they are required to take public comments and consider them. Then officials will release and implement a final rule.

Depending on how quickly this process goes, borrowers could start seeing their debt canceled under the new rule before the November election. That could be key for the president, given that more than 40% of Gen Z swing-state voters have said he's not doing enough on student-debt relief.

How is this different from the other debt forgiveness the Biden administration has announced?

The plan that could be announced in the next several weeks would designate new categories of borrowers as eligible for debt cancellation.

It would be separate from the nearly $138 billion in debt cancellation for nearly 3.9 million borrowers, the Biden administration has announced over the past several weeks. The bulk of that debt forgiveness was for borrowers who were eligible for relief under existing programs, but were stymied from accessing the cancellation due to technicalities.

For example, the Biden administration streamlined the process for public servants seeking debt cancellation under the Public Service Loan Forgiveness program, which has been notoriously hard to access. They also made it easier for borrowers who had been in repayment on their debt for more than 20 years to receive the relief they are entitled to under certain repayment programs.

Will the new plan face legal challenges?

It is likely the new plan will face legal challenges. The administration is currently facing a lawsuit from several Republican-led states over other debt-relief efforts.

The challenges to this debt-forgiveness plan probably won't come until the agency announces its final rule. It's possible that the new plan could face a different fate in the courts.

The debt-relief plan the Biden administration announced in 2022 was grounded in the HEROES Act, which allows the Secretary of Education to waive and modify student loans in the case of a national emergency. The Supreme Court's conservative majority didn't buy that the HEROES Act gave the Secretary the authority to enact a mass-debt-relief program during the pandemic.

The Biden administration is using the Higher Education Act as the legal basis for its new plan. Some advocates have said for years that the HEA gives the Secretary of Education to cancel student debt. The agency has used it in one-off cases.

In addition, the administration has gone through the rulemaking process to develop this new relief program, which gives critics a formal forum in which to air their grievances and for the administration to answer them before finalizing the rule. The plan the Supreme Court struck down didn't go through a formal rulemaking process because the HEROES Act didn't require it.

https://www.morningstar.com/news/marketwatch/20240405365/biden-set-to-announce-new-student-debt-forgiveness-plan-next-week-heres-what-you-need-to-know