December 11, 2023
The brand new federal student loan forgiveness program is getting closer and closer to being finalized. We know a lot about some of the borrowers who will be qualified for this forgiveness and we may know more as soon as this week.
Just so we’re clear – this is the new student loan forgiveness program that the Biden Administration announced after the Supreme Court struck down the last proposed plan of forgiving $10,000 or $20,000 of loans for qualified borrowers. It’s important to understand – the supreme court did not rule that the Biden Administration can never forgive student loans…ever.. The court just said the Biden Administration cannot implement that specific forgiveness program. And there was nothing in the court’s ruling that said the Biden Administration can’t try again. And that’s exactly what’s been happening for the last 6 months.
Generally this forgiveness program is not blanket forgiveness like the last program. It’s more tailored. So far there are four types of borrowers who would be qualified for some form of forgiveness under the proposed new program. And again – this is not finalized yet – more groups may be added – this is just what they have at this point.
Group number one – borrowers whose balances are greater than what they owed upon entering a repayment program. The option for these people is to provide up to $10,000 of relief because the interest on this debt has gotten out of control. There are several other proposals that would provide even more interest relief to lower-income borrowers and borrowers who are already enrolled in the save income driven repayment program.
Group number two – borrowers whose loans first entered repayment many years ago. The Education Department is proposing one-time relief to borrowers who entered a repayment program 20 years ago for their undergraduate loans only. All other borrowers would receive forgiveness on loans that entered repayment 25 years ago.
Group number three – borrowers who are eligible for forgiveness under income-driven repayment plans or programs like the public service loan forgiveness program but just don’t realize they qualify and haven’t applied. This group would just get the automatic forgiveness that they are entitled to under the law.
And group number four – borrowers who attended programs or institutions that failed to deliver sufficient financial value. This group would be qualified if the education department has terminated future borrowing at that institution or program because the institution or program is has failed accountability measures and has left students with unaffordable debts, or because the program or institution has closed.
Now – this program has gone through several rounds of public comments already and the Education Department and the appointed negotiators who do not work for the federal government are holding a two-day public meeting about how to move forward. The goal is to have the draft rules agreed to by the end of tomorrow and the proposed rules out to the public by early in 2024.
Tomorrow is the last day of the two-day public hearing.
Read more about the forgiveness program here.
