If Biden’s newest debt-forgiving program gets the green light, the lives of millions of Americans could change for the better as soon as this fall – but only if they qualify, of course.
Debt Relief 2.0
If at first you don’t succeed, try again.
That seems to be the motto of the Biden administration, at least when it comes to student debt forgiveness, because currently, tens of millions of emails are going out to American borrowers who are waiting to hear if their days of owing student debt are over.
Happy Inboxes
Last week, the Biden administration started sending out emails (in which the U.S. Department of Education states: “We want to make you aware of this potential relief…”) to borrowers who might be eligible for this new wide-scale cancellation of loans.
Christmas Might Come Early
According to the Department of Education, a minimum of 25 million American citizens could see their student debt wiped out.
This endeavor can also benefit about 35,000 borrowers who are mainly employed in the public service sector.
The aim is that this debt relief will be implemented by fall, hopefully, a few weeks before voters are off to the polls for the 2024 presidential election.
For the People
Last week, U.S. Secretary of Education Miguel Cardona claimed in a statement: “Today, the Biden-Harris administration takes another step forward in our drive to deliver student debt relief to borrowers who’ve been failed by a broken system.”
Opt-Out Available
The Education Department added that if a borrower wishes to opt out of this debt-cancellation program for whatever reason, they have until August 30th to contact their loan servicer.
Who’s Eligible?
In the email, four groups of eligibility are listed:
- Debtors whose debt is bigger than it was when they started repayment.
- Borrowers who started repaying their undergraduate loans on or before July 1st, 2005, or their postgraduate loans before July 1st, 2000.
- Individuals who already meet the criteria for student loan cancellation through another of the government’s existing programs, but who haven’t submitted their applications yet.
- Students enrolled in “low-financial value” programs.
And Additional Tax?
For those wondering if they will still owe taxes on canceled debt, it should be noted that student loan forgiveness is exempt from federal taxes until 2025, thanks to a provision in the American Rescue Plan Act of 2021.
Nevertheless, certain borrowers may still be subject to state tax obligations.
Not the First Attempt
President Joe Biden previously attempted to cancel student loans, yet that came to a halt in June 2023 when the Supreme Court ruled with a 6-3 majority against it.
No, Mr. President
The reason was supposedly because, according to the high court, Biden did not have the authority to direct his education secretary to eliminate such a substantial amount of consumer debt without Congress’s approval.
We’ll Try Again
But the same day that the Supreme Court stopped Biden’s first attempt, the White House announced that they would attempt the debt-relief program differently.
What’s Different Now?
The first time, Biden tried to cancel the debt by using an executive order.
This time, he has instructed the Education Department to follow the regulatory procedure. And according to those in the know, this move is sure to improve the likelihood of the program surviving the forthcoming round of legal disputes.
What About Kamala?
But now that Biden has dropped out of the presidential race and passed the torch to Kamala Harris, what does that mean for student loan holders?
Should Harris take the White House, debtors paying off student debt could still be able to see their loans forgiven.
She Seems Supportive
Student loan forgiveness has remained one of the Biden administration’s top programs. Under his ruling, nearly 4.6 million people saw more than $160 billion in federal student loans wiped out.
In her role as Vice President, Harris backed Biden on this, in addition to some of his other loan-cancelling proposals, including his plan to scrap between $10,000 and $20,000 for debtors who meet certain income criteria.
Her Pre-White House Days
But even while Harris was working as a California attorney general, she pressed charges against a for-profit college for engaging in deceptive practices that exploited low-income students.
As a senator, she also offered her support to the Debt-free College Act, even though that ultimately wasn’t passed into law.
Familiar With the Issue
And upon her first bid for the Democratic presidential nomination in 2020, Harris proposed a debt cancellation initiative that had a more limited focus compared to the one she later backed while serving in the Biden administration.
Billions of Debt Gone
But with this newest loan-cancelling program, about $168.5 billion had already been forgiven for nearly 4.8 million Americans thanks to several federal initiatives.
It’s a Big Deal
When it comes to public service workers wrestling with the worry of student debt, this new program isn’t just paperwork – it can actually change the circumstances of many people.
A Tight Deadline
As stated by the Education Department, its final rule on the debt-canceling program will be published around October.
And once that’s implemented, according to Luke Herrine, an assistant professor of law at the University of Alabama, the program is expected to wipe out multiple borrowers’ loans at a rapid pace to beat lawsuits.
Expect Some Fighting
As Herrine states: “It is often harder to undo something rather than prevent its being done, both administratively and legally.”
He also added: “And if the administration doesn’t wait, it forces opponents to put together a lawsuit quickly and without full information.”
Not So Fast…
However, those in opposition to the relief may already be gearing up to fight it, as stated by higher education expert Mark Kantrowitz.
“Most likely a lawsuit will be filed the day the rule is final, seeking a temporary injunction to prevent the Biden administration from forgiving loans” while the legal battle plays out, Kantrowitz said.
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The content of this article is for informational purposes only and does not constitute or replace professional financial advice.
For transparency, this content was partly developed with AI assistance and carefully curated by an experienced editor to be informative and ensure accuracy.
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