Biden Administration's Student Loan Relief Efforts: A Comprehensive Overview

The Biden Administration has made student loan debt relief a central focus of its education policy agenda, aiming to alleviate the financial burden on millions of borrowers. This article provides a detailed overview of the various initiatives undertaken by the administration, the challenges they have faced, and the potential pathways for student loan forgiveness.

The End of the Payment Pause and the Supreme Court Decision

Following a three-year pause on federal student loan payments, repayments resumed in October 2023, with interest accruing from September 1. This followed the Supreme Court's decision on June 30, 2023, which blocked President Biden's initial student loan debt forgiveness plan. This plan, announced in August 2022, proposed to forgive up to $20,000 for eligible borrowers who met specific income thresholds. However, a lawsuit filed by several Republican-led states challenged the President's authority to enact such broad debt cancellation.

The Supreme Court ultimately ruled against the administration, effectively halting the plan. Within hours of the Supreme Court's decision, the Biden Administration announced its intention to begin a negotiated rulemaking to consider providing student loan cancellation benefits for certain federal student loans under asserted authority in Section 432(a) of the HEA.

The SAVE Plan: A New Income-Driven Repayment Option

In response to the Supreme Court's decision, the Biden Administration finalized a new income-driven repayment (IDR) plan called Saving on a Valuable Education (SAVE). This plan replaced the Revised Pay As You Earn (REPAYE) plan and offers more favorable terms for borrowers.

Key features of the SAVE plan include:

Lower monthly payments: Borrowers with only undergraduate loans would pay no more than 5% of their discretionary income monthly.
Zero-dollar payments: Millions of borrowers making $32,800 or less individually (or $67,500 for a family of four) would have their monthly payments reduced to $0.
Interest accrual protection: The plan aims to prevent runaway interest, ensuring that borrowers do not owe more than their initial loan amount.

However, the SAVE plan has also faced legal challenges. Lawsuits filed by attorneys general in Kansas and Missouri sought to prohibit the Department of Education (ED) from implementing further provisions of the plan. While ED still allowed borrowers to apply for IDR plans by paper applications, the processing of these forms is currently on hold by federal loan servicers, per ED’s instructions. ED also placed all borrowers enrolled in the SAVE plan into an interest-free administrative forbearance.

Negotiated Rulemaking and Proposed Regulations

In a third attempt to provide student loan relief, the Biden Administration undertook negotiated rulemaking sessions in late 2023 and early 2024. Following these sessions, ED unveiled proposed rules in April on targeted debt relief. These proposed rules build upon the Administration’s existing work that has approved more than $168 billion in student loan relief for nearly 4.8 million borrowers through various actions. If finalized as proposed, they would bring the total number of borrowers eligible for student debt relief to over 30 million, including borrowers who have already been approved for debt cancellation by the Biden-Harris Administration over the past three years.

The proposed regulations focus on waiving federal student loan debts in specific circumstances. These waivers are based on four main themes:

Growing-Loan-Balance: The proposed rules address situations where a borrower's loan balance has increased due to accrued interest, even while making payments.
Time in Repayment: Borrowers with only undergraduate loans who have been in repayment for more than 20 years (received on or before July 1, 2005) would be eligible for relief.
Eligibility for Forgiveness Based on Repayment Plan: If a borrower has not successfully enrolled in an income-driven repayment (IDR) plan but would be eligible for immediate forgiveness, they would be eligible for relief.
Borrowers who attended poorly performing institutions of higher education (IHEs) or programs.

The proposed rule would authorize the "waive[r]" of qualifying ED-held federal student loans in eight circumstances and would provide for the waiver of certain FFEL program loans held by a private entity or guaranty agency (commercially held FFEL program loans) in three cases.

Specific Waiver Proposals

The proposed regulations outline several specific scenarios in which student loan debt could be waived. These include:

Read also: Biden's Student Loan Plan

IDR Growing-Loan-Balance Waiver

Proposed 34 C.F.R. § 30.81 would authorize the Secretary to waive, once per borrower, the full amount by which each of the borrower's outstanding loan balances exceeds the following:

The text of the proposed rule invokes ED's authority "to waive debt that the Secretary is unable to collect under" the Federal Claims Collections Standards (FCCS) and ED's other debt collection regulations, rather than HEA Section 432 expressly. ED states that its intention with this waiver is to address "excessive interest accrual," the primary driver of which is a borrower's payments under an IDR plan that do not cover the full amount of accumulated interest. Evidently tying growing loan balances to collectability concerns, ED asserts that growing loan balances undermine its ability to collect federal student loan debts.

Non-IDR Growing-Loan-Balance Waiver

Proposed 34 C.F.R. The non-IDR growing-loan-balance waiver in proposed 34 C.F.R. § 30.82 is broader in some ways and narrower in others than its IDR counterpart in proposed 34 C.F.R. § 30.81. The waiver is broader in that all borrowers with qualifying growing debt balances would be eligible for a waiver, regardless of their repayment plan or income. The waiver is narrower, though, because it would be limited to $20,000 of a borrower's growing-loan-balance amount, whereas proposed 34 C.F.R.

ED expresses similar rationales for both growing-loan-balance waivers-reducing the negative psychological impacts of growing balances on borrowers. However, ED explains that it would limit the proposed non-IDR Growing-Loan-Balance Waiver to $20,000 because ED does "not believe it would be appropriate to provide uncapped relief" through a waiver that would be available for all growing-loan-balance borrowers (i.e., available to all borrowers absent other eligibility criteria such as an income cap). ED states that an uncapped benefit could provide an "unnecessary windfall" to some borrowers. ED explains that the $20,000 cap "represents the 90th percentile of the amount by which balances exceed what borrowers originally owed upon entering repayment." In other words, 90% of borrowers with growing loan balances have less than a $20,000 loan balance increase. These borrowers would have all of that growing loan balance waived, either through the uncapped waiver in proposed 34 C.F.R. § 30.81 (the IDR Growing-Loan-Balance Waiver) or through the capped waiver in 34 C.F.R. § 30.82 (the non-IDR Growing-Loan-Balance Waiver). The remaining 10% of growing-loan-balance borrowers-those with a growing loan balance that exceeds $20,000-could still benefit from the NPRM's waivers. However, borrowers in this latter category would only have their entire growing loan balance waived if they qualified under proposed 34 C.F.R.

Waiver Based on Date on Which Loan Entered Repayment

Proposed 34 C.F.R. § 30.83 would authorize the Secretary to waive the entire outstanding balance of a borrower's loan under certain conditions. The HEA and its implementing regulations provide borrowers with several options to manage student loan debt repayment. Proposed 34 C.F.R. The proposed waiver would use different date standards for different loan types to determine when a borrower's loan "enter[ed] repayment." ED would consider a loan to have entered repayment as follows:

For Consolidation Loans made on or after July 1, 2023, the latest date described in 1 or 2 above for loans repaid by the Consolidation Loan. ED explains that it would use two different repayment-entry dates for Consolidation Loans based on the potential for "strategic consolidation." The date that divides proposed 34 C.F.R. § 30.83's two categories for Consolidation Loans-July 1, 2023-is the first day after the Supreme Court's decision in Biden v. Nebraska. It is also the day after President Biden announced a "new approach" to student loan debt relief that would be based in the HEA rather than in the HEROES Act.

Consolidation Loans made before July 1, 2023, receive more favorable treatment under proposed 34 C.F.R. § 30.83 than those made on or after July 1, 2023. To illustrate the effects of the July 1, 2023, date, suppose an individual borrowed a Subsidized Loan for his or her own undergraduate education and that this first loan entered repayment on December 1, 2000. Suppose that the same individual later borrowed a Parent PLUS Loan for his or her dependent undergraduate student's education and that this second loan entered repayment on August 1, 2020. If the borrower consolidated the two loans on July 1, 2021, the full balance of the Consolidation Loan could be waived under proposed 34 C.F.R. § 30.83. That is because the earlier of the two loans repaid by the Consolidation Loan entered repayment more than 20 years ago. The portion of the Consolidation Loan attributable to the Parent PLUS Loan would be forgiven, even though this second loan entered repayment about four years ago. By contrast, if the borrower consolidated the same two loans on July 15, 2023, the Consolidation Loan would not be eligible for waiver of amounts owed under proposed 34 C.F.R. As with the growing-loan-balance waivers, the NPRM ties this proposed waiver to the collectability of federal student loans.

Waivers Based on Existing Loan Discharge, Cancellation, or Forgiveness Opportunities

Proposed 34 C.F.R. The HEA and its implementing regulations provide borrowers with several opportunities to have their qualifying loans discharged, cancelled, or forgiven, depending on borrower circumstances. However, borrowers who are otherwise eligible for these benefits do not always apply successfully. The borrower could, for example, be unaware that the benefit exists. Alternatively, the borrower could apply for the benefit but not receive it because of a deficient application. The NPRM notes persistent challenges to enrollment in or application for an IDR plan or other loan discharge and forgiveness benefits (e.g., closed school discharges) for borrowers who would benefit from such options. The NPRM states that these challenges are due, at least in part, to its past administration of the programs. ED has proposed two waivers to address such scenarios.

Borrowers Eligible for Forgiveness Based on Repayment Plan

Proposed 34 C.F.R. § 30.84 would authorize the Secretary to waive the entire outstanding balance of a borrower's loan if the Secretary determines that the borrower is not enrolled in but….

Additional Relief Programs and Borrower Protections

Beyond the SAVE plan and proposed regulations, several other programs and protections are available to student loan borrowers:

Income-Driven Repayment (IDR): IDR plans reduce monthly payments based on income and forgive remaining debt after 20 to 25 years. The Department of Education’s one-time IDR Account Adjustment will retroactively credit borrowers with time towards loan forgiveness, even if they haven’t been in an IDR plan.
Public Service Loan Forgiveness (PSLF): PSLF allows government and nonprofit employees to have their debt canceled after 10 years of qualifying payments.
Fresh Start for Borrowers in Default: Fresh Start is a program from the Department of Education to help eligible borrowers in default.
Loan Discharge: Borrowers may be eligible for loan discharge due to circumstances such as school closure or disability.
Borrower Defense if you took out loans to attend a school that misled you about your likelihood of finding a job or obtaining certification or licensure in your field of study, the school’s graduation rates, earnings after graduation, or the cost of education at the school.

Challenges and Ongoing Legal Battles

Despite the administration's efforts, student loan relief remains a complex and contentious issue. The legal challenges to the SAVE plan and the proposed regulations highlight the ongoing opposition to broad-based debt forgiveness.

In September, even as final rules still have not been released, seven Republican-led states preemptively filed a lawsuit to block ED from implementing the plans laid out in the proposed rules. Three days later, a district court ruled in favor of the lawsuit, issuing a temporary restraining order against ED, and most recently on September 18th, a judge extended the temporary restraining order for an additional 14 days until October 2nd.

The ongoing legal battles surrounding the SAVE plan, and imminent sunsetting of programs like Fresh Start and the on-ramp period to student loan repayment, have created significant challenges for financial aid administrators as they try to advise borrowers in this constantly-changing environment.

Financial Implications

The Biden Administration's student loan relief proposals have significant financial implications. Estimates suggest that debt cancellation alone could cost hundreds of billions of dollars. The new IDR program could add significantly to this cost, potentially raising the total plan cost to over $1 trillion.

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