What Biden’s New Student Debt Relief Plan Means for You

If you’re hoping student debt relief could still happen in the U.S., you might have another shot. (With an emphasis on might.)

In April 2024, President Biden announced yet another new loan cancellation program. Like his previous attempt, this program would be available to most borrowers with federal student loans.

But unlike past attempts to cancel student loans, this proposal would eliminate up to $20,000 in interest for most borrowers — but would not eliminate part of your loan principal.

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What Is Biden’s New Student Debt Relief Plan? 

First off, the plan’s complete details have not been announced. Those are set to come in the next few months. 

But the basic gist is this: borrowers will have some of their unpaid interest forgiven. 

This new plan will only apply to people with an adjusted gross income (AGI) of $120,000 or less. (For married couples, it’s an AGI of $240,000 or less.) 

Only federal student loans will be eligible — not private student loans.

Kathleen Boyd, CFP and Certified Student Loan Professional at Student Loan Planner, says her company sees many borrowers who have tens of thousands of dollars in accrued interest, often from years of deferment or forbearance.

“I think this proposal is actually more impactful than the original proposal that came out in 2023,” she says.

The plan would also expand the definition of hardship for having your entire loan forgiven. This can make it easier for many borrowers to have their loans canceled if they can’t afford them.

READ MORE: How Does Studen Loan Interest Work?

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What Student Debt Relief Is Available Right Now? 

Even though President Biden has not succeeded in canceling student loans for the majority of the public, he has been able to forgive loans for millions of other borrowers. 

He also introduced the Saving on a Valuable Education (SAVE) plan, which lowers your monthly payments if your income is too low to afford them.

Also, the administration has made significant changes to the income-driven repayment forgiveness program. If you use this program, any forgiven loan balance will be tax-free through 2025. 

Many experts believe this will be extended permanently. This would allow you to lower your monthly payments without the threat of a huge tax bill in the future.

What Should You Do in the Meantime?

Boyd thinks this new loan cancellation plan will go to the Supreme Court, just like the previous program. That means it could be months until the issue is resolved. As such, Boyd warns not to get your hopes up.

Instead, make a plan for what will happen if it doesn’t go through.

“Regardless of what Biden is doing, every borrower should have a plan in place for their student loans,” she says. 

Consider your debt-to-income ratio

Your debt-to-income ratio is your total student loan debt divided by your income. If you owe more than you earn in a year, then you have a high ratio. But if you owe less than you earn, then you have a low ratio.

If you have a high debt-to-income ratio, Boyd says you will likely benefit from an income-driven repayment plan. 

But if your debt-to-income ratio is low, then you should stay on the standard repayment plan.

Explore other loan repayment options

Even if this interest loan cancellation program doesn’t go through, you may still be eligible for other types of forgiveness and repayment options. 

For example, the Public Service Loan Forgiveness (PSLF) program is available if you work full-time for a nonprofit or government organization and are on an income-driven repayment plan.

Some professions — mainly in the healthcare and legal industries — are eligible for other specific programs.

But qualifying for these programs is trickier than qualifying for PSLF. Most of them require that you work for a certain kind of employer or live in an underserved area, or both. You may have to meet those requirements for a few years to receive your loan forgiveness.

Also, there are limited eligible spots for these programs. You have to apply and be accepted to start the loan forgiveness process. 

READ MORE: How To Apply for Student Loan Forgiveness

Consider refinancing

If you have a high interest rate on your student loans, you may want to consider refinancing to get a lower rate. 

But be aware that if you refinance your student loans, they will become private loans. You will lose all the perks and features that come with federal loans.

READ MORE: Federal vs. Private Student Loans: What’s the Difference?

Monitor student loan updates

President Biden and his Department of Education often announce new programs to help borrowers who are struggling with their loans. Follow the news to see what updates are available and how they can help you.

You can set up Google Alerts for the term “student loans” to get notifications. Most major news sites will also post updates if the administration makes significant changes. 

Also, make sure to check any messages sent from your loan servicer. 

FAQs

What did the Supreme Court rule on student loan forgiveness?

In June 2023, the Supreme Court ruled against President Biden’s loan cancellation program. The court was divided 6-3, with the conservative judges voting against the proposal. 

They said that the President does not have the authority to cancel student loans unilaterally, while the liberal-minded judges agreed that the Heroes Act of 2020 did give the President enough authority to cancel student loans.

What is Trump’s stance on student loan forgiveness?

Past President Trump has not backed a broad loan cancellation program but said he is in favor of income-driven repayment plans. However, it does not seem likely that he will continue the targeted loan cancellation programs and policies that President Biden has enacted. 

Are private loans eligible for student loan forgiveness?

Private student loans will not be included in Biden’s loan forgiveness program or most other forgiveness programs, like PSLF. 

However, private loans may still be eligible for loan repayment programs like the occupation-specific ones mentioned above.

Also, if you have a high interest rate on your private student loans, you can refinance them to get a lower interest rate. This can reduce your monthly payment and help you pay less in total interest. 

There is no limit to how many times you can refinance your student loans.

Could Congress pass legislation related to student loans?

While the Supreme Court has ruled that President Biden does not have authority to apply broad student loan cancellation, Congress does have that power if they pass the right legislation.

However, because the Republicans currently have a strong presence in both the House and the Senate, there’s little chance that Congress will cancel student loans for borrowers.

“I wouldn’t trust them to pass anything any time soon as it relates to student loan policy,” Boyd says. “And that’s why this administration has been using executive action to get things done.”

TL;DR

A widespread loan forgiveness program is unlikely, but there are potential changes that could help millions of borrowers. Pay attention to the news and determine if you’re eligible for any new changes that come through. 

But your safest bet is to not assume your loan will be forgiven. Instead, choose a repayment plan that works best for your financial situation.

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