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Biden administration preparing to announce new proposals to reduce, cancel student loan debt

Jacquelyn Martin/AP/File via CNN Newsource

Originally Published: 05 APR 24 09:29 ET

Updated: 05 APR 24 10:24 ET

By Arlette Saenz and Betsy Klein, CNN

(CNN) — The Biden administration is preparing new proposals aiming to reduce or cancel student loan debt for millions of borrowers, two sources familiar with the plans told CNN, another attempt to address a key issue facing voters before November’s election.

The expected proposals come nearly 10 months after the Supreme Court struck down President Joe Biden’s original student loan forgiveness program, which aimed to deliver up to $20,000 of relief to millions of borrowers struggling with outstanding debt. At the time, the president vowed to pursue another student relief approach by using a different legal authority.

The Department of Education soon began working on a different path relying on a different legal authority through the Higher Education Act of 1965. The new proposals are likely to be more targeted than the previous program would have been, laying out specific groups of borrowers who could get student debt cancellation.

Through the expected new proposals, first reported by The Wall Street Journal, the administration is aiming to ease student loan debt for borrowers experiencing hardship in their daily lives that would prevent them from being able to pay back their loans, one of the sources said. It will also help ease the burden on borrowers who have seen their interest significantly accrue over time, that source said.

The president is expected to lay out the new proposals on Monday, the same day he’s scheduled to travel to Madison, Wisconsin, to discuss lowering costs for Americans, the sources said.

Once a proposed rule is announced, it could still take quite some time to go into effect. The proposal would need to go through a public comment period before the administration could issue the final rule.

But it is possible that pieces of the new regulations could begin to be implemented as soon as this fall, one of the sources said, cautioning that the timing remains fluid.

While the new student loan forgiveness program is relying on a different law than the one struck down by the Supreme Court, it could still face lengthy legal battles if the Biden administration is sued again.

The White House declined to comment on the new actions.

The administration’s different route to developing these new proposals required the Department of Education to undertake a formal rulemaking process known as “negotiated rulemaking.”

Since October, a group of outside negotiators, including borrowers, schools and student loan servicer representatives, met several times to discuss the proposals and provide input on the regulatory language.

Negotiators considered making several groups of borrowers eligible for debt relief under the new program, including those who:

  • Currently have balances bigger than what they originally borrowed.
  • Entered repayment at least 25 years ago.
  • Attended career-training programs that created “unreasonable debt loads or provided insufficient earnings for graduates” or that havean “unacceptably high student loan default rate.”
  • Are eligible for existing student loan forgiveness programs but have not applied.
  • Are experiencing financial hardship.

The new proposals could give the president a fresh political jolt as many young voters and borrowers continue to feel financial strains from high student loan debt. Overall, 32% of registered voters say student loan debt is “very important” for presidential candidates to talk about, according to a recent poll by KFF. But for younger voters, ages 18-29, 46%say it’s very important.

Biden has taken other actions to provide relief after the Supreme Court struck down his student loan debt forgiveness program. His administration has made it easier for certain groups of borrowers – like public-sector workers, including teachers; disabled borrowers; and people who were defrauded by for-profit colleges – to qualify for student loan debt forgiveness under existing programs.

About 4 million people have seen their federal student debt canceled under Biden, totaling about $144 billion. While that’s more than any previous administration has delivered in debt relief, it’s just about one-third of the amount of student loan debt that would have been canceled by the forgiveness program rejected by the Supreme Court.

CNN’s Katie Lobosco contributed to this report.

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