President Joe Biden is adding a new tool to his arsenal for canceling student debt in the coming months as his 2024 reelection campaign ramps up.
The White House is set to announce Friday that the administration will implement earlier than planned a provision of Biden’s new loan repayment program that forgives debt for borrowers who initially borrowed less than $12,000 and have made payments for 10 years.
Federal student loan borrowers typically must repay their debts for 20 or 25 years to have their remaining balances discharged under the Education Department’s income-driven repayment plans. But Biden’s “SAVE plan” offers a new, shorter timeline to forgiveness for borrowers who took out a relatively small amount of debt.
That benefit was slated to take effect in July alongside other benefits, such as lower monthly payments for borrowers. But administration officials now plan to begin canceling student debt under the SAVE plan starting next month.
Nearly 7 million borrowers are now enrolled in the program, according to the administration, though it’s not clear exactly how many would qualify for immediate forgiveness.
The new pathway for student debt relief comes as the White House and Biden campaign are focused on making sure he gets credit for his efforts to cancel student debt — while also continuing a multi-pronged approach to boost the total amount of borrowers who get relief.
Even though the Supreme Court struck down his signature mass debt relief program last summer, the administration has still approved $132 billion worth of relief for more than 3.6 million borrowers under other Education Department programs.
The accelerated implementation of part of the SAVE plan will help the Biden administration continue to rack up those total debt forgiveness numbers. The Education Department also plans to continue announcing batches of loan forgiveness it approves for borrowers under previously announced initiatives, such as those targeting borrowers who’ve been paying for decades and public service workers.
Separately, the Education Department on another track is working on its new “Plan B” mass debt relief plan that will target various populations of borrowers. But those policies are still months away from emerging from a lengthy regulatory process.
Biden said in a statement that the announcement on Friday was part of his administration’s “ongoing efforts to act as quickly as possible to give more borrowers breathing room so they can get out from under the burden of student loan debt.”
“I won’t back down from using every tool at our disposal to get student loan borrowers the relief they need to reach their dreams,” Biden said.
The Biden administration finalized the SAVE plan last summer. It is significantly more generous to borrowers than previous iterations of income-driven repayment programs, reducing monthly payments and providing new interest subsidies meant to prevent balances from ballooning.
The shorter timeline for low-balance borrowers was targeted at those who took out relatively small amounts of debt to attend community college or who have some debt because they started to attend college but never finished. Borrowers with those relatively low balances are the most likely to struggle to pay their debt, then default.
Under the plan, borrowers who originally borrowed $12,000 or less start receiving a discharge of their remaining balance after making 10 years of payments. That period of time increases by one year for each additional $1,000 borrowed. So borrowers who initially borrowed $13,000 would need to repay for 11 years before receiving forgiveness, for example.
Republicans have slammed Biden’s SAVE plan as unfair and fiscally irresponsible, blasting the hundreds of billions of dollars the program is expected to cost.
“President Biden is downright desperate to buy votes before the election — so much so that he greenlights the Department of Education to dump even more kerosene on an already raging student debt fire,” Rep. Virginia Foxx, the chair of the House education committee, said in a statement. “It would surprise no one if the Department relied on infants playing with abacuses to balance its books — it is a complete and utter disaster.”
Education Department officials declined to quantify how many borrowers they expect to qualify for the new shorter path to loan forgiveness under the SAVE plan. But they said they were ramping up efforts to boost enrollment, especially for borrowers who might qualify for immediate forgiveness if they simply sign up.
So far, 6.9 million borrowers are now enrolled in Biden’s SAVE program, the Education Department said. About 3.9 million of those borrowers earn income that is low enough to qualify them for a $0 monthly payment.
Yet some borrowers have faced administrative hurdles and delays in trying to enroll in Biden’s program. The Consumer Financial Protection Bureau reported last week that more than 450,000 borrowers who applied for the SAVE plan had been waiting for more than a month for their loan servicer to process their application, as of last fall.
Those delays mean that borrowers are potentially on the hook for more interest and higher payments than they otherwise would have to make, the CFPB noted.
Education Department officials said this week that the backlog has been reduced but not eliminated. A department spokesperson said that, as of Wednesday, 140,000 applications had been pending at servicers for 30 business days or more.
The department’s Office of Federal Student Aid “is working to ensure servicers process applications in a timely manner and that these backlogs do not persist,” the spokesperson said in a statement. “The Department is not afraid to hold servicers accountable when they do not meet their contractual obligation to borrowers and will continue monitoring servicer processing time for [income-driven repayment] applications.”