Biden Just Ended Two Student Loan Forgiveness Plans For 30 Million People — Here’s Why

The Biden administration walked away from two mass student loan forgiveness plans on Friday, marking an anticlimactic end to the efforts to enact broad student debt relief. Officials withdrew proposed regulations that would have allowed the initiatives to be implemented.

The two loan forgiveness plans would have created pathways to student debt relief for broad swaths of student loan borrowers, including those who have experienced runaway balance growth due to interest accrual, and people who are dealing with significant personal or financial hardships. Had the programs been enacted, they could have benefited more than 30 million borrowers.

But given ongoing legal battles over Biden’s student loan forgiveness initiatives — most of which have not been going well for the administration — as well as the transition to the Trump administration in January, officials may have concluded that these plans were unlikely to go into effect, anyway. And by scrapping the programs before the Trump administration takes office next month, Biden officials may be trying to insulate borrowers from potentially adverse actions, and preserve relief for the future.

Here’s what borrowers should know.

Two Biden Student Loan Forgiveness Plans Could Have Benefited Millions

The Biden administration officially withdrew draft regulations for two student loan forgiveness plans on Friday. The first was commonly referred to as “Plan B” in reference to Biden’s first mass debt relief plan, which would have provided $10,000 in loan forgiveness for most borrowers; the the Supreme Court struck that plan down last year. “Plan B” would have targeted debt cancellation for four broad groups of borrowers, in particular those whose loan balances have ballooned over the years due to runaway interest accrual. The plan also would have provided loan forgiveness to borrowers who attended a “low-value” school that failed to comply with federal standards, those who took student loans more than 20 or 25 years ago, and people who qualify for existing loan forgiveness programs but never applied.

The second student loan forgiveness plan would have provided relief to borrowers experiencing hardship. Much of the relief would have been implemented automatically under the plan based on a number of hardship “indicators” the Education Department had identified; these would have included a borrower’s low income, other debt burdens, eligibility for other means-tested government programs, and disability status. Other borrowers would have been allowed to submit an application for individualized review.

But it became clear within the last two months that these plans were likely not going anywhere. “Plan B” student loan forgiveness remains bogged down in a legal battle and subject to an injunction blocking the Education Department from moving forward with the program. And the hardship-based student loan forgiveness initiative was not even going to be finalized until sometime in 2025, when Biden would no longer be in office.

Why Biden Cancelled Regulations For These Two Student Loan Forgiveness Plans

There may be several reasons the Biden administration decided to scrap the two student loan forgiveness plans. The most obvious reason is because they were unlikely to get implemented, given the pending court battle and the incoming Trump administration.

But administration officials may have had broader reasons for officially withdrawing the draft regulations. They may have wanted to prevent the incoming Trump administration from quickly rewriting the draft rules in ways that could harm borrowers — for instance, by placing new restrictions on future student loan forgiveness. In addition, by withdrawing the regulations before the federal court considering the “Plan B” legal challenge has issued a final ruling, that lawsuit likely will become moot, ending the litigation before courts can issue potentially precedent-setting decisions that could limit the ability of a future administration to enact broad student loan forgiveness using the same legal authority under the Higher Education Act.

The Trump administration could still try to enact new regulations that could place certain limits on student loan forgiveness. But by withdrawing the current regulations now, the Biden administration is essentially preventing the Trump administration from trying to turn those rules into vehicles for changes that could harm borrowers. And it may force a Trump-led Education Department to start from scratch if Trump officials want to create new student loan-related regulations, which can be a lengthy and tedious process that can ultimately be subject to legal challenges (as the Biden administration has experienced).

Biden Touts Successful Student Loan Forgiveness Initiatives, Including PSLF

Meanwhile, the Biden administration has been plugging their more successful student loan forgiveness initiatives, including improvements to Public Service Loan Forgiveness, or PSLF. Officials announced on Friday that an additional 55,000 borrowers were approved for PSLF relief, adding to the nearly one million borrowers who have received student loan forgiveness under PSLF during the last four years. The administration has also approved:

• $56.5 billion in student loan forgiveness for more than a million borrowers through Income-Driven Repayment plans;
• $28.7 billion in loan forgiveness for at least 1.6 million people who were misled or harmed by their school;
• $16.2 billion in medical-related discharges for around 572,000 borrowers via the Total and Permanent Disability discharge program.

What’s Next For Student Loan Forgiveness

The Biden administration recently brought back the ICR and PAYE plans, two income-driven repayment programs that can lead to eventual student loan forgiveness after 20 or 25 years. The return of these plans comes as the SAVE plan, a newer IDR option the administration created last year, seems increasingly likely to get overturned in a pending legal challenge, or repealed by the Trump administration.

With Republicans set to control the Congress and the White House next month, borrowers should expect to see changes that may impact student loan forgiveness programs. For example, House Republican leadership is angling to include a repeal of IDR time-based student loan forgiveness for new borrowers, as well as restrictions on new executive action-based student loan forgiveness initiatives, in an upcoming budget reconciliation package. But the scope of any loan forgiveness rollbacks remains unclear at this juncture.

Meanwhile, borrower advocates are pushing the Biden administration to wrap up student loan forgiveness implementation for tens of thousands of borrowers who were already approved, but have yet to receive relief. Some advocacy groups are also calling on the administration to unilaterally cancel student loan debt for older borrowers before Biden leaves office.