Overview of President Biden’s Student Loan Debt Relief Plan

On Aug. 24, President Biden and the Department of Education (ED) announced a series of steps to assist persons with student debt, collectively called the student loan debt relief plan. Following is a summary of the key parts of the student loan debt relief plan.

Final Extension of Student Loan Repayment Pause

ED announced “a final extension of the pause on student loan repayment, interest, and collections through December 31, 2022. Borrowers should plan to resume payments in January 2023.” The pause was originally instituted by President Trump in March 2020.

Student Loan Debt Relief Plan Basics:

  • What loans are affected? Loans that are held by ED are affected. This includes many loans held by dental and dental hygiene students, such as direct unsubsidized and Direct PLUS (Grad PLUS) loans.

  • Who qualifies and what is the relief? Those with incomes less than $125,000 or less than $250,000 (for married couples or Head of Household taxpayers) can receive cancelation of $10,000 in debt; up to $20,000 if the person has received a Pell Grant.

  • Are Direct PLUS loans for graduate students and parents included? Loans for graduate school are included, if the income levels are met, except the Pell Grant benefit does not apply to graduate loans. Direct Parent PLUS loans are also included as long as the parents meet the income requirements.

  • When will the forgiveness kick in? It’s unclear at this point with more details expected in the coming months.

  • What are the next steps? ED will publish by the end of December 2022 a proposed rule to implement the student loan debt relief plan. There will be a 30-day public comment period when the proposed rule is announced.

Changes to the Income-driven Repayment Plan

The plan includes two other proposals of note. ED will establish a new income-driven repayment (IDR) plan. The new IDR plan will require borrowers to pay 5% of discretionary income monthly on their outstanding undergraduate loans.Current IDR plans require a payment of 10% of discretionary income. The new plan would raise the amount of income that is considered nondiscretionary income, thus exempt from the repayment percentage. Finally, under the new IDR plan, the remaining debt would be forgiven after 10 years of payments (current IDR plans forgive the balance after 20 years of payments).

Focusing on Public Service Loan Forgiveness

The Biden administration also highlighted its efforts to assist those working in public service and who are or will seek debt forgiveness through the Public Service Loan Forgiveness (PSLF) program. In October 2021, ED undertook a year-long effort to streamline the process of applying for and receiving relief under the PSLF program which previously had been plagued by delays, uneven administration and confusion.

Earlier this month, ADEA joined other higher education associations in commenting on a Notice of Proposed Rulemaking (NPRM) on several student loan topics, including PSLF. The NPRM proposed allowing more payments to qualify for PSLF including partial, lump-sum and late payments, and allowing certain kinds of deferments and forbearances—such as those for Peace Corps and AmeriCorps service, National Guard duty and active-duty military service—to count toward PSLF. In its comments, ADEA expressed the hope that ED would seriously consider either implementing the PSLF provisions in the NPRM early or extending the current temporary waiver through June 2023 so that there is a seamless transition into the new regulations.

Yesterday’s announcement does not extend the current waiver period but instead encourages those who seek the forgiveness to apply at PSLF.gov before Oct. 31, 2022.

President Biden, in his statement, reiterated his commitment to a doubling of the Pell Grant and free community college.

The new student loan debt plan is intended to provide the same kind of financial relief for students from the effects of the COVID-19 pandemic, as has been provided to their institutions through the Higher Education Emergency Relief Fund (HEERF) grants, to small businesses through the Paycheck Protection Program (PPP) loans that were eligible to be forgiven and the Economic Injury Disaster Loans (EIDLs), which are low-interest rate loans with long-term payback periods for business and agriculture.

ADEA will continue to track and monitor this proposal and report on its implementation.

1Those with both undergraduate and graduate debt will pay a weighted average rate.

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