Biden cancels yet another $7.4B of student debt for 277,000 borrowers
This new debt forgiveness - for those enrolled in the federal Saving on a Valuable Education (SAVE) Plan - comes days after the president unveiled a sweeping student loan forgiveness proposal providing relief for 30 million Americans.
On Friday, the Biden administration announced its latest round of student loan cancellation.
More than 277,000 borrowers enrolled in the federal SAVE Plan, an income-driven repayment plan designed to lower payments, will receive debt relief. This announcement comes just days after President Biden announced a sweeping student loan forgiveness proposal wiping out debt for 30 million borrowers that would replace the one dashed by the Supreme Court last year.
The newest program also applies to borrowers in other income-driven repayment plans, as well as borrowers receiving relief under Public Service Loan Forgiveness plans. The cost of these cancellations is $7.4 billion.
“From day one of my administration, I promised to fight to ensure higher education is a ticket to the middle class, not a barrier to opportunity,” President Joe Biden said in a statement. “I will never stop working to cancel student debt, no matter how many times Republican elected officials try to stop us.”
The SAVE Plan is an updated version of a federal repayment plan that has been offered for decades, but with more generous terms. Congress created the first income-driven repayment option in the 1990s for people struggling to afford payments on standard plans. It capped monthly payments at a percentage of their incomes and canceled any unpaid debt after 25 years. Similar plans were added later, offering cancellation in as little as 20 years. More people now will become eligible after just 10 years of payments.
However, Republican attorneys general in 18 states have filed lawsuits to block various parts of Biden’s plans, including challenges to the SAVE Plan. “Yet again, the president is unilaterally trying to impose an extraordinarily expensive and controversial policy that he could not get through Congress,” according to a new suit led by Missouri Attorney General Andrew Bailey.
Related: Biden’s student loan ‘Plan B’: New proposal could wipe out debt for 30M borrowers
An analysis of the loan forgiveness plan by the Penn Wharton Budget Model estimated that the latest announcement, added to a previous estimate made for the SAVE Plan, would cost taxpayers $559 billion. A Department of Education estimate published in the Federal Register in January suggested a net cost of about $138 billion through 2032.
A senior administration official, when asked if the Penn Wharton estimate is an effective use of tax dollars, said the administration believes the program “is providing critical breathing room for borrowers.”
“This is historic — more than any other administration in history — and it really shows the commitment that we have to ongoing change as we fix this broken system,” Education Secretary Miguel Cardona said.