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Key Points:
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In 2023, Congress struck down President Biden’s plan to forgive up to $20,000 in student loans per borrower.
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The Biden-Harris administration is working on multiple new student loan forgiveness programs, including the SAVE plan.
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Borrowers could start to receive some relief as soon as February 2024.
Student debt is a growing problem in the United States, with 43.4 million student borrowers carrying more than $1.6 trillion in student loan balances as of June 2023. Given student loans' lasting impact on borrowers, the Biden-Harris administration and the Department of Education have worked hard to deliver solutions.
While many still struggle to keep up with student loan payments, upcoming programs aim to reduce or eliminate student loan balances for some borrowers. Here are the developments to follow going into 2024.
Changes that went into effect in 2023 include an increase in the income exemption from 150% to 225% of the federal poverty line.
New Student Loan Forgiveness Program
Last year, Congress struck down Biden’s student loan forgiveness program that would have relieved borrowers of up to $20,000 in student debt. However, Biden quickly got to work on a new forgiveness plan, deemed “Plan B.”
While the original plan was a blanket relief plan for many borrowers, the new plan is more targeted. Specifically, it aims to provide relief for five groups, including those with unpaid interest and those who face barriers when applying for IDR.
Although the plan is still in a long regulatory process, it could be released in 2024, possibly by March of this year. While the plan provides relief, some say it is too targeted and will leave many borrowers without the relief they need.
Biden-Harris Administration Aims to Shorten Path to Debt Cancellation for Some SAVE Borrowers
Separate from Plan B, the Biden-Harris Administration launched the Saving on a Valuable Education (SAVE) plan in 2023. Some of the plan’s changes took effect in 2023, with additional benefits coming in February and July 2024.
Changes that went into effect in 2023 include an increase in the income exemption from 150% to 225% of the federal poverty line. After making the full scheduled payment, it eliminates 100% of unpaid interest for the remaining monthly interest for subsidized and unsubsidized loans.
In January 2024, Biden unveiled new relief coming under the program in February 2024. This includes forgiveness after as few as 10 years for borrowers on the SAVE Plan who took out $12,000 or less for college. Changes coming in July 2024 include reducing student loan payments from 10% to 5% of discretionary income, forgiveness credit for forbearances, and automatic enrollment after missed payments.
Biden Announces Nearly $5 Billion in Additional Student Debt Relief
In December 2023, the Biden-Harris Administration announced $4.8 billion in student debt relief for 80,300 borrowers under income-driven repayment (IDR) forgiveness and Public Service Loan Forgiveness (PSLF). The administration said this latest relief package brings its total relief amount to nearly $132 billion for more than 3.6 million Americans.
The aid package comes in two parts, one for borrowers on IDR plans and another for borrowers who benefited from PSLF. The IDR package includes $2.2 billion and will benefit 46,000 borrowers. This package aims to address issues with the misuse of forbearance. The PSLF package is $2.6 billion and will help 34,400 borrowers. It addressed ongoing regulatory improvements to the programs.
The administration also said it secured the largest increase in federal Pell Grants in a decade and finalized new rules that protect borrowers from programs that leave them with insufficient earnings.
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Payment “On-Ramp” to Protect Borrowers Until September
In June 2023, Congress ended the student loan payment pause, which suspended student loan payments and interest during the COVID-19 pandemic. While more than 60% of the 22 million borrowers with payments due in October 2023 made them by mid-November, others need more time.
As a result, the Department of Education said that in December 2023, it created a 12-month “on-ramp” for borrowers. This would protect the remaining borrowers from the harshest consequences of missed payments, including delinquency, default, and mandatory collections.
While this initiative would give student loans a 12-month runway to make their payments, it will only last until September 2024. At that point, borrowers would no longer be protected, requiring them to make payments or risk serious consequences.
The Bottom Line
With more than $1.6 trillion in outstanding student loans, the Biden/Harris administration has worked hard on debt relief for borrowers. However, Congress struck down the administration’s efforts to forgive up to $20,000 per borrower last year. Now, the administration is proposing a more targeted approach to student debt relief. While this could help some borrowers, it means others may not qualify for debt relief.
Student loan refinance could be a viable option for those who don't qualify. This may allow you to lock in a lower interest rate and monthly payment, especially if your credit has improved since you originally borrowed money. See the best student loan refinance companies to find the best rates.
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Bob Haegele is a freelance personal finance writer who writes about topics like personal finance, investing, banking, and credit cards. His struggle with student loans inspired him to help others get out of debt and start building wealth. He started freelancing full-time in 2020, around the start of the COVID-19 pandemic. Since then, he has written for a variety of nationally recognized financial websites and blogs.
