Biden Scraps Two Student Loan Forgiveness Plans: What Borrowers Must Know

The Biden Administration has withdrawn two key plans designed for student loan forgiveness, a move that will hurt millions of Americans.

The proposed regulations had given the U.S. Department of Education secretary special immunity to cancel student loans for specific groups including long-term borrowers and financially distressed borrowers.

The directives were Biden's government's broader agenda to address the student debt burden issue. In a notice scheduled to be posted to the Federal Register on Friday, the Biden administration said it was withdrawing the plans, stating that the proposals for student debt relief were different from other hardship-related proposals issued in April 2024.

The Biden administration officially withdrew proposed regulations for two student loan forgiveness plans on Friday.

The first plan, also known as "Plan B," which the Supreme Court struck down last year, would have provided $10,000 in forgiveness for most borrowers.

The second plan sought to provide relief to borrowers facing financial hardship. It proposed automatic forgiveness based on various indicators determined by the Education Department, such as low income, heavy debt burdens, eligibility for other government assistance programs, or disability. Borrowers not meeting automatic criteria could apply for a case-by-case review.

The Department has scrapped the proposed regulations due to "operational challenges" in implementation.

Had the programs been enacted, they could have benefited more than 30 million borrowers, according to a report on Forbes.

Consumer advocates expressed dismay over the current reversal of stance.

"President Biden's proposals would have freed millions from the crushing weight of the student debt crisis and unlocked economic mobility for millions more workers and families," Persis Yu, deputy executive director and managing counsel of the Student Borrower Protection Center, told CNBC.

However, borrowers can still avail of several student loan forgiveness options through the Education Department. Eligible candidates can leverage the facilities to manage their debt, despite the recent adjustments.

The Teacher Loan Forgiveness (TLF) and PSLF programs are two noteworthy initiatives. For qualified government and non-profit workers, PSLF provides federal student loan discharge following ten years of timely payments. Teachers who work full-time in low-income schools or educational assistance agencies for five consecutive academic years are eligible for up to $17,500 in loan forgiveness through TLF.

The Biden administration announced Friday that it would forgive another $4.28 billion in student loan debt for 54,900 borrowers who work in public service through PSLF.

This relief brings the total loan forgiveness by the Biden Administration to approximately $180 billion for nearly five million Americans, including $78 billion for 1,062,870 borrowers through PSLF.

The last week's release says over the past four years, the Biden Administration has approved nearly $180 billion in student debt relief for 4.9 million borrowers.

"There are so many borrowers concerned about the impact of the new administration with their student loans," said Elaine Rubin, Director of Corporate Communications at Edvisors, a leading authority on college financial planning and student loans, told CNBC.