The Biden Administration has made a second attempt at broad student loan forgiveness, with proposed regulations that would forgive the student loan debt of 27.6 million borrowers. The draft regulations feature nine separate waivers, including forgiving excess unpaid interest, forgiving debt in repayment for 20 years or more, forgiving loans that would have been eligible for income-driven repayment forgiveness, forgiving loans when borrowers did not successfully apply for forgiveness, and forgiving loans when a college or program loses aid eligibility.
The proposed forgiveness is set to occur on July 1, 2025, before the tax-free status of student loan forgiveness and discharge sunsets on December 31, 2025. The forgiveness would impact 9.2% of the total federal student loan debt outstanding and 63.9% of borrowers.
However, there are several flaws and problems with the proposed regulations. For example, forgiving excess unpaid interest may not consider a borrower’s ability to repay the debt, and the determination of income thresholds may be flawed. Additionally, the proposed regulations may face legal challenges due to the waiver authority being used and the bundling of waivers that may not survive court challenge.
Overall, while the administration is trying to provide as much loan forgiveness as possible, there may be simpler and easier ways to implement some of these ideas. The proposed regulations may need further refinement to address these issues and ensure a fair and effective student loan forgiveness program.