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Who May Be Eligible for Biden’s New Student Loan Forgiveness Plan

Recent student loan debt forgiveness is making good on previous legislation: Bharat Ramamurti

1. Borrowers with ‘runaway interest’

More than 25 million borrowers owe more than they originally borrowed in federal student loans, because of accrued interest charges, according to the Biden administration.

As part of this plan, those borrowers could get up to $20,000 of unpaid interest on their debt forgiven, regardless of income. Certain low- and middle-income borrowers, if they’re enrolled in an income-driven repayment plan, could have the entire interest balance that has accrued on their federal loan debt since they entered repayment canceled.

Anyone enrolled in the Saving on a Valuable Education (SAVE) plan or any other income-driven repayment plan would be eligible without having to apply.

As part of its National Financial Literacy Month efforts, CNBC will be featuring stories throughout the month dedicated to helping people manage, grow and protect their money so they can truly live ambitiously.

2. Borrowers eligible for forgiveness programs, who haven’t applied

Consumer advocates and borrowers have complained that the government’s debt forgiveness programs can be hard to know about and to access.

In addition to the cancellation of interest, Biden’s new plan is also expected to cancel debt for borrowers otherwise eligible for relief through Public Service Loan Forgiveness or the SAVE plan or other income-driven repayment plans, but who have not successfully applied.

The Education Department will review the accounts of borrowers to identify who could be eligible for this type of relief, which would go into effect automatically, the administration said.

3. Borrowers who entered repayment over 20 years ago

Another 2.5 million borrowers would benefit from the forgiveness of student loans that have been held for two decades or longer.

Borrowers with undergraduate debt would qualify for forgiveness if they first entered repayment on or before July 1, 2005, and borrowers with any graduate school debt would qualify if they first entered repayment on or before July 1, 2000, the administration said, and both direct loans and consolidated loans are eligible for relief. 

4. Borrowers who enrolled in ‘low-value’ colleges

5.  Borrowers experiencing ‘hardship’

While harder to quantify, “millions of borrowers could be eligible for relief if they are experiencing hardship in their daily lives that prevent them from fully paying back their loans now or in the future,” the administration said of another piece of the plan that would cancel student debt for borrowers who are at high risk of defaulting on their student loans or families burdened with other expenses like medical debt or child care.

With higher debt burdens, Black and Latino borrowers will benefit disproportionately from this relief, the White House also said.

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