White House cancels 206,000 student loans under new plan, legal challenges follow

The Biden administration has announced the cancellation of student loans for an additional 206,000 borrowers as part of its new repayment plan, aimed at expediting the forgiveness process. The Education Department revealed these latest cancellations on Friday, marking progress in its SAVE Plan initiative.

Under this plan, more borrowers become eligible for loan cancellation after making 10 years of payments, a significantly shorter timeline compared to previous standards. However, legal challenges have arisen, with two lawsuits contesting the plan’s legality. Republican-led states, led by Kansas and Missouri, argue that the administration exceeded its authority in implementing this repayment option.

President Joe Biden reiterated his commitment to addressing student debt, stating, “I will never stop working to cancel student debt — no matter how many times Republican elected officials try to stop us.”

With this recent action, approximately 360,000 borrowers have now been approved for loan cancellation through the SAVE Plan, totaling $4.8 billion. The plan represents an enhanced version of existing federal repayment options, offering more favorable terms to borrowers. Originally proposed alongside a broader plan for one-time debt cancellation, the SAVE Plan moved forward independently after the one-time cancellation proposal was struck down by the Supreme Court.

The plan, which opened for enrollment last fall, aims to alleviate financial burdens for borrowers, particularly those facing economic hardships. Education Secretary Miguel Cardona emphasized the relief provided by the plan, allowing borrowers to redirect funds to essential needs instead of loan payments.

Eligibility for loan forgiveness under the SAVE Plan varies based on the original loan amount, with borrowers who borrowed $12,000 or less qualifying for forgiveness after 10 years. Those with higher loan amounts are eligible for cancellation on a longer timeline, with each additional $1,000 borrowed beyond $12,000 adding another year of payments.

Despite its intentions to assist those most in need, the SAVE Plan faces opposition from Republican attorneys general in 18 states, who argue that it exceeds the president’s authority and disrupts state recruitment efforts. These legal challenges raise uncertainties regarding the fate of loans that have already been canceled under the plan.

In addition to the loan cancellations announced, the administration disclosed forgiveness for 65,000 borrowers enrolled in older income-driven repayment plans and another 5,000 borrowers through the Public Service Loan Forgiveness program. Overall, the Biden administration asserts that it has provided loan relief to 4.3 million individuals, totaling $153 billion through various initiatives.