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Biden administration proposes major expansions to student discharge programs

The proposal would also stop "many instances of interest capitalization," when unpaid interest is added to the debt

Published: July 6, 2022 8:06pm

Updated: July 6, 2022 8:51pm

The Biden administration on Wednesday announced proposals to expand student loan discharge programs by alleviating the debt of borrowers who are totally and permanently disabled and of students who were defrauded by their schools, among other things.

The proposal would also stop "many instances of interest capitalization," when unpaid interest is added to the debt, the Department of Education said in a press release.

"We are committed to fixing a broken system. If a borrower qualifies for student loan relief, it shouldn’t take mountains of paperwork or a law degree to obtain it," Education Secretary Miguel Cardona stated.

"Student loan benefits also should not be so hard to get that borrowers never actually benefit from them. The Biden-Harris Administration is determined to build a more accessible, affordable, and accountable student loan system. These proposed regulations will protect borrowers and save them time, money, and frustration, and will hold their colleges responsible for wrongdoing," he claimed.

The new measure would also make it easier for public servants who have met requirements of the Public Service Loan Forgiveness program to have their debt discharged. 

Democrats welcomed the move. 

Rep. Suzanne Bonamichi (D-Ore.) tweeted that she applauded the Biden administration's decision, explaining, "Many student loan borrowers have told me how complicated and unforgiving our debt payment system is. This is a welcome step toward offering borrowers some needed relief."

The Public Service Loan Forgiveness program already appears to be expanding. The Associated Press reported that the program has canceled the student debt of more than 145,000 borrowers who work for governments, schools, or nonprofits. Hundreds of thousands more have applied so far.

While more than 40 million Americans owe an estimated $1.6 trillion in student loans, newer borrowers cite President Joe Biden's campaign pledge on student debt as reason why they took out loans.

An Intelligent survey last week of student borrowers who have taken out loans since Biden won the 2020 election shows that 86% said Biden's promise affected their decision. Nearly one in three students said they are not likely to stay in school if the president does not deliver on his pledge.

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