Millions of Americans could be eligible for student loan forgiveness under new proposal

The Biden administration is doubling down on efforts to cancel student loan debt, with several new initiatives that are aimed at forgiving the bills of around 30M Americans. “While a college degree still is a ticket to the middle class, that ticket is becoming much too expensive,” President Biden declared. “I’m not stopping.” The latest proposals build on the dozens of executive actions taken to cancel $146B for 4M borrowers, which followed a Supreme Court decision from last summer that struck down a broader proposal aimed at eliminating nearly a quarter of America’s $1.7T in outstanding student debt.

Snapshot: Searching for alternative paths to debt forgiveness, the White House has amended the payments of public service workers and made changes to income-driven repayment plans. It also made debt cancellation available via administrative adjustments and for borrowers with disabilities. The latest proposals would also be targeted, impacting borrowers with balances greater than what they originally borrowed and those who have been in repayment for at least two decades. Eligibility would also be extended to students who attended institutions that couldn’t participate in federal loan programs or those who are at risk of default or other financial hardship.

“When the Supreme Court struck down the President’s boldest student debt relief plan, within hours, we said, ‘We won’t be deterred.’” Education Secretary Miguel Cardona declared. “Today’s announcement shows that we’re continuing to fulfill our promises.” Expect additional legal challenges this time around, but the new measures could have more weight in court, given their scope and basis on the Higher Education Act of 1965, instead of the national emergency-focused Heroes Act of 2003.

Outlook: The concept of student debt cancellation, even if it would pass through Congress, continues to divide the country. Some say it would benefit borrowers at a time of high inflation, while others have flagged it as an unfair measure for those who chose not to go to college because of the cost, don’t have loans, or have already paid them off. Some economists even maintain that debt forgiveness can be a contributor to higher prices or encourage colleges and universities to continue raising their tuition costs. Student loan-related stocks include include Navient (NASDAQ:NAVI), Nelnet (NYSE:NNI), Sallie Mae (NASDAQ:SLM) and SoFi (NASDAQ:SOFI).

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