A new email about proposed federal student loan forgiveness heads to millions of borrowers

Federal student loan borrowers should start digging for a new email to be sent out beginning Wednesday by the U.S. Department of Education regarding the next step toward debt forgiveness.

It's what some call Plan B for the the Biden administration's ongoing student loan forgiveness battle to offer relief to millions of borrowers.

No one should bank on receiving student loan forgiveness soon, though, as more legal challenges could be ahead.

"The email does not guarantee specific borrowers will be eligible," according to the announcement planned for Wednesday morning.

The latest email alert will go out to all federal student loan borrowers with at least one outstanding federally held student loan. The borrowers will have until Aug. 30 to call their servicer and opt out if they do not want this relief from their federal student loan burden.

Borrowers who opt out will not be able to opt back in, according to the Education Department's statement. "And they will also be temporarily opted out of forgiveness due to enrollment in an (income-driven repayment) plan until the department is able to automatically assess their eligibility for that benefit in a few months."

More information will be at StudentAid.gov/debt-relief.

President Joe Biden said Wednesday in a statement that the emails will allow borrowers to be more prepared to benefit once the rules are final.

"Despite attempts led by Republican elected officials to block our efforts, we won’t stop fighting to provide relief to student loan borrowers, fix the broken student loan system, and help borrowers get out from under the burden of student debt," Biden said in his statement.

Borrowers would only be eligible for the proposed relief if they have entered repayment at the time that the department would be determining eligibility, after the proposed rules are finalized.

The Biden-Harris administration, which has faced significant legal setbacks regarding broad-sweeping student loan forgiveness, noted that the proposed rules have not been finalized yet but are expected to be finalized in the fall.

It's unclear exactly what the email will state but some experts say the latest email could give borrowers some indication of how much debt might be forgiven if the Biden administration one day prevails in the courts.

Earlier in July, Biden's well-publicized new income-driven repayment plan, the Saving on a Valuable Education or the SAVE plan, hit a serious roadblock after the 8th U.S. Circuit Court of Appeals temporarily blocked the Education Department from fully launching the program.

The SAVE plan, which was announced in August 2023 as a way to lower monthly payments for millions of borrowers, received much pushback from Republican-led states and GOP lawmakers who charged that Biden overstepped his authority to initiate a costly forgiveness program.

Nearly 8 million borrowers enrolled in the SAVE plan "will be placed in an interest-free forbearance while our administration continues to vigorously defend the SAVE plan in court," according to a statement made July 19 by U.S. Secretary of Education Miguel Cardona.

Mark Kantrowitz, a student loan expert who is the author of "How to Appeal for More College Financial Aid," said it's important to note that the "8th Circuit ruling is temporary. The Biden Administration might prevail in court."

The administration, he said, can also appeal to the U.S. Supreme Court, since rulings from the 8th and 10th U.S. Circuits conflict with one another on the student loan forgiveness issue.

The Education Department on July 19 said it would soon provide regular updates to borrowers. The administration highlighted its success in providing "an unprecedented $169 billion in relief for nearly 4.8 million Americans, including teachers, veterans, and other public servants, students who were cheated by their colleges, borrowers with disabilities, and more."

The Biden administration said it also has fixed Income-Driven Repayment plans "so borrowers get the relief they are entitled to under the law." And it has held "colleges accountable for taking advantage of students and families."

Now, if new rules are finalized as proposed, many could benefit, including:

Nearly 23 million borrowers hurt by "runaway interest." The borrowers in this group, many who received Pell Grants, might benefit, if they have a current balance on certain types of federal student loans that exceeds the balance of that loan when it entered repayment.

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Borrowers who have faced the repayment of federal student loan debt for decades. This relief could apply to borrowers who have only undergraduate federal loans that have been in repayment for more than 20 years. The loans would have been received on or before July 1, 2005. Other borrowers could benefit if they had at least one graduate loan and have been in repayment for more than 25 years. These loans would have been received on or before July 1, 2000.

Borrowers who are otherwise eligible for loan forgiveness but have not yet applied. A borrower who hasn’t successfully enrolled in an income-driven repayment plan could be eligible for immediate forgiveness. The same's true for borrowers who haven't successfully applied for loan forgiveness for closed school discharge or other types of forgiveness opportunities.

Borrowers who enrolled in low-financial value programs. There's also relief on the table for borrowers who attended an institution that "failed to provide sufficient financial value, or that failed one of the Department’s accountability standards for institutions."

The Department of Education anticipates that no application or action would be needed from any of these borrowers.

Contact personal finance columnist Susan Tompor: stompor@freepress.com. Follow her on X (Twitter) @tompor.