Student Loan Update: Republicans Announce New Proposal

Republicans have announced a new proposal that would see student loan forgiveness disappear for millions of Americans.

The House Freedom Caucus presented a "218" Reconciliation Proposal that would repeal much of President Joe Biden's student loan forgiveness initiatives.

Why It Matters

Biden made student loan forgiveness a key part of his presidential agenda. Across the span of four years, the Department of Education approved around $180 billion in student loan debt forgiveness.

That impacted almost 5 million Americans, and millions of others saw reduced monthly payments due to Biden's income-driven repayment programs. One of these, SAVE, has continued to face legal battles.

President Joe Biden speaks in Washington, D.C., on January 13. Biden's student loan forgiveness is in jeopardy after a Republican proposal. Chip Somodevilla/Getty Images

What To Know

The wording about how Congress could cut funds for Biden's student loan forgiveness is brief. Likely, Biden's SAVE income-driven repayment program would entirely disappear, which has allowed millions to find debt forgiveness or lower payments.

Forgiveness for students who saw excessive loan interest after 10 or 20 years would likely no longer be an option.

In addition to the cuts to student loan forgiveness, Republicans are also pushing to make adjustments to the Supplemental Nutrition Assistance Program and Medicaid through block grants and state funding caps.

What People Are Saying

Kevin Thompson, a finance expert and the founder and CEO of 9i Capital Group, told Newsweek: "The outlook for student loan forgiveness is not promising. Any cuts to the program mean reduced funds for forgiveness and increased debt burdens for students. The spending reductions in Biden's plans suggest that those anticipating favorable loan forgiveness outcomes may need to prepare for repayment."

Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek: "The reconciliation proposal is bad news for those borrowers expecting further efforts from the federal government on student loan forgiveness. It's been said a few times already, but it's important to hear again: if you've been ignoring your student loans in the hope they'll be forgiven, it's time to start paying attention and making payments. The odds of forgiveness coming any time soon have rapidly declined."

What Happens Next

Thompson said many of the cuts Republicans are pushing for would disproportionately affect Republican states, which tend to have a higher dependency on government benefits.

"The likelihood of passage is high, but the final form of the legislation remains uncertain," Thompson said. "Negotiations and compromises are inevitable, as some congressional members are utilizing Biden's IRA funds within their districts. Cutting these programs will require careful handling with strategic concessions likely shaping the final outcome."