Biden plans to cancel student loan debts. Here's what it means for 25mn Americans

In a bid to woo the young generation in the upcoming general elections, United States President Joe Biden made another attempt at student loan cancellation.

With the new plan, President Biden is hoping to deliver on a major campaign promise, which he has so far not been able to fulfil.

Biden, on his visit to Wisconsin on Monday (April 8), gave a detailed proposal as per which the debt loan of around 25 million Americans will be cancelled.

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For months, the plan is being worked out after the first attempt of Biden at mass cancellation was rejected by the Supreme Court. The decision of the court was called by Biden a "mistake", as he gave orders to the Education Department to make a new plan by using a different legal authority.

In comparison to his original plan, Biden's latest proposal is more targeted and focused on those for whom student loan is a major hurdle.

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The plans, which were detailed by presumptive Democratic presidential nominee Biden in Madison, Wisconsin, included cancelling up to $20,000 of accrued and capitalised interest for borrowers, without taking into consideration their income.

According to the Biden administration, this will cancel the entire interest for 23 million borrowers.

Who will benefit from Biden's new proposal?

The new proposal of Biden will offer cancellation of loans to five categories of borrowers.

According to the proposal, the student loan of those borrowers whose debt has grown due to unpaid interest will be cancelled.

The government will cancel around $20,000 in interest for Americans who currently oweway more than what they had borrowed originally.

However, this cap will not be applicable to individuals who earn less than $120,000 every year or couples whose income is less than $240,000 and have enrolled themselves in an income-driven repayment plan.

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According to the Education Department, 25 million people will be eligible for that relief, which includes 23 million whose interest will be completely erased.

In the new proposal, the loans will also get cancelled for the borrowers who are eligible for different federal forgiveness programmes but have not applied. It is also applicable to the Public Service Loan Forgiveness programme and income-driven repayment plans.

The debt of the borrowers, who have been repaying undergraduate loans for 20 years or more, will be cancelled. Those who have been paying graduate school debt for the last 25 years will also get relief as per the proposal.

The Biden administration has claimed to cancel the loans of more than twomillion people.

(With inputs from agencies)