The federal government is expected to cut the amount of student loan payments in 2021 by as much as half, to $9,500 per student, as it struggles with the fallout from the Great Recession.
The budget includes $1.2 trillion in new stimulus, including $1 trillion to help small businesses.
The rest will go to pay down student loans and cover costs related to the Affordable Care Act.
The Budget Office has already projected that the number of borrowers who owe at least $1,000 per month will hit 7.1 million, up from 7.3 million last year.
It said in a recent report that student loan debt will continue to climb and that the average student debt will top $40,000 by 2027.
The government will pay $2.4 billion in interest on the $2 trillion debt, which will reduce the debt for future students by about $2,500 a year, the report said.
But the interest rate on the debt will be reduced to 5.75 percent, the lowest in more than 40 years.
Student loan debt has risen to $1 million for some borrowers, according to the federal data, up almost 6 percent from $936,000 for those with the lowest balances.
But it has dropped more than 10 percent from last year, according a survey of borrowers by the National Association of Student Financial Aid Administrators.
The new stimulus includes $500 billion to help student borrowers pay for college costs.
The funds will be used to expand student financial aid to more borrowers, the budget said.
That includes more financial aid for families of recent immigrants and students who qualify for Pell grants.
It also includes $700 billion in funding for veterans.
The $1 billion stimulus will cover the first two years of repayment for current students and families who have had their loans forgiven, and $200 billion over 10 years for future borrowers, including loans that are not in default.
The other stimulus funds will help students pay for health insurance and tuition for up to six years, as well as help states cover the cost of debt collection.
That money will be distributed by the Education Department to states.
The first of the two stimulus funds, $200 million over 10 months, will go toward expanding health insurance for veterans and new students.
The other $1 and $2 billion will be targeted to help states pay for tuition for new students, and help states set up loans to help borrowers refinance their debt.