More than 800,000 borrowers will have $39 billion in student loan debt forgiven under what the Biden administration says is a “fix” for historically inaccurate income-driven repayment plans. The plan builds on an effort the Department of Education announced last year to make up for “past administrative failures” that resulted in incorrect payment counts, said Education Secretary Miguel Cardona. It is separate from a loan-relief program recently blocked by the Supreme Courtthat would have provided more than $400 billion in relief to a much wider swath of borrowers.
- Borrowers with either 20 or 25 years of monthly payments under IDR plans will be eligible for forgiveness. The plans are set up to erase remaining debt after a certain time period.
By Saundra Latham, Editor at LinkedIn News
Biden administration forgives $39 billion in student debt for more than 800,000 borrowers
- The Biden administration announced it would automatically cancel education debt for 804,000 borrowers, for a total of $39 billion in relief.
- The debt cancellation is a result of the administration’s fixes to repayment plans, which included updated counts of borrowers’ payments.
The Biden administration announced Friday it would automatically forgive $39 billion in student debt for 804,000 borrowers.
The relief is a result of fixes to the student loan system’s income-driven repayment plans. Under those repayment plans, borrowers get any remaining debt canceled by the government after they have made payments for 20 years or 25 years, depending on when they borrowed, and their loan and plan type.
In the past, payments that should have moved a borrower closer to being debt-free were not accounted for, according to the Biden administration.
“For far too long, borrowers fell through the cracks of a broken system that failed to keep accurate track of their progress towards forgiveness,” U.S. Secretary of Education Miguel Cardona said in a statement.
To bring people over the line for forgiveness, the Biden administration counted payments for borrowers who’d paused their payments in certain deferments and forbearances and those who’d made partial or late payments.
Although the forgiveness is a huge victory for borrowers, it is relief to which they were entitled, said Persis Yu, deputy executive director at the Student Borrower Protection Center.
″[M]ake no mistake — over 804,000 people are receiving relief with this action because of 804,000 failures — and this is only the tip of the iceberg,” Yu said in a statement. “Working people have been made collateral damage by a dysfunctional student loan system.”
The Education Department will notify eligible borrowers in the coming days.
