Joe Biden Uses Program Fix To Help 800,000 Student-Loan Borrowers

New Reforms to Bring $39 Billion in Debt Relief to 800,000 Student-Loan Borrowers
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Joe Biden Uses Program Fix To Help 800,000 Student-Loan Borrowers

In response to the Supreme Court’s rejection of President Joe Biden’s ambitious student-loan forgiveness plan, his administration has unveiled an alternative form of relief for borrowers. On Friday, the Department of Education announced that it will automatically cancel $39 billion in student debt for 804,000 borrowers, thanks to modifications made to the department’s income-driven repayment plans. These plans were initially designed to forgive student debt after a minimum of 20 years of qualifying payments. However, due to various issues within the system, such as administrative errors and difficulties in tracking payments, many borrowers have found themselves in prolonged repayment periods.

According to a press release, the recent announcement applies to borrowers accrued the equivalent of 20 or 25 years of qualifying months. Under Secretary James Kvaal stated, “At the start of this Administration, millions of borrowers had earned loan forgiveness but never received it. That’s unacceptable. Today we are holding up the bargain we offered borrowers who have completed decades of repayment.”

The forgiveness notices will be sent to borrowers in the coming days and will apply to those with direct student loans or loans under the Federal Family Education Loan program, all of which are held by the Education Department. The forgiveness threshold can be reached during various periods, including any month when the borrower was in repayment status, regardless of whether the payments were partial or late.

Additionally, any period of 12 or more consecutive months in forbearance, any cumulative forbearance period of 36 or more months, any pre-2013 deferment month, and any month spent in economic hardship or military deferment on or after January 1, 2013, will count towards forgiveness. The department also noted that months spent before loan consolidation into the federal direct loan program will also be considered for forgiveness.

The Education Department confirmed that loan discharges will commence 30 days after eligible borrowers receive notification emails.

This announcement follows the Supreme Court’s ruling on June 30, which struck down Biden’s plan to cancel up to $20,000 in student debt for federal borrowers. While the court deemed Biden’s approach an overreach of authority, the Department of Education initiated the relief process using the Higher Education Act of 1965. However, this second attempt will take longer due to the negotiated rulemaking process.

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