The Biden Administration just announced major student loan forgiveness plans to wipe debt for 40,000 borrowers.
There has been some unusually good news for student loan borrowers looking to get some slack on burdening repayments. Just a few weeks ago, the Biden administration announced that it would be extending the current student loan repayment pause until the end of the summer. Yesterday, they delivered even better news for some college debtors, as the U.S. Department of Education announced they are shelling out student loan forgiveness for 40,000 people, and offering credits to help another 3.6 million more.
The announcement came in a press release touted as a plan of action to combat the longstanding failures encountered within student loan forgiveness and repayment plan programs. Designed to aid low-income borrowers and public servants, the government will immediately cancel student debt for roughly 40,000 borrowers. This is on top of the report made earlier this year by the Biden administration that 100,000 borrowers were newly eligible under the same program.
On top of the student loan forgiveness initiative for more public service workers, 3.6 million extra borrowers will also receive credits toward their student loan balance. While this endeavor might seem brand new, it is poised at a correction to issues found within the student loan industry that reportedly further indebted and set back millions of borrowers. One of those problems found is known as forbearance steering. In this, student loan servicing companies were found to have wrongfully encouraged borrowers to enter forbearance programs rather than income-driven repayment plans. This steering was said to have set back millions of debtors even further.
Income-driven repayment plans were first offered by the government in 2009. One of the first major endeavors in student loan forgiveness efforts, they were designed to help borrowers with low income repay their debt in a monthly amount fitted to be affordable according to their exact monthly income. Much of the new effort to revamp the program came after many news outlets, such as NPR released irrefutable data showing how the program over the last decade or so had been riddled with “longstanding flaws and mismanagement”.
“Student loans were never meant to be a life sentence, but it’s certainly felt that way for borrowers locked out of debt relief they’re eligible for.”Education Secretary Miguel Cardona
Rolling out the efforts for the new student loan forgiveness plan, the Department of Education announced it will count forbearances of more than 12 consecutive months or 36 cumulative months as payments counting towards the debtors’ eligibility for student loan forgiveness. This will put millions of borrowers at least one whole year ahead of schedule to pay off their debt. Furthermore, those who are enrolled in an income-driven repayment plan will now have their student loan bills wiped out after 20 years, or 240 payments. Those working in public service will be guaranteed to have a clean slate on student loan debt after 10 years or 120 qualifying payments.
Further making amends for past issues with student loans, the student loan forgiveness plan will require the Education Department to complete a one-time review of borrowers’ past payments. Any past payments made under other repayment plans will be credited as counting towards forgiveness under the income-driven repayment program. Furthermore, after discovering gaps in data prior to 2013, any months that borrowers spent in deferment prior to that year will now also count as income-driven payments toward forgiveness.
It’s a big initiative that will once again find Americans divided on the plan. But for the millions of borrowers who still report struggling to pay their loans from college, it’s hope. It’s not the end of the battle for more student loan forgiveness either. Last week, the White House press secretary hinted that Biden might once again extend the payment pause once it ends on August 31st. She even alluded that an executive order to permanently cancel more borrowers’ student loan debt might be looming as well.