Biden administration cancels $1.2B in student loan debt

The Biden administration is set to notify nearly 153,000 student loan borrowers on a new repayment plan, inaugurated by the administration, about the cancellation of their remaining federal student loan debt. The email, expected on Wednesday, will carry a congratulatory message from President Joe Biden, emphasizing the administration’s commitment to addressing student loan debt. The total debt cancellation is estimated to be around $1.2 billion.

President Biden, speaking at a small community library in Culver City, California, acknowledged the challenges his administration faced after the Supreme Court rejected his signature student loan forgiveness program last year. Despite setbacks, Biden remains determined to alleviate student debt burdens and has canceled nearly $138 billion for almost 3.9 million borrowers since taking office.

The latest round of debt relief targets borrowers enrolled in the new SAVE (Saving on a Valuable Education) repayment plan launched in August. Under SAVE, federal student loan balances will be erased for those who originally borrowed $12,000 or less and have made payments for at least 10 years. This initiative, initially set to begin in July, was expedited to start in February.

The SAVE plan offers favorable terms for low-income borrowers, with approximately 7.5 million enrollees. Monthly payments are income-driven, potentially resulting in smaller payments compared to other plans. Unpaid interest does not accrue with a full monthly payment, and forgiveness can occur in as little as 10 years for those who meet the criteria.

Additionally, the Biden administration is conducting a one-time recount of past payments to rectify “past administrative failures” and expects to complete the recount by July. This effort aims to address the Department of Education’s historical difficulties in tracking borrowers’ payments, providing credit toward forgiveness for any months with payments.

Other initiatives under the Biden administration include the expansion of the Public Service Loan Forgiveness (PSLF) program for public-sector workers and progress in handling borrower defense to repayment claims, particularly for those defrauded by for-profit colleges. The administration has also simplified the process for disabled borrowers to receive automatic discharges without extensive documentation.

Overall, the Biden administration’s approach to student loan debt relief involves a combination of new repayment plans, addressing administrative errors, and expanding existing forgiveness programs to provide significant relief for borrowers.