Student Loan Forgiveness: Biden Cancels $39 Billion of Borrower Debt — Do You Qualify
The Biden administration announced on Friday, July 14 it would cancel $39 billion of debt for 804,000 student loan borrowers. This follows the June 30 Supreme Court 6-3 decision, which struck down President Joe Biden’s student loan forgiveness program.
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“Today, the Department of Education has started notifying 804,000 student loan borrowers that they will have $39 billion in Federal student loans automatically discharged in the coming weeks,” the department tweeted.
The Department of Education explained in a statement that the discharges are a result of fixes implemented by the Biden-Harris Administration to ensure all borrowers have an accurate count of the number of monthly payments that qualify toward forgiveness under income-driven repayment (IDR) plans.
Borrowers are eligible for forgiveness if they have accumulated the equivalent of either 20 or 25 years of qualifying months, the department added.
“For far too long, borrowers fell through the cracks of a broken system that failed to keep accurate track of their progress towards forgiveness,” Secretary of Education Miguel Cardona said in the statement. “By fixing past administrative failures, we are ensuring everyone gets the forgiveness they deserve, just as we have done for public servants, students who were cheated by their colleges, and borrowers with permanent disabilities, including veterans.”
The department will inform eligible borrowers as of July 14 that they qualify for forgiveness, without further action on their part, and discharges will begin 30 days after emails are sent.
These include borrowers with Direct Loans or Federal Family Education Loans held by the Department (including Parent PLUS loans of either type) who have reached the necessary forgiveness threshold as a result of receiving credit toward IDR forgiveness for any of the following periods:
Any month in which a borrower was in a repayment status, regardless of whether payments were partial or late, the type of loan, or the repayment plan;
Any period in which a borrower spent 12 or more consecutive months in forbearance.
Any month in forbearance for borrowers who spent 36 or more cumulative months in forbearance.
Any month spent in deferment (except for in-school deferment) prior to 2013.
Any month spent in economic hardship or military deferments on or after January 1, 2013.
In addition, the months described above that occurred prior to a loan consolidation will also be counted toward forgiveness.
The Department added that it will also notify borrowers who reach the applicable forgiveness thresholds — 240 or 300 qualifying monthly payments, depending on their repayment plan and type of loan — every two months until next year when all borrowers who are not yet eligible for forgiveness will have their payment counts updated, according to the statement.
Student loan interest will resume starting on Sept. 1, 2023, and payments-which paused during the pandemic- will be due starting in October.
Will Sealy, co-founder and CEO of Summer, said that today is the latest in a series of announcements that make IDR an even more appealing avenue for borrowers who will struggle with monthly payments when they resume this fall.
“This long-promised relief, in addition to the hugely beneficial SAVE plan coming soon, means that borrowers should have even more confidence that enrolling in IDR plans is a viable path to manage and eventually be free of student debt,” said Sealy. “We can’t wait to continue our work making sure borrowers get enrolled in the plans and repayment strategies that benefit them the most, and IDR in particular.”
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A few hours after the Supreme Court’s decision on June 30, the administration announced it was seeking an “alternative path to debt relief,” and also announced it finalized the “most affordable repayment plan ever created, ensuring that borrowers will be able to take advantage of this plan this summer–before loan payments are due.”
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