The Biden administration said on Friday, July 14, that 804,000 borrowers, representing $39 billion in debt, would have their student loans forgiven in the coming weeks. This is a result of improvements that more precisely reflect qualifying monthly payments under current income-driven repayment programs.
Loan Forgiveness
In a CNN report, federal student loan borrowers now have access to a variety of income-driven repayment plans that calculate monthly payments based on factors such as family size and income rather than the total amount of debt owed. A borrower's remaining amount is erased when a certain forgiveness level has been reached, often 20 or 25 years.
The Education Department claims that the move taken on Friday is an attempt to rectify "historical failures" and administrative mistakes that led to the improper counting of borrowers' qualifying payments. The department's Direct Loan and Federal Family Education Loan recipients would be among those impacted.
Federal student loan payments, suspended for years due to the pandemic, will resume in October. The announcement made on Friday is the latest step by the administration to make good on President Joe Biden's promise to provide debt relief to millions of Americans.
According to the Department of Education, more than 3.4 million Americans have had their student loan debts reduced or canceled since Biden assumed office, at a cost of $116.6 billion.
After the Department of Education's official regulation procedure, Biden's SAVE (Saving on a Valuable Education) proposal will be partially implemented this summer and completely adopted next year.
When the plan is completely implemented, people will notice a 50% reduction in their monthly costs and a complete cancellation of any outstanding debt after making payments for at least 10 years.
Also Read: Student Loan Forgiveness: Biden Unveils' New Path' After Supreme Court Setback
Obstacles Encountered
While the Supreme Court struck down Biden's plan to forgive up to $20,000 in federal student loans for millions of borrowers at once last month, the administration has been working to find other ways to cancel debt and make it simpler for borrowers to qualify for loan forgiveness. Biden, in light of the Supreme Court's ruling, promised a "new path" toward debt reduction.
"I'm never going to stop fighting for you. We'll use every tool at our disposal to get you the student debt relief you need and reach your dreams. It's good for the economy. It's good for the country," Biden remarked last month at the White House.
During that time, he said that his government would instead pursue a proposal to grant temporary debt relief under a different law. However, this route is contingent on the completion of a formal rule-making procedure, which may take months and about which no information is currently available.
In addition, he said that his government would provide a grace period to borrowers before payments resume, allowing them to avoid fees if they fall behind in the first year.
Also Read: Joe Biden Student Loan Forgiveness Plan: Experts Think Biden Admin Lawyer Just Saved the Program
