Biden administration forgives $39 billion in student loan debt. What to know
Weeks after the U.S. Supreme Court struck down President Joe Biden’s student loan forgiveness plan, officials have announced they will discharge $39 billion worth of student loan debt for more than 800,000 borrowers.
Officials said the relief is the result of fixes to the student loan system’s income-driven repayment plans.
The July 14 announcement marks the administration’s latest attempt at facilitating student loan relief since first sharing a plan to forgive borrowers last summer.
Here’s what to know about the latest debt relief.
Who is eligible for forgiveness?
The latest round of debt forgiveness applies to student loan borrowers with income-driven repayment plans — including Direct Loans or Federal Family Education Loans — that are held by the Department of Education.
Borrowers who have accumulated the equivalent of 20 or 25 years of qualifying payments are eligible to have their debts discharged, the department said. That’s the equivalent of 240 or 300 qualifying monthly payments.
Some borrowers will have reached their necessary forgiveness threshold as a result of credit for forgiveness, according to the department. Credited months that occurred prior to a loan consolidation will also count toward forgiveness.
How to get your debts discharged
The department said it will begin notifying eligible borrowers immediately. Borrowers who qualify for relief will see their debts automatically discharged beginning 30 days after they are notified.
Borrowers will receive notification from the student loan servicer once their debts have been discharged, officials said. Eligible student loan borrowers will continue to have their loan repayment paused until their discharge is processed.
Officials said the department will continue identifying and notifying borrowers every two months until next year “when all borrowers who are not yet eligible for forgiveness will have their payment counts updated.”
What is an income-driven repayment plan?
Borrowers with these plans are eligible for forgiveness after making 20 to 25 years of payments — depending on the plan type — or after accumulating the equivalent of 20 to 25 years of payments.
After reaching the threshold for payments, any remaining loan balance is forgiven.
How is this allowed after SCOTUS’ ruling?
The Supreme Court struck down the Biden administration’s initial one-time student loan debt forgiveness plan in a June 30 ruling.
That plan, which was announced in August 2022, would have given student loan borrowers a one-time discharge determined by their annual income and household size.
Unlike the original plan to offer all borrowers one-time relief, the latest attempt at relief is the result of fixes to the existing income-driven repayment plan system.
“(Income-driven) plans that should have moved borrowers closer to forgiveness were not accounted for,” the department said in their July 14 statement.
Now, the department is correcting inaccurate payment counts to ensure a borrower is properly credited and has an accurate count of the number of monthly payments that qualify them for forgiveness.
“For far too long, borrowers fell through the cracks of a broken system that failed to keep accurate track of their progress towards forgiveness,” U.S. Secretary of Education Miguel Cardona said in the department’s July 14 statement. “By fixing past administrative failures, we are ensuring everyone gets the forgiveness they deserve.”
This story was originally published July 14, 2023 at 8:44 AM with the headline "Biden administration forgives $39 billion in student loan debt. What to know."
