The Biden administration will forgive $39 billion in federal student loan debt for over 804,000 borrowers, the Department of Education announced on Friday.
The borrowers will be notified of the automatic discharge starting Friday and in the coming weeks, the department stated in a release.
The debt cancellation is the result of fixes made to income-driven repayment (IDR) plans under the Biden administration. The Education Department noted that previous plans had “historical inaccuracies” when it came to the count of payments that qualified for relief. Prior inaccurate payment counts resulted in borrowers losing progress towards loan forgiveness, the department stated.
Under these new fixes, borrowers who have made either 20 or 25 years of monthly IDR payments will be eligible 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,” said U.S. Secretary of Education Miguel Cardona, in a statement.
Those who borrowed with Direct Loans or Federal Family Education Loans held by the Education Department will be eligible for the relief, said the department. Federal student loan discharges are set to begin 30 days after the initial notification.
The Education Department said it will continue to identify and notify borrowers who have reached the applicable forgiveness threshold of 240 or 300 total qualifying monthly payments, at every two months until next year.
A new plan outside of the Supreme Court
The latest plan comes after the Supreme Court struck down President Joe Biden’s $430 billion student loan forgiveness program in an 6-3 decision just last month.
It was previously estimated that the plan, if allowed, would have completely erased the student loan debt of about 20 million Americans while lowering the balances of close to another 20 million who qualified for the relief.
Quickly after the decision, Biden said he would be looking towards next steps to provide federal student loan debt relief to borrowers, including a temporary 12-month “on ramp” program from October 1, 2023, to September 30, 2024, that would remove the risk of default or potential impact to credit.
Another measure includes initiating a rulemaking process aimed at opening an alternative path to debt relief for as many working and middle-class borrowers as possible, using the Secretary’s authority under the Higher Education Act.
Speaking on the latest measures, Vice President Kamala Harris said in a statement that the administration “will continue to fight to make sure Americans can access high-quality postsecondary education without taking on the burden of unmanageable student loan debt.”
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Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
