An estimated 804,000 student loan borrowers are set to collectively receive $39 billion in federal loan debt cancellations in the upcoming weeks.
The Biden Administration’s latest initiative to tackle the nation’s overwhelming trillion-dollar student debt crisis has brought relief and joy to Black borrowers and advocates
These unprecedented debt cancellations are made possible by systemic corrections that now ensure all black borrowers receive full credit for qualifying payments under the Department’s Income-Driven Repayment (IDR) plans.
A significant aspect of this development is that Black borrowers stand to be the biggest beneficiaries of this initiative. Recent data analysis has highlighted the additional burden of student debt on Black Americans.
Prior to this initiative, as of June 1, 2021, only 157 Black borrowers had received forgiveness from the Education Department, despite thousands more being eligible, according to the federal Government Accountability Office (GOA). The GOA also found that approximately half of the outstanding federal student Direct Loans, totaling more than $1 trillion, were being paid by Black borrowers using IDR plans.
Under the new rules, Black borrowers who have completed either 20 or 25 years of qualifying payments will benefit from loan forgiveness. Moreover, loan payments made before loan consolidation will now count toward forgiveness.
President Joe Biden expressed his Administration’s commitment to addressing the issue, citing the significant increases in Pell Grants and the creation of new income-driven repayment plans aimed at easing the burden on low-income borrowers.
Secretary of Education Miguel Cardona emphasized that these corrections ensure everyone gets the forgiveness they deserve
Borrowers will receive notifications in the coming days if they have reached the necessary forgiveness threshold due to qualifying payments under IDR plans for various periods, including repayment status, forbearance, deferment, and economic hardship or military deferments.
The Center for Responsible Lending (CRL) praised the Administration for forgiving hundreds of thousands of loans through the improved income-driven repayment program but urged more work to be done for fairer and more affordable federal student loan debt repayment programs.
The initiative aims to address the disparities in financial burdens faced by Black borrowers, who have been disproportionately affected by the dysfunctional student loan system. Experts point out that systemic issues have led to higher debt and lower college completion rates for Black and Latinx student borrowers, exacerbating the racial wealth gap in the country.