The White House recently announced its plan to cancel $39 billion in federal student loans for over 804,000 borrowers.
Despite the U.S. Supreme Court striking down President Joe Biden’s federal student loan forgiveness program, President Biden remains committed to debt relief
The U.S. Department of Education issued a news release on July 14, stating that the student loan forgiveness will be “automatically discharged” in the upcoming weeks. This discharge is a result of fixes implemented by the Biden administration to ensure accurate counting of qualifying monthly payments under income-driven repayment (IDR) plans.
The IDR plans are intended to provide affordable monthly payments based on borrowers’ incomes and offer student loan forgiveness after 20 or 25 years if the balances cannot be repaid. However, several issues led to borrowers being denied proper credit toward student loan forgiveness, including being steered into costly forbearances or not being credited correctly for progress toward loan forgiveness.
The new initiative by the Education Department will continue to identify and inform borrowers who reach the student loan forgiveness thresholds
These notifications will occur every two months until all eligible borrowers have their payment counts updated. Months counted for this purpose can also count toward the Public Service Loan Forgiveness (PSLF) program if the borrower documents qualifying employment during the same period.
Borrowers eligible for student loan forgiveness need not take any further action, but those who wish to opt out of the discharge can contact their loan servicer. Borrowers receiving student loan forgiveness will have their loan payments paused during the processing of the discharge. For those who opt out, loan repayment will resume in October after a pause that began in March 2020.
By pursuing these measures, the Biden administration aims to rectify past failures in the student loan program and offer relief to eligible borrowers burdened by student debt.