The Biden administration announced on Friday that more than 800,000 borrowers with $39 billion in federal student loans would have their debt erased.
The Department of Education said it will begin notifying borrowers today about the automatic discharge of their debt, which will take place in the coming weeks.
The debt relief comes just two weeks after the Supreme Court ruled that the Biden administration’s plan for broad-based student loan forgiveness, which would have helped more than 40 million students each erase up to $20,000 in debt, was unconstitutional. The initiative revealed on Friday is tied to the Biden administration’s separate endeavor to strengthen income-driven repayment plans (IDRs), which are aimed to cut student loan monthly payments by tying payment amounts to a person’s income.
Who is getting student loan forgiveness?
According to the Biden administration, 804,000 people will be notified that their debt has been forgiven. According to the administration, these are people who were enrolled in IDRs and have amassed the equivalent of 20 or 25 years of qualifying monthly payments.
The Department of Education said Tuesday in an update on the loan relief program that it began contacting qualified borrowers by email on July 14 that they qualify for student loan forgiveness. According to the organization, the loans would begin to be discharged 30 days after the messages were issued. Loan servicers will notify borrowers when their loans are forgiven.
Borrowers who are granted relief under the program will have their loan repayments frozen until their loans are canceled.
What happened with income-driven repayment plans?
After making 240 or 300 monthly payments under an IDR plan or the normal repayment plan, respectively, a borrower becomes eligible for student loan forgiveness under the Higher Education Act and Education Department regulations. The number of months varies depending on when a borrower took out the loans, the type of loans they had, and the IDR plan in which they were enrolled.
But “inaccurate payment counts” meant that some borrowers weren’t progressing toward student loan forgiveness, the administration noted.
Borrowers with Direct Loans, Federal Family Education Loans held by the Education Department, and Parent PLUS loans are all eligible.
According to the Education Department, Texas has approximately 64,000 borrowers who qualify for student loan forgiveness under the Biden administration’s plan, with total debts worth more than $3 billion.
According to Persis Yu, deputy executive director at the Student Borrower Protection Center, while student loan forgiveness is a major achievement for debtors, it is relief to which they were entitled.
″[M]ake no mistake — over 804,000 people are receiving relief with this action because of 804,000 failures — and this is only the tip of the iceberg,” Yu said in a statement. “Working people have been made collateral damage by a dysfunctional student loan system.”
The announcement comes just weeks after the Supreme Court rejected President Joe Biden’s expansive student loan forgiveness scheme, which would have helped approximately 37 million people.