he Biden administration has announced a massive student loan forgiveness initiative. The plan, which amounts to $39 billion, will benefit 804,000 borrowers who have been part of income-driven repayment (IDR) plans.
Education Secretary Miguel Cardona stated that the system had previously failed to accurately track borrowers’ progress towards loan forgiveness, leading to many falling through the cracks. The new initiative aims to correct these past administrative oversights and provide the deserved debt relief to these borrowers.
IDR plans are designed to make loan repayments manageable based on the borrower’s income and family size. Payments can range from 10 to 20 percent of the borrower’s discretionary income, and in some cases, can be as low as $0. After making 240 or 300 monthly payments, depending on the specific plan and type of loan, the remaining debt is forgiven.
However, due to administrative errors in tracking payments, many borrowers were found to be paying beyond their end-dates, losing their hard-earned progress towards loan forgiveness. The Department of Education’s latest action aims to rectify this error, with the estimated $39 billion in debt set to be automatically discharged in the coming weeks.
The Department of Education will continue to identify and notify borrowers who reach the applicable forgiveness thresholds every two months until next year. By then, all borrowers who are not yet eligible for forgiveness will have their payment counts updated.
This initiative brings the total student loan forgiveness approved by the Biden-Harris Administration to over $116.6 billion, benefiting more than 3.4 million borrowers.
This move follows a Supreme Court decision that struck down the Biden administration’s previous student loan forgiveness plan. Despite this setback, President Biden vowed to find a “new way” to provide debt relief. The Department of Education then began working towards finalizing an affordable repayment plan using the authority under the Higher Education Act.
While the administration insists that these programs will benefit low- and middle-income borrowers, critics argue that they could lead to as much as $1 trillion in additional federal expenditures over the next decade, having negative effects for everyone.