President Joe Biden announced on Wednesday that his administration will forgive $1.2 billion in student debt for about 153,000 borrowers who have been paying off their loans for at least 10 years. This debt cancellation is part of the Saving on a Valuable Education (SAVE) Plan, a repayment program offering earlier forgiveness for low- and middle-income borrowers.
The eligible borrowers will receive emails from the Department of Education, informing them that their debts will be discharged, and they do not need to take any further action to receive relief. The debt cancellation will impact borrowers with initial loan balances of $12,000 or less who have signed up for the SAVE Plan. Relief for every $1,000 taken out over $12,000 will be provided after an extra year of payments.
Secretary of Education Miguel Cardona highlighted that the recipients of this debt relief have sacrificed and saved for a decade or more, making them more likely to have qualified for Pell grants and often coming from lower- and middle-income backgrounds. Many of them attended community colleges and took out loans at higher risk for delinquency and default.
The Department of Education will also reach out to borrowers eligible for the shortened time to forgiveness who haven’t enrolled in the SAVE Plan. Currently, 7.5 million borrowers are registered for SAVE, and 4.3 million of them have zero monthly payments based on their incomes.
The SAVE Plan, touted as the most affordable repayment plan for low- and middle-income borrowers, allows for loan forgiveness after 20 or 25 years, depending on whether the borrowers have graduate school loans. It prevents borrowers from accumulating runaway interest that inflates their loan balances over time. By July, the Department of Education will implement other features of the SAVE Plan, reducing monthly payments from 10 percent of a borrower’s discretionary income to 5 percent.
This announcement aligns with the Biden-Harris administration’s efforts to address a broken student loan system, aiming to provide more relief and open doors of opportunity to Americans facing financial hardships. The administration has proposed regulations to expand the pool of borrowers eligible for loan forgiveness, prioritizing those experiencing financial difficulties. While the Supreme Court blocked the administration’s initial loan forgiveness plan in June, the Department of Education has already approved debt relief for 3.9 million people, totaling about $138 billion. Secretary Cardona emphasized the administration’s commitment to fixing the broken student loan system, stating they won’t stop fighting to deliver more relief and open doors of opportunity for Americans more quickly.
