Student loan forgiveness: Administration announces new plan to forgive $7.4 billion in debt

The administration's new student loan forgiveness plan targets four groups.

The Biden administration announced Friday that more than 277,000 student loan borrowers will have their loans forgiven, according to the Department of Education.

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Changes in the DOE’s income-driven repayment plan and the Public Service Loan Forgiveness program will wipe out $7.4 billion in student debt.

“Today we are helping 277,000 borrowers who have been making payments on their student loans for at least a decade,” U.S. Under Secretary of Education James Kvaal said in a statement.

“They have paid what they can afford, and they have earned loan forgiveness for the balance of their loan.”

This relief will go to borrowers who:

  • Are enrolled in the SAVE Plan and had smaller loans for their post-secondary studies. Borrowers can receive relief after at least 10 years of payments if they originally borrowed $12,000 or less for college. Each additional $1,000 in borrowing adds 12 more months until forgiveness. All borrowers on SAVE receive forgiveness after 20 or 25 years, depending on whether they have loans for graduate school.
  • Have had their payments adjusted through the income-driven repayment program. The income-driven repayment (IDR) plan bases your monthly student loan payment amount on your income and family size.
  • Have gotten fixes through the Public Service Loan Forgiveness (PSLF). The DOE announced new PSLF discharges a few weeks ago. If you’re employed by a government or not-for-profit organization, you might be eligible for the PSLF program. The PSLF Program forgives the remaining balance on loans after you’ve made the equivalent of 120 qualifying monthly payments under an accepted repayment plan, and while working full-time for an eligible employer.

Borrowers will begin receiving emails Friday informing them of their approvals.

Earlier this week, Biden outlined a new plan to give student debt relief to some 25 million borrowers.

The new regulations, the specific details of which are expected to be revealed in the coming months, would provide relief to those whose payments have ballooned because of unpaid interest.

The program will be aimed at those who have been making payments for years, but because of interest rates haven’t yet paid off their balances.

Biden’s original proposal of eliminating student debt for millions was struck down by the U.S. Supreme Court last June. In the ruling, the court said the administration did not have the authority to wipe out the debt.

The administration has tried several plans to erase debt since the Supreme Court in June rejected Biden’s student loan forgiveness program, which would have canceled as much as $20,000 in student loan debt for individual borrowers, totaling $430 billion.

A plan announced by Biden in July aims to adjust the way the DOE calculates certain student loan payments. The adjustments are being made, the department said, to correct past errors in counting payments, and the result would show that borrowers made payments that were not counted correctly toward their debt.

The Biden administration has forgiven $127 billion in student loan debt for nearly 3.6 million borrowers to date.

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