(CNN) — The Biden administration announced Friday that 804,000 borrowers will have their student debt wiped away, totaling $39 billion worth of debt, in the coming weeks due to fixes that more accurately count qualified monthly payments under existing income-driven repayment plans.
“For far too long, borrowers fell through the cracks of a broken system that failed to keep accurate track of their progress towards forgiveness,” Education Secretary Miguel Cardona said in a written statement.
There are currently several different kinds of income-driven repayment plans for borrowers with federal student loans, which base payments on a borrower’s income and family size – regardless of their total outstanding debt. After reaching a set forgiveness threshold of 20 or 25 years, a borrower’s remaining balance is then wiped.
“By fixing past administrative failures, we are ensuring everyone gets the forgiveness they deserve, just as we have done for public servants, students who were cheated by their colleges, and borrowers with permanent disabilities, including veterans,” Cardona added in the statement.
Friday’s action addresses “historical failures” and administrative errors that miscounted qualifying payments made by borrowers, according to the Department of Education. Those borrowers affected will include Americans with Direct Loans or Federal Family Education Loans held by the department.
With student loan repayments resuming in October after a yearslong pause during the pandemic, Friday’s action is the latest announcement from the administration to fulfill President Joe Biden’s promise to provide millions of Americans debt relief and continues efforts that have already resulted in more debt being canceled during his tenure than any other president.
Since Biden took office, his administration has approved $116.6 billion in student debt relief for more than 3.4 million Americans, according to the Department of Education.
Despite the Supreme Court last month striking down Biden’s loan forgiveness program to provide millions of borrowers up to $20,000 in one-time federal student debt relief, his administration has continued to pursue other avenues to cancel debt and make it easier for borrowers to receive loan forgiveness. Biden at the time responded to the Supreme Court’s decision by pledging a “new path” forward on debt relief.
“I’m never going to stop fighting for you. We’ll use every tool at our disposal to get you the student debt relief you need, and reach your dreams. It’s good for the economy. It’s good for the country,” Biden said at the White House last month.
At the time he announced that his administration would pursue another plan to provide one-time debt relief based on a different law from the original plan. But it’s a pathway that requires a formal rule-making process, which can take months, and the details of which have not yet been announced. He also announced that his administration will ease the transition period for borrowers ahead of payments resuming with an “on ramp” period to help borrowers avoid penalties if they miss payments during the first year.
While not part of today’s actions, the Department of Education is also moving ahead with a separate and significant change to the federal student loan system that will enable Americans to enroll in a new income-driven repayment plan.
Some parts of the plan, which Biden is calling SAVE (Saving on a Valuable Education), will be implemented this summer and be fully phased in next year now that it has gone through the formal rulemaking process at the Department of Education. It is similar to other income-driven repayment plans the government has developed without facing a successful legal challenge.
Once the plan is fully implemented, people will see their monthly bills cut in half and remaining debt canceled after making at least 10 years of payments
The-CNN-Wire
™ & © 2023 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.
