More than 800,000 borrowers with $39 billion in student loans will be forgiven

People rally in support of the Biden administration's student loan relief plan in front of the US Supreme Court on February 28, 2023 in Washington, DC.  - AFP
People rally in support of the Biden administration’s student loan relief plan in front of the US Supreme Court on February 28, 2023 in Washington, DC. – AFP

After months of student and government protests, the Biden administration announced Friday that more than 800,000 borrowers with $39 billion in federal student loans would be forgiven.

Starting today, it will start notifying borrowers about the upcoming automatic discharge of their loans, according to an announcement by the Department of Education.

Two weeks ago, the Supreme Court rejected the Biden administration’s plan for comprehensive student loan forgiveness, which would allow more than 40 million borrowers to receive loan forgiveness of up to $20,000 each.

It was replaced by the Debt Relief Program.

Additionally, the Biden administration is working to increase income-driven repayment plans (IDRs), which are designed to reduce monthly student loan payments by linking a person’s payment amount to his or her income. This scheme, which was unveiled on Friday, is related to the same initiative.

According to CBS NewsThe Biden administration announced loan forgiveness for 804,000 people who signed up for IDRs and made qualifying payments for 20 to 25 years.

The administration is now canceling the loans because of what it claims were “historic failures” in managing the IDR.

The administration claimed in a statement that “certain eligible payments made under IDR schemes that should have moved borrowers closer to forgiveness were not accounted for”.

“For far too long, borrowers fell through the cracks of a broken system that failed to keep accurate track of their progress toward forgiveness,” US Education Secretary Miguel Cardona said in a statement.

The Higher Education Act and Department of Education regulations allow borrowers in the IDR plan or the Standard Repayment Plan to receive forgiveness after making 240 or 300 monthly payments.

The number of months depends on the initial loan type and enrollment of the borrower. However, some borrowers were not able to proceed towards loan forgiveness due to incorrect payment calculation. Borrowers of Direct Loans, Federal Family Education Loans and Parent PLUS Loans are covered.

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