Student loan forgiveness empowered relief to approximately 800K borrowers

student loan

Student loan forgiveness plan of Biden’s administration was part of broader $400 billion student loan relief bid, where they have waived off $39 billion in students loan for 804,000 borrowers with debts outstanding for more than 20 years

As per student loan forgiveness plan, President Biden administration forgiven around $39 billion of student debt.

Over 804,000 federal student loan debtors are set to be pleasantly surprised as per President Biden administration student loan forgiveness plan.

While the Supreme Court thwarted President Biden’s efforts for mass debt forgiveness, these borrowers are about to receive an email from the United States Department of Education informing them that their loans will shortly be automatically wiped.

The forgiveness is the result of a promise made by the Biden administration last year in response to years of complaints, lawsuits, and an NPR investigation that discovered many long-term borrowers who should have qualified for loan forgiveness under the rules of the government’s income-driven repayment plans (IDR) had not received it due to mismanagement by the department and loan servicers.

There is official briefing came in statement and release from White House by Kamala Harris – click below link to read more (Source : whitehouse.gov)

Student loan forgiveness statement from While House

Kamala Harris on Additional Student Loan Forgiveness

“For far too long, borrowers fell through the cracks of a broken system that failed to keep accurate track of their progress towards forgiveness,” said U.S. Secretary of Education Miguel Cardona in a news statement announcing the forgiveness on Friday.

The measure will result in the cancellation of $39 billion in federal student loan debt.

Borrowers, advocates, and journalists have been warning about IDR failures for years.

While IDR guidelines have long guaranteed that a borrower’s loan sum will be erased after 20 years of payments, a March 2021 analysis by borrower activists discovered that, at the time, 4.4 million borrowers had been repaying their loans for at least 20 years – yet only 32 had had their debts canceled under IDR.

Why? One major issue: these IDR programs, which were intended as a safety net for low-income borrowers, were difficult to enroll in. As a result, loan servicing companies frequently place financially challenged debtors in long-term forbearance, a procedure that call center employees may more readily negotiate over the phone. Although forbearance provides a temporary break from payments, interest continues to accrue.

In April 2022, an NPR investigation based on previously unreleased Education Department documents revealed even more flaws in the department’s handling of these IDR plans, including the fact that several loan servicing companies were not tracking borrowers’ progress toward forgiveness (which the department was aware of) and that payment histories were frequently damaged and incomplete after borrowers were transferred from one servicer to another, a common practice.

In response, the Biden administration said last spring that it would execute a one-time “account adjustment” for federal student loan borrowers, providing them with retroactive credit toward loan forgiveness for months spent in long-term deferral. Even borrowers who have never participated in an IDR plan are currently receiving or will soon earn retroactive credit toward forgiveness, “regardless of whether payments were partial or late, the type of loan, or the repayment plan,” according to the department’s announcement.

This broad examination of borrower accounts is far from over and will continue until 2024.

The $39 billion announced on Friday adds significantly to the Biden administration’s earlier debt relief initiatives, which now total at least $116 billion, and demonstrates how the Education Department may provide targeted help to poor borrowers despite the Supreme Court’s recent censure.

The US Supreme Court finally shot down Mr. Biden’s wider plan to cancel billions of dollars in student loans for more than 40 million Americans last month in a 6-3 verdict. The Supreme Court ruled that the Biden administration exceeded its jurisdiction with the scheme, which would have forgiven up to $20,000 per borrower in some situations.

The total amount of loan cancelled is $39 billion which is part of President Joe Biden’s broader $400bn student loan relief bid.