800,000 borrowers with student loan debt on IDR payment plans will have their loans forgiven as a result of the Department of Education’s payment count change.
After the Supreme Court struck down the White House’s program to forgive up to $20,000 in student loan debt on 30 June, President Biden spoke to the nation promising that his administration would find another way to bring debt relief to millions of Americans. “We’re not going to waste any time on this. We’re getting moving on it,” said Biden from the White House with Education Secretary Miguel Cardona.
The “new approach” didn’t take long to materialize with Federal Student Aid releasing the rules for a new Income-Driven Repayment (IDR) plan, called the . The latest move, announced on Thursday the US Department of Education said that it would be automatically for over 800,000 borrowers.
This will be welcome relief for those borrowers who were preparing to come October, and with interest to begin accruing again in September. While it falls short of the over 38 million covered forgiving around $400 billion by the broader plan shot down by six justices, Biden promised that the new path would be “legally sound.”
800,000 debtors will have their $39 billion in student loan debt forgiven by President Biden.
The Education Department is working to “address historical failures in the administration of the Federal student loan programme” where borrowers’ qualifying payments that should’ve brought them closer to having their debt discharged were not accounted for. With this most recent debt forgiveness, the Biden administration has now forgiven nearly $117 billion for 3.4 million borrowers.
More specifically, more than 804,000 borrowers who were engaged in income-driven repayment (IDR) plans and paid the required 240 or 300 monthly payments—equivalent to 20 or 25 years of qualifying months—were incorrectly counted. Under this programme, which will last into the following year, millions of other borrowers will also have their loans amended.
“Today, the Biden-Harris Administration is taking another historic step to right these wrongs,” declared Secretary Cardona. “Borrowers fell through the cracks of a dysfunctional system for far too long, failing to accurately track their progression towards forgiveness.”
This latest action is part of the payment count adjustment that was announced in April last year. Errors made either tracking payments or advising properly on the payment process by companies tasked with helping guide borrowers has led to millions falling further behind on settling the debts they took out to get a higher education.
Over 8 million people use IDR plans who may now benefit from this action as well as the newly announced SAVE plan that could see outstanding federal student loan debt discharged after as little as 10 years.