Biden Administration announces $1.2B in student debt forgiveness
26th February 2024 · 0 Comments
By Stacy M. Brown
Contributing Writer
(NNPA Newswire) — In a significant move to alleviate the burden of student debt, the Biden administration revealed on Wednesday of last week its decision to automatically forgive $1.2 billion in student loans for 153,000 borrowers.
Those eligible for debt relief are individuals enrolled in the Saving on a Valuable Education (SAVE) repayment plan who have diligently made payments for at least ten years.
The Department of Education said it would email those who will receive the debt cancellation, another step in the administration’s ongoing efforts to address the nation’s staggering $1.77 trillion student debt crisis. The announcement comes after the Supreme Court invalidated the administration’s previous plan for widespread student loan forgiveness, which aimed to assist over 40 million borrowers in wiping away up to $20,000 in debt.
U.S. Secretary of Education Miguel Cardona emphasized the administration’s commitment to providing relief, stating, “If you’ve been paying for a decade, you’ve done your part, and you deserve relief.”
It was just last month a similar announcement was made in which teachers, social workers, and other public servants would be among those expected to benefit. The January initiative, it is estimated, would relieve those eligible of $4.9 billion debt in return for their service to communities that earned them forgiveness under Public Service Loan Forgiveness (PSLF) and Income-Driven Repayment (IDR).
This most recent move now brings the total approved loan relief to nearly 3.9 million borrowers, with a cumulative debt cancellation of almost $138 billion through various executive actions.
The latest 153,000 qualifying borrowers represent the first group to benefit from the SAVE plan policy, which allows debt forgiveness after ten years of repayment for those who borrowed $12,000 or less in student loans.
Originally scheduled for July, the Biden-Harris administration implemented this provision of the SAVE plan nearly six months ahead of schedule, which the White House said amplified its commitment to delivering swift relief to those who have faithfully repaid their loans.
Under the SAVE plan, borrowers enrolled in the program who have been in repayment for at least a decade and took out $12,000 or less in loans will receive immediate debt relief. The Department of Education identified and notified the nearly 153,000 borrowers enrolled in the SAVE plan who qualify for debt cancellation. Additional outreach will be conducted to encourage eligible borrowers not currently enrolled in SAVE to join the program.
The accelerated timeline for forgiveness is expected to particularly benefit community colleges and other borrowers with smaller loans, propelling them toward freedom from student debt faster than ever before. According to the Biden-Harris administration, 85 percent of future community college borrowers under the SAVE plan will be debt-free within a decade.
Biden introduced the SAVE plan last year, which offers the most affordable repayment option ever by basing monthly payments on income and family size rather than loan balance. Additionally, the plan ensures that borrowers making monthly payments do not accumulate interest, and starting in July, undergraduate loan payments will be halved.
The Biden-Harris Administra-tion’s track record of canceling student debt now includes nearly 3.9 million Americans receiving almost $138 billion in debt relief through various actions.
In late 2023, the Federal Reserve determined that although most consumers pay $400 or less in monthly loan payments, 19 percent of borrowers pay far more. As reported by Motley Fool, payments between $500 and $999 are made by 14 percent of borrowers, while payments of $1,000 or more are paid by five percent of borrowers.
“Outstanding student loan debt exceeds outstanding auto loan debt and credit card debt,” recently noted Rohit Chopra, director of the Consumer Financial Protection Bureau (CFPB). “If student loan borrowers are unable to successfully enroll in payment plans or obtain accurate information about their accounts, this can have a domino effect on the rest of their financial lives.”
In December 2023, CFPB issued a new report entitled, Making Ends Meet in 2023. Two findings in this report highlight the heavy and disproportionate financial effects for borrowers of color:
“Consumers who currently have student debt were 10 percentage points more likely to have difficulty paying bills than consumers who had student debt at some point in the last 10 years but no longer do and consumers who have not had student debt for at least 10 years if ever.”
“Nearly 58 percent of Black consumers and 54 percent of Hispanic households could not cover expenses for more than a month in February 2023,” continued the CFPB report, “while this was the case for only 34 percent of non-Hispanic white households and 32 percent of households of another race. These differences among groups were largely unchanged since 2022.”
“The President remains dedicated to delivering debt relief to as many borrowers as possible, continuing to fight for comprehensive solutions to address student loan debt challenges,” officials stated in a Fact Sheet. “The administration has also taken historic steps to improve the student loan program, including significant increases in Pell Grants and reforms to the Public Service Loan Forgiveness program.”
Borrowers can find additional resources at StudentAid.gov and sign up for the SAVE plan at StudentAid.gov/save.
Charlene Crowell is a senior fellow with the Center for Responsible Lending contributed to this article.
This article originally published in the February 26, 2024 print edition of The Louisiana Weekly newspaper.
