On Friday, the Biden administration announced that they would forgive $39 billion in student debt for 804,000 borrowers.
According to CNBC, the Department of Education revised the income-driven repayment plans for the student loan program as part of a new regulatory rulemaking procedure, which is what led to the creation of the new program.
Depending on when they borrowed, the sort of loan they took out, and the repayment plan they choose, after making payments for 20 or 25 years, the government will eliminate any outstanding debt for the borrower.
The Biden administration claims that in the past, payments that ought to have brought b orrowers closer to debt freedom were not taken into account.
“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 US Secretary of Education, Miguel Cardona.
Eligible borrowers are expected to be notified in the next coming days by the Education Department.
The changes that led to the loophole included crediting payments for both partial or late payments made by borrowers as well as those whose payments had been suspended during various deferments and forbearances.
The Department of Education claims that Friday’s action corrects “administrative failures” and “historical failures” that led to an incorrect calculation of eligible payments made by borrowers. Americans having Direct Loans or Federal Family Education Loans held by the department are among those who are impacted.
The action being taken just before student loan payments, which were suspended for years during the pandemic, are expected to start up again in October.
Separately, the Saving on a Valuable Education (SAVE) strategy, which we’ve previously noted, is also progressing within the Department of Education.
Under the President’s SAVE plan, borrowers with undergraduate loans would only have to pay back 5% of their discretionary income rather than 10%, saving them, according to the administration, about $1,000 annually. In addition, rather than the initial 20 years of payments, students with sums of $12,000 or less would be eligible for student loan forgiveness after ten years.
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