The Biden administration announced today it will automatically cancel $39 billion in student debt, benefitting 804,000 borrowers across the nation.
The decision stems from crucial improvements made to the income-driven repayment plans within the student loan system. Under these plans, borrowers are eligible to have any remaining debt canceled by the government after making consistent payments for either 20 or 25 years, depending on the timing of their loans and the type of repayment plan they have chosen.
However, the Biden administration identified a significant oversight in the previous system. It became evident that certain payments, which should have contributed to borrowers’ progress toward debt-free status, were not being properly accounted for.
“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 Secretary of Education Miguel Cardona.
To ensure that deserving borrowers are not denied the opportunity for forgiveness, the Biden administration revised its approach. The administration now includes payments made by borrowers who had temporarily paused their payments through deferments and forbearances, as well as those who had made partial or late payments.
“By fixing past administrative failures, we are ensuring everyone gets the forgiveness they deserve, just as we have done for public servants, students who were cheated by their colleges, and borrowers with permanent disabilities, including veterans,” Cardona said.
While this debt forgiveness represents a victory for borrowers, it is important to acknowledge that it is relief to which they were rightfully entitled.
“Make no mistake — over 804,000 people are receiving relief with this action because of 804,000 failures — and this is only the tip of the iceberg,” said Persis Yu, the deputy executive director at the Student Borrower Protection Center. “Working people have been made collateral damage by a dysfunctional student loan system.”
This announcement follows closely on the heels of the Supreme Court’s recent decision to strike down President Joe Biden’s comprehensive student loan forgiveness plan. The original plan aimed to provide relief to 37 million individuals burdened by student debt.
In the coming days, the Department of Education will begin notifying eligible borrowers of their newfound debt forgiveness.
