The Biden administration has announced that hundreds of thousands of borrowers who have been diligently paying their student loans for more than 20 years will have their remaining balances canceled. This move is part of the administration’s efforts to correct the challenges faced by borrowers in accessing the benefits of income-driven repayment plans.
In July, officials revealed their plan to cancel $39 billion in student debt for over 800,000 borrowers who have been diligently making payments on their loans for at least 20 or 25 years. Now, the government has started discharging the debt of eligible borrowers. Those who qualify for this relief will receive notifications via email from their loan servicers, and the Department of Education expects all eligible loans to be canceled in the coming weeks.
The debt discharges aim to address the issue of borrowers who have been making payments for decades but still had outstanding balances. Consumer advocates and regulators have attributed this problem to student loan servicers steering borrowers toward forbearance, a status that temporarily pauses payments but still accumulates interest and does not contribute towards loan forgiveness. It was alleged that servicers took this approach as it was quicker and less costly than enrolling borrowers in income-driven repayment plans.
To rectify this issue, the Biden administration conducted a review last year to identify periods where borrowers should have been building credit towards debt relief under income-driven repayment plans but were not accurately counted. The borrowers who are now seeing their debt canceled are those who have been determined by the Department of Education to have made at least 20 years’ worth of qualifying payments.
President Joe Biden expressed his commitment to addressing this injustice, stating, “When I came into office, hundreds of thousands of borrowers weren’t accurately getting credit for student loan payments that should have delivered them forgiveness. I was determined to right this wrong.”
Overall, this announcement brings hope and relief to the diligent borrowers who have been making payments towards their student loans for two decades or more. The proactive measures taken by the Biden administration reflect a commitment to rectifying past discrepancies and providing borrowers with the debt relief they deserve.
Debt Cancellation Lawsuit Dismissed
The Cato Institute and the Mackinac Center for Public Policy, two conservative think tanks, recently filed a lawsuit against the Biden administration’s plan to cancel student loan debt. They sought a temporary block on the debt cancellation while the case made its way through the legal system. However, a federal judge appointed by George W. Bush in Michigan dismissed the suit and the request to halt the policy, citing lack of standing to sue.
A Different Kind of Debt Cancellation
It’s important to note that the debt cancellation that began this week is not the same as the mass student loan forgiveness that has been making headlines. The Supreme Court previously struck down the Biden administration’s plan to cancel up to $20,000 for a wide array of borrowers. This policy would have cleared debt for borrowers regardless of how long they had been making payments on their student loans.
Plan B in Progress
Following the court’s rejection of his initial plan, President Biden announced that he would pursue an alternative approach to debt forgiveness. This “Plan B” is currently in progress, but its success or failure won’t be known for several months.
In a statement on Monday, President Biden reassured borrowers, saying, “We will continue to explore every available option to provide relief to as many student loan borrowers as possible, and we will do so without delay. Our mission is to help these individuals achieve their dreams.”
Advocates Push for Quick Action
Advocates for student loan borrowers have been urging officials to act swiftly in canceling debt. This urgency stems from the fact that student loan payments are scheduled to resume this fall after a pause of over three years. Without some form of relief, the end of the freeze could create financial and logistical challenges for borrowers.
Interest on student loans will begin accruing again on September 1, and borrowers will be expected to make their first payment in October.
