Student loans: President Joe Biden’s latest decision on student debt will bring 3.6 million borrowers one step closer to canceling their loan
The new actions, announced Tuesday, are the latest steps the Biden administration has taken to make it easier for federal student loan borrowers to get a forgiveness they may already be eligible for under existing programs.
To note: The video above is from a previous report on federal student loan repayments.
By the end of March, more than 700,000 of the 43 million federal student loan borrowers had seen their debt unpaid under President Joe Biden, totaling more than $17 billion in relief. It recently extended a pandemic-related payment pause for federal student loans until August 31.
Tuesday’s actions will bring more than 3.6 million borrowers of at least three years closer to getting forgiveness through what’s known as the Income-Based Repayment, or IDR, program. The program, which offers four types of repayment plans, helps borrowers avoid defaults by lowering their monthly payments based on their income and family size.
IDR also promises loan forgiveness after 20-25 years of payments. Several thousand borrowers will immediately see forgiveness through the IDR program after the full implementation of Tuesday’s actions, according to the Ministry of Education.
Another 40,000 borrowers will receive immediate forgiveness under the Civil Service Loan Forgiveness Program as they get credit for more of their payments.
“Student loans were never meant to be a life sentence, but it certainly is for borrowers stuck on the debt relief they are eligible for,” the US Secretary of Education said. Miguel Cardona, in a press release.
“Today, the Ministry of Education will begin to address years of administrative failures that effectively denied the promise of loan cancellation to some borrowers enrolled in IDR plans,” he added.
Democratic Senators Elizabeth Warren of Massachusetts, Sherrod Brown of Ohio and Dick Durbin of Illinois last week called on the Department of Education to investigate the mismanagement of the IDR program and provide borrowers with debt relief. debt. The lawmakers’ letter cited a recent NPR report that found very few borrowers were able to obtain the loan forgiveness promised to them by the IDR program.
Correction of past errors
The changes announced Tuesday will help federal student loan borrowers who haven’t gotten accurate information from their loan officers about their repayment options and have been pressured into forbearance — which allows for a temporary halt to payments — so that they could have been enrolled in an IDR plan.
Forbearance can be a quick and easy solution to help borrowers who are struggling to make their monthly loan payments avoid defaults. But sometimes it is better for borrowers to enroll in an IDR program instead. This way, they can make a lower monthly payment while still getting forgiveness credit.
A Ministry of Education study suggests that loan servicers forced borrowers to forbear in violation of ministry rules, even when a borrower’s monthly payment under an IDR plan could have been as low as $0.
The Department of Education will make a single count adjustment that will count time spent in abstentions of more than 12 consecutive months or more than 36 cumulative months toward forgiveness under the IDR and the Loan Forgiveness Program. public service. PSLF cancels debt after 10 years for eligible public sector workers who make eligible monthly payments.
The agency will also strengthen oversight of the use of forbearance by loan servicers in the future.
The Department of Education has also found flaws in the way payments are tracked by loan officers and its own federal student aid office, suggesting borrowers are missing out on progress toward IDR remission. To address past inaccuracies, the agency will conduct a one-time review of IDR payments and reform the federal student aid tracking system.
Biden’s piecemeal approach to loan forgiveness
Biden resisted pressure from other Democrats to give a broad student loan forgiveness. Instead, his administration has taken several steps to make it easier to forgive loans under existing programs.
Last year, the administration temporarily expanded eligibility for the Civil Service Loan Cancellation Program through Oct. 31, 2022. So far, the Department of Education has identified more than 113,000 borrowers with approximately $6.8 billion in loans eligible for student debt cancellation due to forgoing it.
The department also reduced a backlog of forgiveness applications filed under a policy known as Borrower Defense of Reimbursement that allows former students who were defrauded by their colleges to apply for federal debt relief. . Under the policy, the Biden administration canceled about $2 billion in debt held by more than 105,000 people who attended for-profit colleges and another $1.2 billion for borrowers who attended technical institutes. ITT before it closed.
The ministry also improved its efforts to reach borrowers eligible for debt relief due to permanent disabilities, reversing $7.8 billion for more than 400,000 borrowers.
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