|*ED Review (08/18/23)
AUTOMATIC LOAN FORGIVENESS
On August 14, after a federal judge rejected a legal effort to stop the action, the
Department announced the beginning of automatic discharges for 804,000 borrowers who
qualify for $39 billion in student loan relief. These discharges are the result of
fixes implemented by the Biden Administration to address historic failures in the
administration of the federal student loan program, in which qualifying payments made
under income-driven repayment (IDR) plans that should have moved borrowers closer
to forgiveness were not accurately accounted for. Borrowers are eligible for forgiveness
if they have accumulated the equivalent of 20 or 25 years of qualifying months (press release and state-by-state data).
“Today, the Biden Administration is beginning to discharge loans for those borrowers
who never received the forgiveness they rightfully earned through decades of payments,”
noted Secretary Cardona. “We are standing up for borrowers who did everything right,
but whose progress toward forgiveness went unaccounted due to past administrative
failures that the Biden team has worked tirelessly to correct. From day one, President
Biden has focused on fixing the broken student loan system, and we will not back down
or give an inch when it comes to fighting for debt relief for working families.”
President Biden also issued a statement on the action.
*ED Review (07/07/23)
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SCOTUS DECISION: BLOCKING STUDENT LOAN DEBT RELIEF
On June 30, in a split decision, the U.S. Supreme Court blocked implementation of
the Administration’s one-time federal student loan debt relief plan.
“This fight is not over,” President Biden emphasized in a statement, prior to addressing the nation with additional information on the Administration’s
response (remarks and video). “My Administration’s student debt relief plan would have been the lifeline tens
of millions of hard-working Americans needed as they try to recover from a once-in-a-century
pandemic. Nearly 90% of the relief from our plan would have gone to borrowers making
less than $75,000 a year, and none of it would have gone to people making more than
$125,000. It would have been life-changing for millions of Americans and their families.
And, it would have been good for economic growth, both in the short- and long-term.”
“President Biden, Vice President Harris, and I will never stop fighting for borrowers,
which is why we are using every tool available to provide them with needed relief,”
Secretary Cardona stressed in his own statement, outlining the Administration’s further actions (see below). “[T]he Administration
will continue the critical work we have pursued under President Biden’s leadership
to make college more affordable to more Americans and make long-overdue improvements
to the student loan system. [We] remain fully committed to ensuring students can
earn a postsecondary education and build fulfilling careers -- without the burden
of student loan debt blocking them from opportunity.”
In light of the court’s ruling, the Administration has taken a number of steps (fact sheet).
First, the Secretary initiated a rulemaking process aimed at opening an alternative path
to debt relief for as many working and middle-class borrowers as possible, using his
authority under the Higher Education Act (HEA). Indeed, the Department issued a notice announcing a virtual public hearing on July 18 and soliciting written comments from
stakeholders on topics to consider. The agency will begin the negotiated rulemaking sessions this fall and complete the whole process as quickly as possible.
Second, the Department finalized the Saving on a Valuable Education (SAVE) repayment plan, ensuring that borrowers will be able to take advantage of this plan yet this summer
-- before loan payments are due. This new income-driven repayment (IDR) plan will
cut borrowers’ monthly payments in half, allow many borrowers to make $0 monthly payments,
save all other borrowers at least $1,000 per year, and ensure borrowers do not see
their balances grow from unpaid interest. All borrowers in repayment will be eligible
to enroll in the SAVE plan.
Third, to protect the most vulnerable borrowers from the worst consequences, the Department
is instituting a 12-month “on-ramp” to repayment, running from October 1, 2023, to
September 30, 2024, so that those who miss payments are not considered delinquent,
reported to credit bureaus, placed in default, or referred to debt collection agencies. While
payments are due and interest will accrue during this period, interest will not capitalize
at the end of the period. Borrowers do not need to take any action to qualify for
These steps build on the unprecedented actions the President and his Administration
have taken to make college more affordable for working and middle-class families and
federal student loans more manageable, including securing the largest increase to
Pell Grants in a decade; fixing broken student loan programs, such as Public Service
Loan Forgiveness (PSLF), so borrowers get the relief they deserve; and approving over
$66 billion in loan cancellations for 2.2 million borrowers across the country, including
public service workers and those who have been defrauded by their institutions.
For further background, see the White House press briefing (transcript and video).
The Federal Student Aid (FSA) office has also issued FAQs about debt relief and payments resuming.