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 this on-ramp.

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.