President Biden’s administration is on the verge of canceling the student loan debt of approximately 40,000 borrowers. The Department of Education just announced a new review of their student debt process and revealed that there have been mistakes in the past that kept almost 4 million borrowers from having credit toward the forgiveness of their loans. Correcting this mistake will lead to the cancellation of debt for 40,000 people effective immediately.
Miguel Cardona, the U.S. Secretary of Education, recently said that student loans were not intended to be a life sentence, but it has seemed like that for people who have been “locked out” of debt relief that they are eligible to receive. Cardona wrote in a statement, “Today the Department of Education will begin to remedy years of administrative failures that effectively denied the promise of loan forgiveness to certain borrowers enrolled in [income-driven repayment] plans.”
The process used to have the practice of “forbearance steering,” which meant the student-loan companies that serviced the debt encouraged the indebted person to go into a forbearance program instead of an income-driven repayment plan. This was the norm for many borrowers even though there were plans that could have resulted in the borrower paying $0 per month. The new initiative will not only stop this practice but rectify it.
The plan to rectify this mistake includes the Education Department counting forbearances of more than 12 consecutive months or 36 cumulative months as payments. These payments will be considered for the person’s eligibility for student loan forgiveness.
Those who have student loans and are enrolled in the income-driven repayment program will see their loans forgiven after 20 years or 240 payments. But if the borrower has worked in public service, their loans can be forgiven after just 10 years or 120 payments that qualify.
The new initiative from the Education Department will also include a review of the payment histories and they will credit accounts so that past payments made under other plays to repay will not count towards loan forgiveness as if they were in the income-driven repayment program.
This news comes just after President Biden announced that his administration would continue a pause in payments of student loans that was to end on May 1. The borrowers now will have until August 31 to begin payments again. When this extension was announced by White House press secretary Jen Psaki, she said that at the end of this extension the president would either extend it again or use his executive authority to permanently cancel a portion of federal student loan debt.
The discussion previously has been getting Congress to authorize the forgiveness of $10,000 in student debt, but Senate Majority Leader Chuck Schumer, a New York Democrat, has been challenging the president to authorize canceling $50,000 per borrower in debt relief.
This new initiative from the Education Department will bring millions of borrowers closer to having their student loans completely forgiven. They are driven to create a permanent fix for what they say are years of mistakes with services of student loans. Next year, borrowers will be able to log into their accounts through the Federal Student Aid office and see the progress that is being made toward income-driven repayment online.
The Educations Department plans to simplify the payment process even further by allowing even more loan statuses to count toward income-driven forgiveness.
This is all a part of Biden’s overall agenda. His administration has already canceled more than $17 billion in debt for some 725,000 borrowers since the president took office.