Topline
The Department of Education announced a plan Tuesday to immediately forgive student loan debt for at least 40,000 Americans—and move another 3.6 million borrowers closer to loan forgiveness—using pre-existing programs the department said have been mismanaged, a move that follows President Joe Biden’s decision to extend a pandemic-related pause on all student loan payments.
LOS ANGELES, CA – NOVEMBER 19: University of California Los Angeles (UCLA) students and supporters … [+]
Key Facts
Some 3.6 million student loan borrowers will be given three years of credit toward eventual debt forgiveness, through a revision of payment counting for the Department of Education’s income-based repayment program, which it says will address “data problems and past implementation inaccuracies.”
The program was implemented in 1992 as a way for borrowers to use a portion of their income to pay off loans for 20 to 25 years and have their remaining balances forgiven at the end of that term, but almost no one has had their debt canceled via the program.
The Department of Education says it also aims to end “forbearance steering,” a tactic in which loan providers—in violation of department rules—advised borrowers to use what should be last-resort tools to pause their loan payments, causing exponential interest to accrue without a path toward eventual loan cancellation.
The federal government will allow borrowers who were “inappropriately placed” in long-term forbearances to have their accounts reviewed as part of a one-time adjustment, and the department says it will monitor the implementation of this tool more closely moving forward.
Another 40,000 people enrolled in the public service loan forgiveness program—which forgives debt held by some borrowers who work for a government agency or nonprofit for 10 years—will also have their loans erased following the adjustments.
Crucial Quote
“Student loans were never meant to be a life sentence, but it’s certainly felt that way for borrowers locked out of debt relief they’re eligible for,” Secretary of Education Miguel Cardona said in the department’s release.
Surprising Fact
Out of over 8 million Americans who have enrolled in the income-driven repayment program in its 30-year existence, only 32 people have ever received a cancellation of their debt as of March 2021, according to a survey from the National Consumer Law Center.
Key Background
Earlier this month, the Biden Administration also extended its pause on all federal student loan repayments, interest and collections through August 31, pointing to the continued economic consequences of the coronavirus pandemic. Student loan payments were first halted in March 2020, and the pause has been extended six times. As a presidential candidate, Biden said he would support legislation to forgive a minimum of $10,000 worth of student debt per person.
Big Number
$1.7 trillion. That’s how much student loan borrowers—40 million Americans, or roughly 12% of the country—collectively owe in the U.S. as of April 7, according to the Federal Reserve.
Source: https://www.forbes.com/sites/alisondurkee/2022/04/19/biden-administration-will-broaden-student-loan-forgiveness-programs-for-millions-of-borrowers/