Biden Administration Utilizes Student Loan Forgiveness Programs to Erase $7.4 Billion in Debt

TFD – Discover how the Biden administration is leveraging student loan forgiveness programs to erase a substantial amount of debt for borrowers.

The Biden administration said on Friday that it is utilizing already-existing student loan forgiveness programs to erase an additional $7.4 billion in student debt for 277,000 borrowers.

Under President Joe Biden, the Department of Education has made it easier for some specific groups of borrowers, like public sector workers, to qualify for loan forgiveness. It also introduced a new repayment plan that gives many low-income borrowers a quicker route to loan forgiveness; however, at least two states with Republican-led legislatures are challenging this plan in court.

The Biden administration has approved the cancellation of around 4.3 million people’s $153 billion in student loan debt. That represents over 9% of all federal student loan debt that is still owed.

The Biden administration has been keen to highlight the amount of student loan debt it has forgiven as the November election draws near. It updates eligible debtors via email and makes new debt relief announcements approximately once a month. Biden unveiled a fresh set of suggestions for student debt reduction earlier this week, some of which may become operative this autumn.

Many Republicans have harshly criticized Biden’s efforts to cancel student loans, claiming the president is shifting the expense to taxpayers who either paid for their own education or choose not to attend college. Additionally, they claim he is avoiding the Supreme Court, which overturned Biden’s well-known student loan forgiveness scheme just a year ago.

Two groupings of states led by Republicans have filed lawsuits against the Biden administration in recent weeks regarding the income-driven repayment plan that was introduced a year ago. For low-income borrowers, the initiative, known as SAVE (Saving on a Valuable Education), provides the most favorable conditions.

Those enrolled in the SAVE plan would get about $3.6 billion of the student debt relief announced on Friday.

Republicans in eighteen states want to keep the SAVE plan from helping their own people. Speaking to reporters on the phone on Thursday, White House press secretary Karine Jean-Pierre stated, “They want to end SAVE, make their constituents’ payments go up, and keep them under mountains of loan debt with no end in sight.”

How the revised SAVE plan handles loan forgiveness

About 8 million borrowers have signed up for SAVE since it debuted last year, and 360,000 of them have had their remaining debt forgiven as a result of the new plan’s provisions.

The federal government formerly provided a number of income-driven repayment programs prior to SAVE, which link monthly payments to a borrower’s family size and income. However, when the plan is fully implemented in July, some borrowers will have their monthly payments halved under Biden’s revised version.

Once borrowers have made monthly payments for a predetermined number of years under SAVE, there is a forgiveness component. That is also the case with other income-driven repayment plans; but, under SAVE, debt relief is granted more quickly and is contingent upon the borrower’s initial loan amount. For instance, if a borrower borrows $12,000 or less, their loan will be erased after ten years of payments, as opposed to more than twenty years if they enroll in a different plan.

Borrowers participating in SAVE will also benefit from the fact that interest will not accrue as long as all monthly payments are completed in full. In other words, even if a borrower’s monthly payment is insufficient to pay the interest accrued during that month, their debt will not rise.

Additional initiatives to erase student loan debt

In 2022, Biden tried to enact a comprehensive scheme for student loan forgiveness, but the Supreme Court overturned it before it could provide any debt relief. The scheme, which was projected to cost roughly $400 billion, would have erased up to $20,000 for borrowers making less than $125,000 annually.

The administration went beyond its bounds of power, the high court decided.

Even yet, Biden has erased more student loan debt than any other president, primarily through the use of already-existing programs. Under his administration, qualifying for student loan debt forgiveness has been simpler for a number of borrowers, including teachers and other public sector employees, borrowers with disabilities, and those who were duped by for-profit colleges.

A recount of previous payments is being carried out by the Department of Education in order to correct administrative mistakes and help some individuals avoid bankruptcy.

The Biden administration has been developing a fresh set of recommendations to provide relief to certain groups of borrowers since the fall, based on alternative legal authority. For instance, cumulative interest may be erased for borrowers whose student loan amounts exceed the amount they originally borrowed.

Although such plans have not yet been completed, administration officials say that some of them may take effect as soon as this fall.