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Biden Forgives $39 Billion in Student Debt
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The Biden administration has forgiven billions in federal student loans by improving the current safety net available to borrowers.
By Arit John, Courtney Subramanian
July 14, 2023 8:48 AM PT
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The U.S. Education Department announced Friday that it will cancel $39 billion in federal student loans for more than 800,000 borrowers who were enrolled in loan repayment plans based on their incomes.
The announcement comes two weeks after the Supreme Court blocked President Biden’s plan to cancel up to $20,000 in loans for borrowers making less than $125,000 a year.
Friday’s announcement was a continuation of his administration’s efforts to reduce student loan debt through existing policies.
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“By fixing past administrative failures, we are ensuring everyone gets the forgiveness they deserve, just as we have done for public servants, students who were cheated by their colleges and borrowers with permanent disabilities, including veterans,” Secretary of Education Miguel Cardona said in a statement.
The Department of Education announced last year that it would make a one-time adjustment to its calculation of how many months’ worth of payments borrowers in income-driven repayment plans — in which borrowers pay a small fraction of their discretionary income — should be credited for in order to have their debts forgiven. Borrowers enrolled in current income-driven repayment plans are eligible for loan forgiveness after 20 or 25 years’ worth of monthly payments, depending on their specific program.
Borrowers who are eligible for debt cancellation as a result of the adjustment will be notified starting Friday.
Vice President Kamala Harris vowed in a statement Friday that the White House would not stop fighting to reduce student loan debt.
She pointed to last month’s announcement that the White House would pursue an alternative path to provide relief through the Higher Education Act after the Supreme Court’s decision on the president’s plan. The administration also finalized its new income-driven repayment plan, which Harris said would cut monthly payments in half for undergraduate loans.
“Our administration will continue to fight to make sure Americans can access high-quality postsecondary education without taking on the burden of unmanageable student loan debt,” Harris said.
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The Biden administration is expected to launch its revamped income-driven repayment program later this year.
In addition to paying less each month, borrowers will have any accrued interest that exceeds their monthly payments waived. Borrowers with less than $12,000 in original loan balances will have their debt forgiven after 10 years of payments.
Biden’s debt cancellation plan has received attention in recent months, but his administration has quietly approved tens of billions in loan discharges for borrowers through existing programs such as permanent disability discharge, the Public Service Loan Forgiveness program for public servants and the Borrower Defense to Repayment program for people who believe they were defrauded by their schools.
So far, the Biden administration has approved more than $116.6 billion in debt cancellation for 3.4 million borrowers, according to the Education Department.