President Joe Biden and the Education Department are moving forward with a number of student loan forgiveness initiatives. Meanwhile, millions of borrowers are bracing for student loan payments to resume.
The student loan pause has suspended most federal student loan payments and stopped all interest since March 2020. But after Biden signed federal spending legislation earlier this summer codifying the end of the moratorium in order to avert a debt ceiling crisis, payments will be restarting, and there will be no further extension of relief. The student loan pause officially ends at the end of August, with bills likely generated in September and payments first becoming due in October.
However, the administration is also forging ahead with a number of student loan forgiveness initiatives designed to blunt the impact of student loan payments restarting.
Here are the latest updates.
Biden Administration Moves Forward With Student Loan Forgiveness Backup Plan
Last week, the Education Department took the first concrete steps to establish a new student loan forgiveness plan in the wake of the the June Supreme Court ruling that struck down Biden’s first attempt to provide mass student debt relief. The administration will rely on a different legal authority through the Higher Education Act to establish a new program.
“Today – less than three weeks since President Biden announced actions to open a new path to provide debt relief to as many borrowers as possible – we are taking an important step forward: to improve our regulations on the Secretary’s authority under the Higher Education Act to compromise waive, or release Federal student loans,” said Undersecretary of Education James Kvaal in a statement. “Our goal is to provide debt relief to borrowers, particularly those working- and middle-class borrowers who need it most.”
The process for establishing a new loan forgiveness plan under the Higher Education Act — called negotiating rulemaking — will be long and tedious. The department’s first step was to hold a public hearing to establish a committee of stakeholders that will work together to develop the parameters of the new program.
“We will help as many borrowers as possible, and we will work as quickly as possible under the law,” promised Kvaal.
In the meantime, the Biden administration announced a 12-month “on-ramp” period after student loan payments resume, during which borrowers will not be penalized for missing payments. While not expressly confirmed by officials, the administration may be hoping to have the new loan forgiveness program in place by the time the on-ramp period ends in 2024.
First Wave Of Borrowers Approved For Student Loan Forgiveness Under Account Adjustment
Meanwhile, the Biden administration moved forward this month in implementing a separate student loan forgiveness initiative through the IDR Account Adjustment. This program will allow the Education Department to credit borrowers with time toward their 20- or 25-year IDR loan forgiveness terms, pushing many past the threshold required to receive a discharge.
This month, over 800,000 borrowers were notified by the department that they qualify for loan forgiveness. These borrowers should have their debts discharged before payments resume in October. More borrowers may qualify for student loan forgiveness under the initiative in subsequent months.
More Borrowers Approved For Student Debt Relief Due To School Misconduct
Also this month, the administration announced that thousands of borrowers would be eligible for automatic student loan forgiveness due to school misconduct. The Education Department approved $130 million in student debt relief for thousands of Colorado borrowers, according to a statement issued by the department this week.
This debt relief is the latest in a series of initiatives by the administration to wipe out the student loan debt for borrowers who were misled or defrauded by their schools. The Education Department is continuing to process billions of dollars in student loan forgiveness for former students of the now-shuttered campuses of national for-profit college chains such as Corinthian Colleges and ITT Technical Institutes. And the department is implementing $6 billion in student debt relief under the Sweet v. Cardona settlement for borrowers who attended dozens of institutions accused of misconduct.
New Student Loan Forgiveness Regulations Now In Place
New rules governing a number of existing student loan forgiveness programs went into effect in July. In many cases, these new regulations will expand access and ease the application process for many borrowers seeking student debt relief.
The administration touted the expansion of Public Service Loan Forgiveness under the new rules, as more loan periods and categories of employment can potentially qualify. The new regulations also expand the types of school misconduct that can be the basis of a Borrower Defense to Repayment claim. And they streamline and expand access to debt relief under the Total and Permanent Disability (TPD) discharge program.
New Student Loan Repayment Plan Will Be Phased In
The Biden administration also announced that a new income-driven repayment plan will be phased in over the next year, with some benefits available as student loan payments resume.
The Saving on a Valuable Education plan, or SAVE for short, will have a number of features including new interest subsidies to curtail runaway balance growth, and a higher amount of income excluded from consideration under poverty guidelines. SAVE will also feature a more affordable repayment formula, and a faster student loan forgiveness track for borrowers with relatively low initial starting balances.
The SAVE plan’s interest features and higher poverty exclusion limit will be available for borrowers when payments resume, according to the Education Department. Other benefits will be available in 2024.
Further Student Loan Forgiveness Reading
New Changes Expand Student Loan Forgiveness For Public Service Borrowers
Biden Rolls Out New Student Loan Interest Benefits And Waivers As Payments Resume
Your Student Loan Payment Plan Could Get Eliminated — Here’s Why
Here’s When Student Loan Payments Resume, And What Borrowers Should Do Now
Read the full article here
