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  • Writer's pictureThe Credit Laboratory - Research Team

Biden-Harris Administration Scheduled To Automatically Forgive Over 804,000 Student Loan Borrowers

The Department of Education is notifying over 804,000 borrowers that they will have a total of $39 billion in Federal student loans automatically discharged in the coming weeks. The Biden-Harris Administration has approved over $116.6 billion in student loan forgiveness for more than 3.4 million borrowers.

These discharges are a result of fixes implemented by the administration to ensure accurate counting of monthly payments that qualify for forgiveness under income-driven repayment plans. The Department is committed to addressing historical failures in the administration of the Federal student loan program, where qualifying payments were not properly accounted for. Borrowers are eligible for forgiveness after accumulating either 20 or 25 years of qualifying months.

U.S. Secretary of Education Miguel Cardona stated that this step is being taken to correct the flaws in the system and provide debt relief to borrowers who have been overlooked for too long. The administration is dedicated to leveling the playing field in higher education.

Today's action is part of the Biden-Harris Administration's implementation of the payment count adjustment announced in April 2022. This adjustment aims to address historical inaccuracies in the count of payments that qualify for forgiveness under income-driven repayment (IDR) plans. According to the Higher Education Act and the Department's regulations, borrowers become eligible for forgiveness after making 240 or 300 monthly payments, which is equivalent to 20 or 25 years on an IDR plan or the standard repayment plan. The number of required payments varies based on factors such as when the borrower took out the loans, the type of loans borrowed, and the specific IDR payment plan enrolled in.

The inaccurate payment counts have resulted in borrowers losing progress towards loan forgiveness that they rightfully earned. This action also addresses concerns about loan servicers putting borrowers into forbearance in violation of Department rules. The Department has already started discharging loans for borrowers who reached forgiveness through the Public Service Loan Forgiveness (PSLF) program using these changes.

Secretary James Kvaal emphasized the administration's commitment to rectifying the situation, stating, "At the start of this Administration, millions of borrowers had earned loan forgiveness but never received it. That's unacceptable. Today, we are fulfilling our promise to borrowers who have diligently repaid their loans for decades."

The notifications that borrowers will receive in the coming days will include those with Direct Loans or Federal Family Education Loans held by the Department, including Parent PLUS loans. These borrowers have reached the necessary forgiveness threshold due to receiving credit towards IDR forgiveness for specific periods.

Under the new guidelines, borrowers may qualify for loan forgiveness in the following circumstances:

  • Any month in which the borrower was in a repayment status, regardless of the payment amount or timing, loan type, or repayment plan.

  • Any period of 12 or more consecutive months in forbearance.

  • Any month in forbearance for borrowers who have accumulated 36 or more cumulative months in forbearance.

  • Any month spent in deferment (excluding in-school deferment) before 2013.

  • Any month spent in economic hardship or military deferments on or after January 1, 2013.

Additionally, any months mentioned above that occurred before a loan consolidation will also be considered for forgiveness. The Department will continue to identify and notify borrowers who meet the forgiveness thresholds (240 or 300 qualifying monthly payments, depending on their repayment plan and loan type) every two months until next year. This will ensure that all borrowers who are not yet eligible for forgiveness have their payment counts updated. If a borrower provides documentation of qualifying employment for the same period, any month counted for forgiveness can also be counted towards Public Service Loan Forgiveness (PSLF).

Eligible borrowers will receive notifications from the Department starting today, informing them that they qualify for forgiveness without needing to take any further action. Discharges will begin 30 days after the emails are sent. During this period, borrowers who wish to opt out of the discharge for any reason should contact their loan servicer. After their debt is discharged, borrowers will be notified by their servicer. Those who receive forgiveness will have their loan repayment paused until the discharge is processed, while those who opt out of the discharge will resume repayment once payments restart.

RePRefresident Biden and the Department have taken steps to assist borrowers in accessing affordable payments moving forward. Recently, the Department issued final regulations introducing the Saving on a Valuable Education (SAVE) plan, which is the most affordable payment plan ever created. Under the SAVE plan, payments on undergraduate loans will be reduced by half compared to other income-driven repayment (IDR) plans. Additionally, borrowers will not see their balance increase as long as they meet their required payments, and a larger portion of their income will be protected for basic needs. For single borrowers earning less than $15 an hour, no payments will be required. Those earning above that amount will save over $1,000 annually on their payments compared to other IDR plans. The benefits of the SAVE plan will begin to be available this summer.

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