Biden Administration Announces $39 Billion In Student Debt Relief

The Department of Education (Department) will begin notifying more than 804,000 borrowers today that they have a total of $39 billion in Federal student loans that will be discharged automatically in the coming weeks.

Over the course of the Biden-Harris Administration, more than $116.6 billion in student loan forgiveness has been approved for more than 3.4 million borrowers.

The upcoming discharges are the result of fixes put in place by the Biden-Harris Administration to ensure that all borrowers have an accurate count of the number of monthly payments that qualify for forgiveness under income-driven repayment (IDR) plans.

These fixes are part of the Department’s commitment to addressing historical failures in the administration of the Federal student loan program, such as the failure to account for qualifying payments made under IDR plans that should have moved borrowers closer to forgiveness. Borrowers who have accumulated the equivalent of either 20 or 25 years of qualifying months are eligible for forgiveness.

“For far too long, borrowers fell through the cracks of a broken system that failed to keep accurate track of their progress towards forgiveness,” said U.S. Secretary of Education Miguel Cardona. “Today, the Biden-Harris Administration is taking another historic step to right these wrongs and announcing $39 billion in debt relief for another 804,000 borrowers. 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. This Administration will not stop fighting to level the playing field in higher education.”

Today’s action is part of the implementation of the announced in April 2022 by the Biden-Harris Administration. This action addressed historical inaccuracies in the calculation of payments that are eligible for forgiveness under IDR plans.

According to the Higher Education Act and Department regulations, a borrower is eligible for forgiveness after making 240 or 300 monthly payments—the equivalent of 20 or 25 years on an IDR plan or the standard repayment plan, with the number of required payments varying depending on when the borrower first took out the loans, the type of loans borrowed, and the IDR payment plan in which the borrower is enrolled. Borrowers have lost valuable loan forgiveness progress due to inaccurate payment counts. This action also addresses concerns about loan servicer practices that place borrowers in forbearance in contravention of Department rules. Previously, the Department began discharging loans for borrowers who achieved Public Service Loan Forgiveness (PSLF) forgiveness through these changes.

“At the start of this Administration, millions of borrowers had earned loan forgiveness but never received it. That’s unacceptable,” said Under Secretary James Kvaal. “Today we are holding up the bargain we offered borrowers who have completed decades of repayment.”

Borrowers who will receive notifications in the coming days are those who have Direct Loans or Federal Family Education Loans held by the Department (including Parent PLUS loans of either type) and have reached the required forgiveness threshold as a result of receiving credit toward IDR forgiveness for any of the following periods:

• Any month in which a borrower was in a repayment status, regardless of whether payments were partial or late, the type of loan, or the repayment plan;
• Any period in which a borrower spent 12 or more consecutive months in forbearance; 
• Any month in forbearance for borrowers who spent 36 or more cumulative months in forbearance;  
• Any month spent in deferment (except for in-school deferment) prior to 2013; and 
• Any month spent in economic hardship or military deferments on or after January 1, 2013.

Furthermore, the months mentioned above that occurred prior to a loan consolidation will be counted toward forgiveness.

The Department will continue to identify and notify borrowers who meet the applicable forgiveness thresholds (240 or 300 qualifying monthly payments, depending on a repayment plan and loan type) every two months until next year, when all borrowers who are not yet eligible for forgiveness will have their payment counts updated. Any month used for this purpose can also be used to calculate PSLF if the borrower documents qualifying employment for the same time period.

Beginning today, eligible borrowers will be notified by the Department that they are eligible for forgiveness without further action on their part. Discharges will begin 30 days after the emails are sent. Borrowers who wish to opt out of the discharge for any reason should contact their loan servicer during this time. Borrowers will be notified by their servicer once their debt has been discharged. Those who receive loan forgiveness will have repayment paused until their discharge is processed, while those who opt out of the discharge will resume repayment once payments resume.

Today’s action builds on the Biden-Harris Administration’s unrivaled record of student debt relief to date, which includes:

• $45 billion for 653,800 public servants through improvements to PSLF;
• $5 billion for 491,000 borrowers who have a total and permanent disability; and 
• $22 billion for nearly 1.3 million borrowers who were cheated by their schools, saw their schools precipitously close, or are covered by related court settlements.

President Biden and the Department have also taken steps to help borrowers access affordable payments in the future. The Department recently issued final regulations establishing the most affordable payment plan ever—the Saving on a Valuable Education (SAVE) plan.

When compared to other IDR plans, the SAVE plan will cut payments on undergraduate loans in half, ensure that borrowers never see their balance grow as long as they make their required payments, and protect more of a borrower’s income for basic needs. A single borrower earning less than $15 per hour will not be required to make any payments. Borrowers earning more than that amount will save more than $1,000 in annual payments when compared to other IDR plans. The SAVE plan’s benefits will become available this summer.