Biden Administration Forgives $1.2B in Student Loan Debt. Whose Loans Are Canceled?
Borrowers with a smaller amount of student loan debt are getting relief automatically.
The Biden administration has a new plan for student debt relief.
Nearly 153,000 student loan borrowers are getting debt relief today, the Biden administration has announced. Starting Wednesday, the administration is notifying borrowers enrolled in the Saving on a Valuable Education plan that it's canceling $1.2 billion in student debt.
The debt forgiveness comes almost four years after then-presidential candidate Joe Biden proposed a plan for broad student loan forgiveness. SAVE is the newest of four income-driven repayment plans available to federal student loan borrowers. Under the SAVE plan, you are eligible for forgiveness if you borrowed less than $12,000 in federal student loans and have been in repayment for at least 10 years.
The Department of Education paused student loan repayments and interest through the pandemic and restarted payments in fall 2023. The administration's plan to forgive up to $20,000 in federal student loans for all borrowers was knocked down by a Supreme Court ruling last summer. Total student loan debt at the end of 2023 stood at $1.6 trillion, according to the Federal Reserve Bank of New York, second in household debt behind home mortgages at $12.14 trillion.
Here's what we know about the new plan to cancel federal student loan debt and who qualifies. For more on your money, here are your tax filing deadlines this year and how you can track the status of your tax refund. And here are our picks for the best tax software for 2024.
What is the Department of Education's new plan to cancel student loan debt?
The Department of Education is now forgiving loans for borrowers who are enrolled in the department's SAVE plan, who originally took out $12,000 or less for undergraduate or postgraduate studies and have been paying off the loan for at least 10 years, according to a press release.
Those with larger loans can qualify over a longer time period: For every additional $1,000 borrowed above $12,000, borrowers must make an additional year of payments before their loans are canceled. Forgiveness will be based on the amount originally borrowed and not on the amount currently owed.
The Department of Education had originally set a July deadline to roll out its student debt relief plan.
If I qualify, when will my student loan debt be canceled?
Those who qualify will have their debts canceled immediately, the administration said, and won't have to take any action to get loans canceled. In the coming days, the administration said, loan servicers will process the forgiveness and borrowers who qualify will see their loans forgiven on their accounts.
The administration said 7.5 million borrowers are now enrolled in SAVE. The Department of Education said it will continue to identify and discharge loans on a regular basis and will email borrowers starting next week who can become eligible for this forgiveness if they switch to the SAVE program. Sign up for SAVE at StudentAid.gov/save.
What is the SAVE income-driven repayment plan?
For those enrolled in the SAVE plan, monthly payments are calculated based on income and family size instead of on the balance of the student loan. For example, single borrowers who earn less than $32,800 per year or those in a family of four making less than $67,500 have a $0 payment. Monthly payments are capped at 10% of a borrower's discretionary income.
For more, here are what to know about your filing your taxes if the government shuts down in March and how to set up an IRS account.