President Joe Biden continues to pursue federal student loan forgiveness options, announcing on Wednesday, Feb. 21, that his administration will eliminate debt for more than 150,000 borrowers.
Find Out: What Would a Biden Win in 2024 Mean for Student Loan Debt?
Trending Now:: 6 Unusual Ways To Make Extra Money (That Actually Work)
The move cancels about $1.2 billion in debt, CNN reported, and advances the Biden administration’s student loan forgiveness program after a much more ambitious plan to cancel up to $20,000 in debt per borrower was struck down by the Supreme Court last summer. As it stands, Biden has now canceled about $138 billion for 3.9 million borrowers since taking office, The New York Times reported.
The latest round of debt relief will impact certain borrowers who are enrolled in a new income-driven repayment (IDR) program called the Saving on a Valuable Education (SAVE) Plan. SAVE aims to eliminate monthly payments for low-income borrowers, save other borrowers at least $1,000 per year on payments and ensure borrowers don’t see their balances grow from unpaid interest.
Explore More: How Student Loan Debt Payments Are Cutting Into Employee 401(k)s
Eligible SAVE borrowers were expected to receive emails on Feb. 21 informing them of the canceled debt, according to CNN.
“From day one of my Administration, I vowed to fix student loan programs so higher education can be a ticket to the middle class — not a barrier to opportunity,” the email reportedly said.
Debt relief under the SAVE plan was not scheduled to begin until July 2024, but last month the Biden administration said it would start forgiving the loans well ahead of schedule.
Although loan forgiveness might be happy news for borrowers, not everyone likes it. Critics of Biden’s loan cancellation policies say they are unfair to borrowers who have already repaid their loans and also unfair to taxpayers who might have to foot the bill.
A February 2023 report from the U.S. House Committee on Education & the Workforce said the Biden administration’s $400 billion forgiveness plan, originally announced in August 2022, would simply move the loan debt “onto the backs of American taxpayers.” According to that report, the Biden plan would cost every taxpayer about $2,500 — even those who never went to college.
It’s uncertain how much the SAVE plan will cost individual taxpayers. However, an analysis released last summer by the Penn Wharton Budget Model (PWBM) estimated that SAVE will “incur a net cost of $475 billion over the 10-year budget window.”
About $200 billion of that will come from payment reduction for the $1.64 trillion in loans already outstanding in 2023. The PWBM estimates that roughly 53% of the current loan volume will move to SAVE after it goes active, implying that about $869 billion will be “subject to enhanced subsidies” under SAVE.
More From GOBankingRates
This article originally appeared on GOBankingRates.com: Biden Cancels Student Loan Debt for 150,000 Borrowers — How Much Will it Cost Taxpayers?
