- The Biden administration announced it was fast-tracking a forgiveness plan
- Eligible borrowers took out small loans and have been repaying for a decade
- Qualifying borrowers must be enrolled in the SAVE repayment plan
President Joe Biden has fast-tracked a new student loan forgiveness plan which wipes out debt for certain borrowers who have been in repayment for the last decade.
The plan, which will come into effect in February, will apply to borrowers who took out relatively small loans and are enrolled in the Biden administration’s new income-driven payment plan.
In a statement, President Biden said the move, which was originally meant to begin in July, was coming ‘six months ahead of schedule.’
It is part of a push from the Biden administration to provide relief to borrowers after the Supreme Court struck down its broader student loan forgiveness plan in June, which planned to wipe out more than $400 million in debt.
What are the details and who is set to benefit?
President Joe Biden has announced a new student loan forgiveness plan which wipes out debt for certain borrowers
Who qualifies for the new plan and when does it start?
Education Department officials confirmed that borrowers who originally took out $12,000 or less for college and have made at least 10 years of qualifying repayments will have their debt completely forgiven in February.
Borrowers must also be enrolled in the new income-driven repayment plan, known as SAVE.
The provisions come six months ahead of schedule, and will particularly help community college borrowers, low-income borrowers, and those struggling to repay their loans, a White House statement said.
How many people will qualify?
Officials did not announce the exact number of people who will be affected by the cancellation effort, or the dollar amount that will be forgiven.
But the Biden administration said anyone who originally took out a loan for $12,000 or less should apply for the SAVE program as soon as possible.
While 30 million people are eligible for the SAVE plan, only 6.9 million are currently enrolled.
Borrowers must be enrolled in the new income-driven repayment plan, known as SAVE, to qualify for forgiveness under the latest deal
What is the SAVE plan?
The Saving on a Valuable Education, or SAVE plan, opened for enrolment in August 2023.
The SAVE plan offers far more generous terms than several other income-driven repayment plans that it was designed to replace.
Previous plans offered cancellation after 20 or 25 years of payments, while the SAVE plan cuts this in half for those who took out loans for $12,000 or less.
For each $1,000 borrowed beyond $12,000, it adds an additional year of payments on top of 10 years. For example, if someone originally took out a loan for $13,000, any remaining balance would be canceled after 11 years of qualifying monthly payments.
Some 3.9 million people enrolled in the plan already have no monthly repayments, according to the White House.
What else has the Biden administration done for loan forgiveness?
The announcement comes following similar actions by the Biden administration in recent months to reduce student debt.
Shortly after loan repayments restarted in October, Biden approved $9 billion in student loan debt forgiveness for 125,000 people, including 53,000 beneficiaries of the Public Service Loan Forgiveness program.
The president is also separately pursuing another plan for widespread cancellation.
After the Supreme Court rejected Biden’s first plan, he asked the Education Department to try again under a different legal authority. The department has been working on a new proposal that would provide relief to targeted groups of borrowers.
