Student loan borrowers who took out relatively small amounts to attend college and have been paying their debt for at least 10 years could have their loans forgiven as soon as February — as long as they're on the Biden administration's new repayment plan, officials announced. Friday.
Under the SAVE plan, which the Department of Education launched earlier this year, borrowers with loans of $12,000 or less are eligible to have their debts canceled after at least 10 years of repayment. Originally, the feature wasn't supposed to be available until July, but on Friday, the department said it would begin implementing the initiative in February.
Officials did not say how many borrowers this would affect, but said they would identify beneficiaries within the next few weeks. Borrowers who made $12,000 or less, have been making payments for at least 10 years and are already enrolled in SAVE will not have to take any action to receive the relief. The Department of Education is also embarking on an outreach and email campaign to encourage borrowers to sign up and potentially take advantage of the shortened forgiveness schedule.
“This measure will especially help community college borrowers, low-income borrowers, and those struggling to repay their loans,” President Joe Biden said in a statement announcing the initiative. “This is part of our ongoing effort to act as quickly as possible to give more borrowers breathing room so they can get out of the burden of student loan debt, move forward with their lives, and achieve their dreams.”
Getting back into repayment has proven complicated
Friday's announcement comes as borrowers and the government report long call wait times, missing or inaccurate bills and other challenges complicating the return of student loan payments after a more than three-year hiatus.
Some of these issues have the potential to pose hurdles for borrowers receiving the relief announced Friday. As of October, more than 450,000 applications for income-driven repayment plans, including SAVE, were still on hold with borrower servicers for more than 30 days. A senior Education Ministry official told reporters on a conference call that the backlog has declined since October.
“I don’t have a number to share with you, but it is a lower number than what was reported at the time of the CFPB report,” the official said.
About 6.9 million borrowers have successfully enrolled in the SAVE program so far, the Education Department said Friday. The bulk of these borrowers were automatically transferred from a different repayment plan.
Under savings, borrowers pay off their debt as a percentage of income and the remainder is usually canceled after 20 or 25 years of payments. Savings is the latest version of income-based repayment that has been around for years, but it includes new benefits.
Borrowers were able to access some new features last year. For example, interest not covered by the borrower's monthly payment is erased and the plan protects more of the borrower's income before payments begin. Among those enrolled in the SAVE program so far, nearly 3.9 million qualify for the $0 monthly payment, the Education Department said.
Other benefits of the plan are scheduled to begin later this year. The shortened forgiveness timeline for some borrowers was originally supposed to take effect in July, but the Education Department will release the benefit early, officials said.
By focusing on borrowers with relatively low balances, the agency aims to target a group that is disproportionately likely to suffer from student debt, officials said. Often times, a low balance can be a sign that the borrower did not complete their degree or earned a degree that has relatively little value in the job market.
Additionally, the Department of Education said offering loan relief to those who received $12,000 would erase the debt of 85% of future community college borrowers within 10 years.
Friday's announcement is separate from other forgiveness efforts previously touted by the Biden administration. To date, the Department of Education has approved $132 billion in debt cancellation for more than 3.6 million borrowers. These include borrowers who have been repaying their loans for at least 20 years, some government employees and borrowers whose schools were defrauded.
Additionally, the Biden administration is revamping its broad debt relief proposal after the Supreme Court struck down its initial plan to cancel up to $20,000 in student debt for a wide range of borrowers in June.
The new debt relief initiative has not been finalized, but Biden administration officials have indicated that it will focus on certain groups of borrowers, including those who have been paying for a long time and those who owe more than they borrowed.
