Biden: $39B Student Loans to Be Automatically Discharged Soon

The Department of ⁢Education made an ​exciting announcement on Monday. Over ⁣804,000 borrowers will soon receive automatic discharge of ⁣their $39 billion⁢ in federal student loans.‍ This news comes as a result of fixes implemented by ⁤the ‌Biden-Harris‌ Administration to ensure accurate counting of qualifying monthly payments for forgiveness under income-driven repayment plans.

If borrowers have accumulated the equivalent of​ either 20 ‌or 25 years of⁤ qualifying months, they were “eligible for forgiveness,” said the department.

In total, the current Biden ⁢administration has approved ​more⁢ than $116.6 ​billion in student loan forgiveness for more than 3.4 million borrowers, according to the release.

The department also highlighted the Saving on ⁣a Valuable Education (SAVE) plan, ⁢which offers significant benefits ⁤to borrowers. Under this plan, ‍undergraduate⁢ loan payments will be cut in​ half compared to other IDR plans, borrowers’ balances will not grow as long as they make required payments, ‍and more of a ⁣borrower’s income will be protected for basic needs.

“A single​ borrower who ​makes less than $15 an‌ hour will not ⁣have to ⁣make any payments.”

Borrower benefits ⁣from the SAVE plan are ​estimated​ to begin rolling out this summer.

SCOTUS Ruling and Biden Counter

In June, the Supreme Court voted against the Biden administration’s⁣ loan⁤ forgiveness ⁤plan. However, President Biden promised to⁣ find another way to‌ provide relief to⁤ borrowers.

The Department of Education then initiated a regulatory ⁣process to ⁢create “the most affordable repayment plan ever” using⁤ the authority found under the Higher Education Act. ​Several programs were put in place to support borrowers.

“President Biden, Vice President ⁤Harris, and I will never stop fighting for borrowers, which is why we are using every tool available to provide⁤ them with⁢ needed relief,” said Education Secretary ‍Miguel Cardona at the time.

Despite the administration’s insistence that low-⁢ and⁢ middle-income borrowers‍ would benefit, experts have raised concerns about the strain these programs may put on the economy, with estimates suggesting up to $1 ⁢trillion ⁢in additional ​federal expenditures over the next decade.

Eligibility Complications

The loan forgiveness is ‌only ⁣applicable to loans made under the IDR plan, ‍provided borrowers have made 240 to 300 monthly payments, equivalent to 20 to 25 years’ worth. The loan must also be a federal Direct Loan or a Federal ⁢Family Education​ Loan held by the Department of Education.

To be eligible for loan forgiveness, the borrower must meet specific criteria related to repayment‌ status, ⁣forbearance, deferment, and economic hardship or military deferments.

Blowback to ‘Forgiveness’

The Biden administration’s income-based student loan⁤ repayment plan has ⁤faced criticism ‍for its potential cost and impact on college students. The SAVE plan alone is estimated to cost $138 billion over a decade, but experts predict the ⁢cost could be much higher.

According to the University of Pennsylvania’s Penn Wharton’s Budget‍ Model, the SAVE plan could cost $475 billion⁤ over 10 years. ‍This cost includes payment reduction for existing loans and reduced⁣ payments for new loans.

While the Biden administration aims to provide relief to borrowers, concerns remain about the long-term economic effects of these⁢ programs.