The Biden administration announced Friday that it would forgive $39 billion in student loans for 804,000 borrowers, explaining it had pursued certain fixes to existing income-driven-repayment plans.
“For far too long, borrowers fell through the cracks of a broken system that failed to keep accurate track of their progress towards forgiveness,” Education Secretary Miguel Cardona said in a statement.
These income-driven plans set a forgiveness threshold of 20 or 25 years. Borrowers must make payments that qualify over this period, either 240 or 300 in total. These payments can be as low as $0 based on an individual’s income and family situation.
“By fixing past administrative failures, we are ensuring everyone gets the forgiveness they deserve, just as we have done for public servants, students who were cheated by their colleges, and borrowers with permanent disabilities, including veterans,” said Cardona. “This Administration will not stop fighting to level the playing field in higher education.”
In late June, the Supreme Court struck down President Joe Biden’s sweeping plan for at least $10,000 in loan-forgiveness for all borrowers who make less than $125,000. Chief Justice John Roberts wrote for the majority that the Court’s precedent “requires that Congress speak clearly before a department secretary can unilaterally alter large sections of the American economy.”
After the decision, Biden said he would attempt to help borrowers by other means. The president announced a new relief program that will be grounded in the Higher Education Act, instead of the HEROES Act, though that will likely face a legal challenge.
The president also announced there will be a temporary on-ramp repayment program over the next year so that borrowers who miss monthly payments during this period are not considered delinquent.
Additionally, a new income-driven repayment plan will be introduced, which the administration has said is the most affordable yet. Under the SAVE plan, no one with an undergraduate loan will spend more than 5 percent of their disposable income each month. Balances for borrowers who originally took out loans of $12,000 or less will also be forgiven after 10 years, instead of at least 20.