2023-08-20 22:16:38
Bloomberg — For most people with federal student loans, the Supreme Court dashed their dreams of debt relief. However, some borrowers are starting to see their balances wiped out.
The US Department of Education recently began forgiving $39 billion of student debt for more than 800,000 borrowers who had enrolled in income-based repayment plans and made monthly payments for at least 20 years. In April of last year, the Biden administration launched a unique initiative to correct clerical errors that had kept borrowers on the hook for repayments when their balances should have been reduced to zero. Their clean slates are landing just as payments are due to resume federal lending for the first time in more than three years.
Shannon Short, 52, had student debt since she enrolled in college in 1988. Now her $299,000 balance has been reduced to zero, thanks to what amounts to a registry adjustment. The amount she owed had risen from $140,000 in 2005, and she was set to make monthly payments of about $700 a month when billing resumed in October.
“I sat there and cried for 20 minutes,” said Short, who lives in Los Angeles. “This has changed my entire financial future.”
For decades, IDR and utility loan forgiveness programs have offered avenues for elimination of balances, but recordkeeping errors have resulted in low levels of debt actually being eliminated, according to Bureau reports. of Government Accountability. The Biden administration is now trying to address longstanding frustrations by adjusting the records so that qualifying borrowers may be eligible to have their balances discharged, depending on their type of loan. The program was separate from the flagship forgiveness plan that was announced in August last year and which, by one estimate, would have cost $400 billion.
At least $116 billion in relief for 3.4 million borrowers has been approved through a variety of programs, the administration said Monday. This is a fraction of the total $1.8 trillion in federal student debt, and the White House said in June that it would explore a new avenue to forgive some of these loans.
It’s a relief
After Matthew Mittelstadt graduated in 2001, deferring his loans was the best option while he worked low-paying jobs. Forbearance helped him get by until he started making steady payments in 2010. Even so, the interest accrued and his balance grew to as much as $31,000 thanks to the interest.
“There came a time when I had three jobs and barely had enough to live on,” he explains.
For the 45-year-old insurance company worker who lives in Boston, relief came tricklingly. Earlier this week he watched as half of his remaining $18,500 in student debt was paid off. Then, on Thursday, he logged into his account and realized that the rest had also disappeared.
The IDR adjustment this week also wiped out the remaining balance of $84,000 in student debt held by Indiana veterinarian Ward Phillips. The 59-year-old vet had been paying his $213,000 since he graduated in 1996. Monthly payments of at least $500 were expected to resume in October.
“It’s a relief to get it out of my mind,” Phillips said. “I thought I was going to die with this.”
Read more at Bloomberg.com
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