2023-07-15 21:50:27
The Biden administration recently announced a $39 billion student loan forgiveness program targeted at people who have taken out certain federal loans and are paying them back under the income-based repayment (IDR) plan.
Loan forgiveness only applies to loans that were made under the IDR plan as long as borrowers have made 240 or 300 monthly payments, which equates to 20 to 25 years, depending on a Press release of July 14 from the US Department of Education (DoE). An IDR plan sets the monthly payment at an amount intended to be affordable for borrowers based on their income and family size.
In addition to being an IDR plan, the loan must be a federal Direct Loan or a Federal Family Education Loan (FFEL) from the Department of Education, including Parent PLUS loans.
To be eligible for loan forgiveness, a borrower must meet the required loan forgiveness threshold as a result of receiving the IDR forgiveness credit in any of the following five types of periods, according to the news release.
Any month in which a borrower was in repayment status, regardless of partial or late payments, loan type, or repayment plan; Any period in which a borrower spent 12 or more consecutive months in forbearance; Any month in forbearance for borrowers who spent 36 or more cumulative months in forbearance; Any month spent in deferment (except deferment in school) before 2013; and Any month spent in economic hardship or military deferrals on or after January 1, 2013. “In addition, the months described above that occurred before a loan consolidation will also be counted toward forgiveness.”
The Department of Education will notify more than 804,000 borrowers that their federal student loans will be automatically discharged in the coming weeks.
This equates to a total of $39 billion in loan forgiveness. When the loans are discharged, it means that borrowers no longer have to repay their loans.
The department said eligible borrowers will be informed as of the press release date, July 14, if they are qualified, “without further action on their part.”
Downloads will begin 30 days after the emails are sent. Once their debts are paid off, the loan servicer will notify the borrowers about it. Borrowers who receive forgiveness will have their loan payments suspended until the cancellation process is complete.
“The Department will continue to identify and notify borrowers who meet applicable forgiveness thresholds (240 or 300 qualifying monthly payments, depending on their repayment plan and loan type) every two months until next year, when all borrowers who have not yet are eligible for forgiveness will have their payment counts updated.
“Any month counted for this purpose may also be counted toward the Federal Family Education Loan (FFEL) if the borrower documents qualifying employment for that same period,” the news release says.
Supreme Court
The Biden administration’s plan to forgive loans for a portion of IDR borrowers comes after the US Supreme Court blocking a massive student loan forgiveness plan in June. Under that plan, Biden wanted to write off up to $20,000 in installments from around 40 million borrowers, which would have resulted in a massive $800 billion commitment from the government.
Biden’s new $39 billion pardon plan has drawn both praise and criticism. “This is great news!” Rep. Pramila Jayapal (D-Wash.) said in a July 14 post on Twitter. “We are going to keep fighting to pay off more student debt every day.”
Students protest rising student loan costs for higher education on Hollywood Boulevard in Los Angeles on Sept. 1, 2019. Jan. 22, 2012. (David McNew/Getty Images)
“We won’t stop fighting to #CancelStudentDebt to bring relief to millions of Americans struggling with student loan debt. Thank you President Biden for continuing to act. I am proud that this will help more than 42,000 New Yorkers.” said Senate Majority Leader Chuck Schumer (DN.Y.) in a July 15 post on Twitter.
Tom Fitton, president of the conservative Judicial Watch foundation, called the forgiveness program a “show of contempt for the Supreme Court and the authorities of the United States Constitution as Biden moves to spend $39 billion without authorization from Congress.” ”, according to his post July 14 on Twitter.
Sen. Marsha Blackburn (R-Tenn.) accused to the Biden administration of “having no respect for our institutions” in a post on Twitter. “Joe Biden should use the $39 billion he plans to forgive student loan debt to secure the border — not pay for gender studies degrees,” the senator added in another post.
The issue of student loan forgiveness has been contentious due to the consequences potentially damaging effects that can have on college costs. Some argue that forgiving debts will end up encouraging colleges and universities to keep raising their fees.
According to an estimate by the Federal Reserve Bank of New York, college tuition rates increase $0.60 for every dollar of subsidized student loans.
In all, the Biden-Harris administration has approved more than $116.6 billion in student loan forgiveness in recent years for more than 3.4 million people, the education department said.
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