The U.S. Supreme Court may have overturned President Biden’s grand effort to wipe out student loan debt for millions of Americans, but where there’s a will, there’s a way.
In Biden’s new plan, over 800,000 student loan borrowers who have been repaying their loans for 20 years or more will see $39 billion of their loans written off.
“I have long said that college should be a ticket to the middle class – not a burden that weighs down on families for decades,” Biden said in his announcement.
“But we’re not stopping there," he added. "My administration has worked hard to secure the largest increases to Pell Grants in a decade, fixed broken loan programs such as Public Service Loan Forgiveness, and created a new income-driven repayment (IDR) plan that will cut undergraduate loan payments in half and bring monthly payments to zero for low-income borrowers.”
The latest action is part of the Biden-Harris administration’s implementation of the payment count adjustment announced in April 2022, where historical errors were discovered in the count of payments that qualify for forgiveness under IDR plans. According to the U.S. Department of Education, the inaccuracy of those payment counts led to borrowers losing hard-earned progress toward loan forgiveness.
How this plays out
In the most basic terms, how what Biden has put into play works like this: a borrower qualifies for forgiveness after making 20 or 25 years (240 or 300 months) of loan payments, depending on when a borrower first took out the loans, the type of loan they borrowed, and the IDR payment plan they are on.
Over the next few weeks, qualifying borrowers should receive a notification in the coming days providing all the details.
The Education Department said qualifiers include people with Direct Loans or Federal Family Education Loans held by the department, including Parent PLUS loans of either type, who have reached the necessary forgiveness threshold as a result of receiving credit toward IDR forgiveness for any of the following periods:
Any month in which a borrower was in a repayment status, regardless of whether payments were partial or late, the type of loan, or the 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 for in-school deferment) prior to 2013; and
Any month spent in economic hardship or military deferments on or after January 1, 2013.
In addition, the department noted that the number of months that occurred prior to a loan consolidation will also be counted toward forgiveness.
The Department said that once the initial notifications are sent out, it will continue to identify and notify borrowers who reach the applicable forgiveness thresholds every two months until 2024 when all borrowers who are not yet eligible for forgiveness will have their payment counts updated.
And don’t forget the SAVE plan
With all the announcements and detours Biden’s student loan forgiveness plan has encountered, one effort to help borrowers access affordable payments hasn’t gotten much attention – the Saving on a Valuable Education (SAVE) plan.
The SAVE plan was designed to chop payments on undergraduate loans by as much as half compared to other IDR plans, so consumers are able to keep enough money in the bank to take care of their basic monthly needs.
For example, a single borrower who makes less than $15 an hour will not have to make any payments. And even the borrowers earning above that amount get a nice plum.
They will save more than $1,000 a year on their payments compared to other IDR plans. Benefits from the SAVE plan will start becoming available before summer 2023 is in the books, the department said.
