This round of debt relief will eliminate the debt of 125,000 borrowers nationwide: 22,000 with disabilities, 51,000 through an income-driven repayment plan, and 53,000 through the Public Service Loan Forgiveness program.
Nearly half of all borrowers say they aren’t financially prepared to begin repaying their debt. Despite this, interest began accruing again on Sept. 1, and payments will be due again in October.
The Biden administration has begun the process of creating a new plan for widespread loan cancellation and implementing the SAVE Plan, which will cut monthly payments to $0 for millions of borrowers. There will also be a 12-month “on-ramp” period to ease borrowers back into making payments.
For many borrowers, qualifying monthly payments that should have moved them closer to forgiveness were not accounted for, effectively forcing them to make extra payments under their IDR plans.
Nationwide, more than 45 million people owe $1.6 trillion in federal loans for college, according to government data, and as many as 43 million of them stood to benefit from the cancellation program.
The Supreme Court Is Hearing Arguments About Biden’s Student Loan Cancellation Plan on Tuesday. Here’s What You Need to Know
About 90% of the benefits from Biden’s plan will go to families earning less than $75,000 according to the White House, but a group of Republican-led states have sued to block it.
Prior to this move, student loan debt—unlike credit card bills, medical bills, and most other forms of debt—was not eligible to be automatically wiped away when a person filed for bankruptcy.
In the past week, two separate courts controlled by conservative judges have ruled against the Biden administration’s plan to cancel tens of thousands of dollars in federal student loan debt for millions of borrowers, putting that relief in jeopardy.