The Department of Education will forgive the debts of 804,000 people. They are doing this because there were mistakes in the system that prevented these people from getting the loan relief they were eligible for. These borrowers have been making payments based on their income, and their loans were supposed to be forgiven after 20 or 25 years. However, due to errors in tracking the payments, many borrowers ended up paying for longer than they should have.
The Education Secretary, Miguel Cardona, said that the system had failed these borrowers for a long time. He wants to fix the mistakes and ensure that everyone gets the loan forgiveness they deserve. This debt relief is similar to what has been done for public servants, students who were deceived by their colleges, and borrowers with permanent disabilities, including veterans.
The Department of Education offers different income-driven repayment plans, but they all have the same goal: to set a monthly payment based on income and cancel any remaining loans after 20 to 25 years. However, it has been found that the cancellation part of the plan often doesn’t happen, as reported by government watchdogs.
The Department of Education’s fixes to the income-driven repayment plans will provide $39 billion in automatic debt relief. Borrowers will be notified and relief will start 30 days after the announcement. If borrowers don’t want their debts canceled, they can contact their loan servicers.
The Department of Education wants to keep its promise to borrowers who have been making payments for decades. The debt relief announced is part of a larger effort to fix programs that haven’t been delivering on their promises. This includes providing relief to those enrolled in the Public Service Loan Forgiveness program and to borrowers who were defrauded by for-profit colleges.
The total debt relief provided through these fixes is $116.6 billion, benefiting more than 3.4 million borrowers. These efforts are being made because President Biden’s plan to cancel debt on a large scale was rejected by the Supreme Court. However, the government is working on other ways to address the issue, such as implementing a new income-driven repayment plan with lower monthly payments and a shorter forgiveness timeline. They are also exploring debt forgiveness through the Higher Education Act, although legal challenges are expected.