The Biden administration announced it will relieve $39 billion in student loan debt, weeks after the Supreme Court struck down President Joe Biden's initial student loan plan.
The plan was first announced last week, but with more details being announced by the Department of Education on Friday, here is everything to know about Biden's new student loan forgiveness plan.
What is the plan?
The plan fixes "past administrative failures" regarding calculations for those with income-driven repayment plans for their student loans. Under the Higher Education Act, borrowers with these eligible plans can have their loans forgiven after making 240 or 300 monthly payments.
The Department of Education will now be counting months where the borrower made the payment in part or late, had certain periods of consecutive months in forbearance, had months in deferment prior to 2013, or had "economic hardship or military deferments on or after January 1, 2013," toward this figure.
The changes will move a significant number of borrowers into the threshold to have their loans forgiven, per the Department of Education.
Who is eligible?
Those eligible for the forgiveness are those who have been paying their federal income-driven repayment plan student loans for the required 240 or 300 monthly payments, depending on the plan, who had months that previously were not counted.
“For far too long, borrowers fell through the cracks of a broken system that failed to keep accurate track of their progress towards forgiveness,” Secretary of Education Miguel Cardona said Friday. “By fixing past administrative failures, we are ensuring everyone gets the forgiveness they deserve, just as we have done for public servants, students who were cheated by their colleges, and borrowers with permanent disabilities, including veterans. This Administration will not stop fighting to level the playing field in higher education.”
The department said it would begin notifying eligible borrowers, including those who took out Direct Loans or Federal Family Education Loans held by the department in "the coming days."
Eligible borrowers who are contacted by the department about qualifying for forgiveness will not have to take any further action and discharges will take start 30 days after they are contacted.
How many people are affected?
The Department of Education says that an estimated 804,000 borrowers will be notified that they will have their debt forgiven in the coming days.
How does this differ from Biden's previous plan?
Biden's original plan, unveiled in August 2022, would have canceled up to $20,000 in student loan debt for people holding federal student loans. The president's legal rationale for the program was the Higher Education Relief Opportunities for Students Act of 2003.
That plan was to have been more broad and applied to all federal borrowers, rather than certain groups of borrowers. It was estimated that the original plan would have eliminated an estimated $400 billion in student loan debt.
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The Supreme Court struck down President Joe Biden's original student loan forgiveness plan last month.
Biden vowed to take additional action shortly after that decision was released, echoing early campaign promises he made in 2020 to ease student debt for millions of borrowers.