Education Department Unveils Historic $39 Billion Student Loan Forgiveness Program, Offering Relief to Millions of Borrowers
Education Department announces $39 billion student loan forgiveness program under income-driven repayment adjustment, benefiting long-time borrowers and easing debt burdens for millions.
In August, President Biden and U.S. Education Secretary Miguel Cardona revealed an extensive student debt relief plan. (PHOTO: CNN)
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Historic IDR Program Brings Long-Awaited Relief as Education Department Erases $39 Billion in Student Loan Debt, Benefiting Millions of Responsible Borrowers
In a major relief for long-time student loan borrowers, the Education Department announced on July 14 that $39 billion in remaining debt would be forgiven under the income-driven repayment (IDR) account adjustment program. This one-time initiative, launched in April 2022 to rectify past flaws in the IDR system, aims to grant forgiveness to millions of borrowers who had earned it but never received it. As a result of this adjustment, many borrowers will be at least three years closer to IDR forgiveness, and some may have their loans forgiven entirely.
According to reports, more than 4.4 million borrowers who have been repaying their loans for over 20 years, with 2.3 million of them never defaulting or being delinquent on their loans, stand to benefit from this program. Although there is no final count yet on the total number of borrowers eligible for the IDR account adjustment forgiveness, experts believe legal challenges to this initiative are highly unlikely, unlike President Biden’s up-to-$20,000 student debt cancellation plan, which was struck down by the Supreme Court.
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Education Department’s Wave-based Notifications Promise Timely Debt Relief; IDR Account Adjustment Offers Borrowers New Path to Loan Forgiveness, Alleviating Years of Student Debt Struggles
The Education Department plans to notify recipients of loan forgiveness in waves every two months, with the next announcement expected by mid-September, as reported in WLNS. The accounting adjustment will be applied by the end of 2023 to borrowers who have made enough payments for forgiveness, while others will receive three additional years of credit toward IDR loan forgiveness in 2024.
To determine eligibility for the one-time IDR account adjustment forgiveness, borrowers must count their past payments, with undergraduate loan borrowers typically requiring at least 240 monthly student loan payments and those with some graduate loans needing 300 payments. The adjustment counts various periods, such as late or partial payments, forbearance time, and deferment periods, toward the required number of payments for forgiveness. Months spent in default will generally not be included in the recount, except for those who enroll in the temporary Fresh Start program to exit default.
For most eligible federal borrowers with older direct loans, federally held Federal Family Education Loan Program (FFELP) loans, and parent PLUS loans, the loan forgiveness will be automatic, requiring no action on their part. However, borrowers are advised to update their contact information in their Federal Student Aid (FSA) and servicer accounts to ensure a smooth process. Amid preparations for student loan payments to resume in October, this IDR account adjustment brings significant relief to millions of borrowers burdened by long-standing student debt.
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