Biden administration begins canceling student loan debt for 804,000 borrowers

Biden administration begins canceling student loan debt for 804,000 borrowers

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Beginning next week, federal student loan borrowers will start receiving emails from their loan servicers with the subject line “Notification: Your Student Loan Debt Has Been Cleared.”

These notifications are part of the efforts by the Biden administration to provide relief to 804,000 borrowers who meet the criteria for debt cancellation through their repayment plans but have faced delays due to administrative issues.

The commencement of these email notifications was scheduled for Monday, as indicated in the confirmation notices exclusively obtained by ABC News.

Over the next few weeks, it is anticipated that more than 800,000 borrowers will be informed about the relief they are eligible for. By the close of business on Monday, the Department of Education estimated that it had successfully discharged the debt of over 200,000 individuals.

Approximately 614,000 borrowers are expected to have their entire student loan debts forgiven, while others may still have outstanding loans from various timeframes. This relief initiative targets individuals who participated in income-driven repayment (IDR) plans. These plans allow the federal government to forgive student loan debts after 20 or 25 years of payments, depending on the specific plan.

However, due to documented errors in payment tracking, numerous IDR plan enrollees have been burdened with extended payment periods without any indication of eventual forgiveness.

President Joe Biden, recognizing the flaws in the student loan system that have persisted before his tenure, views these adjustments as steps toward rectifying the situation. He stated, “These plans promise loan forgiveness after 20 or 25 years of payments. Yet, due to systemic errors and administrative shortcomings predating my administration, over 804,000 borrowers were denied the credit they earned and the promised forgiveness, despite their decades of payments.”

“I was committed to addressing this injustice,” he added.

Borrowers enrolled in IDR plans can anticipate receiving emails from their loan servicers with the subject line “Your Federal Student Loan Debt Has Been Eliminated.” The email content will convey, “Congratulations! The Biden-Harris Administration has granted full forgiveness for your federal student loan(s) listed below with [servicer name].” While specific timelines for relief distribution couldn’t be provided due to the complexity of reviewing individual loans, officials assured that the process will be concluded within weeks.

It’s worth noting that there could be potential legal challenges that might temporarily halt the debt discharges. However, a recent lawsuit filed by the New Civil Liberties Alliance, representing the Cato Institute and the Mackinac Center for Public Policy, contesting the Department of Education’s authority was recently dismissed by a U.S. district court judge in Michigan.

For now, the Department of Education is proceeding with its plan to provide debt relief to qualifying borrowers.

Miguel Cardona, Secretary of Education, emphasized, “We stand up for borrowers who followed the rules, yet their progress towards forgiveness was hindered by previous administrative shortcomings that the Biden-Harris team has been diligently rectifying.”

In total, the corrective actions taken by the Department of Education regarding IDR plans will lead to approximately $39 billion in automatic debt relief, as previously reported by ABC News.

Supporters of debt relief referred to Monday’s developments as “overdue justice.”

“The Biden Administration has fulfilled its latest commitment to 800,000 individuals who were consistently let down by the flawed student loan system. For these borrowers, the prospect of belated justice will be truly transformative,” said Persis Yu, Deputy Executive Director and Managing Counsel for the Student Borrower Protection Center.

Critics, such as Republican Rep. Virginia Foxx, Chairwoman of the House Education and Workforce Committee, view the relief as an improper use of taxpayer funds.

“The Biden administration’s overtly political attempt to bypass the Supreme Court is disgraceful. This trampling of the rule of law hurts borrowers and misuses taxpayer money for the sake of headlines,” Foxx stated when the policy was initially announced.

These efforts are part of a broader series of changes to federal loan programs aimed at rectifying shortcomings. This includes $45 billion in forgiveness for individuals enrolled in Public Service Loan Forgiveness who didn’t receive the promised relief, as well as $22 billion for borrowers deceived by for-profit colleges.

Overall, the debt relief measures announced by the Biden administration thus far amount to $116.6 billion for over 3.4 million borrowers, according to the Department of Education.

Biden’s ambitious plan for widespread student loan debt cancellation was rejected by the Supreme Court in June, with a majority of justices ruling that it exceeded his authority.

This initiative, a campaign pledge by Biden, would have eliminated federal loans ranging from $10,000 to $20,000 for individuals with incomes below a certain threshold.

Since then, the White House has introduced a new IDR plan that reduces monthly payments to 5% of discretionary income, down from 10%, and shortens the forgiveness timeframe to 10 years of payments if the initial loan was under $12,000.

Additionally, the Department of Education is in the process of rulemaking to explore debt forgiveness through a different law, the Higher Education Act, although legal challenges are anticipated.

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