In a major step toward addressing the mounting issue of student debt, the Biden administration has announced the automatic cancellation of $39 billion in outstanding loans. As reported by CNBC, this momentous decision will directly impact a staggering 804,000 borrowers across the United States.
The cancellation of debt is the direct result of critical revisions made to the income-driven repayment plans within the student loan system. Going forward, the government will cancel the debts of borrowers who have diligently made payments for either 20 years or 25 years, depending on specific factors such as loan acquisition timing and repayment plan details.
The Biden administration has expressed concern over the flaws of the previous system, which failed to account for payments that should have propelled borrowers closer to attaining debt-free status. Quoting US Secretary of Education Miguel Cardona, CNBC reports, “For far too long, borrowers fell through the cracks of a broken system that failed to keep accurate track of their progress towards forgiveness.”
To ensure greater inclusivity, the Biden administration has taken into account payments made during periods of deferment and forbearance, as well as partial or late payments. This measure aims to assist a broader range of borrowers in their pursuit of financial relief.
Notably, this announcement follows a recent Supreme Court ruling that struck down President Joe Biden’s extensive student loan forgiveness plan. Despite this setback, the administration remains unwavering in its commitment to providing much-needed assistance to borrowers burdened by student debt.
The Education Department is poised to take immediate action by notifying eligible borrowers in the coming days, streamlining the debt cancellation process and offering much-needed respite.