Student loan borrowers have been struggling to repay their loans for years, with many stuck in a cycle of debt for decades. But now, the Biden administration is taking steps to provide relief to those who have been burdened by student debt. The Education Department recently announced it will be automatically canceling $39 billion in student debt for 804,000 borrowers. In this article, we’ll delve into all the details of this new reform and what it means for student loan borrowers across the country.
What is the New Student Debt Relief Plan?
The Education Department recently announced a new form of relief for student loan borrowers who have been struggling to repay their loans. As part of the changes made to the department’s income-driven repayment plans, $39 billion in student debt relief will be granted to 804,000 borrowers who have accumulated the equivalent of either 20 or 25 years of qualifying months. The relief will be granted automatically.
The new relief plan will apply to borrowers who have direct student loans or loans in the Federal Family Education Loan program, which are all loans held by the Education Department. Borrowers who have spent at least 20 years making qualifying payments will have their loans automatically forgiven. The Education Department will begin notifying eligible borrowers in the coming weeks, and discharges will begin 30 days after the emails are sent.
Who is Eligible for the New Relief Plan?
The new relief plan will apply to borrowers who have direct student loans or loans in the Federal Family Education Loan program, which are all loans held by the Education Department. Borrowers who have spent at least 20 years making qualifying payments will have their loans automatically forgiven. This relief will be granted to 804,000 borrowers who have accumulated the equivalent of either 20 or 25 years of qualifying months, according to the press release.
The borrowers receiving notices of forgiveness in the coming days are those with direct student loans or loans in the Federal Family Education Loan program, who have reached the necessary forgiveness threshold during any of the following periods:
- Any month when the borrower was in repayment status, regardless of whether the loans were partial or late
- Any period when the borrower spent 12 or more consecutive months in forbearance
- Any month in forbearance when borrowers were in forbearance for 36 or more cumulative months
- Any month in deferment before 2013
- And any month spent in economic hardship or military deferment on or after January 1, 2013
The department stated that any months spent before loan consolidation into the federal direct loan program will also count toward forgiveness.
How Will Borrowers Be Notified?
The Education Department will begin notifying eligible borrowers in the coming weeks, and discharges will begin 30 days after the emails are sent. The discharges will be automatic, meaning eligible borrowers will not have to take any action to receive the relief. Borrowers who want to opt out of the relief have to contact their student-loan servicer. Eligible borrowers will also have repayment on their loans paused until the relief is processed.
What Happened to Biden’s Broad Relief Plan?
The new relief plan comes after President Joe Biden’s broad plan for student-loan forgiveness was struck down by the Supreme Court. The court ruled that the law Biden used for that relief was an overreach of authority. However, the Education Department announced it is beginning the process of getting relief to borrowers using the Higher Education Act of 1965, which will take longer than the first time around due to the negotiated rulemaking process.
Why is the New Relief Plan Important?
The new relief plan is important because it provides much-needed debt relief to student loan borrowers who have been struggling to repay their loans for years. For many borrowers, student loan debt has become a crushing burden that has prevented them from achieving their financial goals. The automatic forgiveness of loans will provide some much-needed relief and allow borrowers to move on from the financial stress that has been weighing them down.
Conclusion
The new relief plan announced by the Education Department will provide $39 billion in student debt relief to 804,000 borrowers. Those who have accumulated the equivalent of either 20 or 25 years of qualifying months will automatically receive the relief. In the coming weeks, notifications will be sent to eligible borrowers, and discharges will commence 30 days after sending the emails. This relief is a much-needed lifeline for student loan borrowers who have been struggling to repay their loans for years.
Frequently Asked Questions
Q: How do I know if I am eligible for the new relief plan?
A: Borrowers who have direct student loans or loans in the Federal Family Education Loan program, which the Education Department holds, will be eligible for the new relief plan. Borrowers who have spent at least 20 years making qualifying payments will have their loans automatically forgiven.
Q: Will I have to take any action to receive the relief?
A: No, the discharges will be automatic. Eligible borrowers will not have to take any action to receive the relief.
Q: What happened to Biden’s broad relief plan?
A: The Supreme Court struck down Biden’s broad plan for student-loan forgiveness. However, the Education Department announced it is beginning the process of getting relief to borrowers using the Higher Education Act of 1965.
Q: Why is the new debt relief plan important?
A: The new relief plan is important because it provides much-needed debt relief to student loan borrowers who have been struggling to repay their loans for years. The automatic forgiveness of loans will provide some much-needed relief and allow borrowers to move on from the financial stress that has been weighing them down.
Q: When will discharges begin?
A: The Education Department will begin discharges 30 days after sending the emails to eligible borrowers.
First reported on: Business Insider
