In a significant move to alleviate the burden of student loan debt, the Biden administration has recently announced the automatic cancellation of $39 billion in debt for 804,000 student loan borrowers.
This decision comes in the wake of the Supreme Court’s 6-3 ruling on June 30, which struck down President Joe Biden’s student loan forgiveness program.
Student Loan Cancellation, Opening New Opportunities for Borrowers
While the Department of Education has begun sending out email notifications to eligible borrowers, there are still opportunities for those who haven’t received an email to qualify.
The loans to be canceled are a result of efforts undertaken by the Biden-Harris administration to ensure all borrowers have an accurate count of qualifying months toward forgiveness under income-driven repayment (IDR) plans.
To be eligible for forgiveness, borrowers must have accumulated the equivalent of either 20 or 25 years of qualifying months.
Forbes highlights that even borrowers who do not qualify for full loan forgiveness may still benefit from the new policy.
They may receive retroactive credit toward their 20- or 25-year student loan forgiveness term, which could significantly reduce the repayment period and advance their progress toward eventual debt relief.
While the Education Department is currently prioritizing borrowers who have reached the IDR threshold for student loan forgiveness, those who fall short of the forgiveness milestone will receive more specific details about their standing some time in 2024.
The Department’s announcement also reveals that it will continue to identify and notify borrowers who reach applicable forgiveness thresholds every two months until next year.
This ongoing process will ensure that all borrowers who are not yet eligible for forgiveness will have their payment counts updated in due course.
It’s essential to note that any month counted for IDR forgiveness can also be counted toward Public Service Loan Forgiveness (PSLF) if the borrower documents qualifying employment during that same period.
Read more: Student Loan Borrowers Brace For Lengthy Wait On Biden’s Debt Relief Proposal
The IDR Account Adjustment
If you have received notifications since July 14 about your eligibility for loan forgiveness, there’s no need to take any further action.
These notifications apply to borrowers with Direct Loans or Federal Family Education Loans (FFEL) held by the Department, including Parent PLUS loans.
They qualify for forgiveness as a result of receiving credit toward IDR forgiveness for various qualifying periods, such as repayment status, forbearance, deferment, economic hardship, or military deferments.
To take advantage of the IDR Account Adjustment, borrowers with commercially held FFEL loans will need to consolidate their loans by the end of 2023.
Due to potential legal challenges against the waiver, experts recommend borrowers with commercially-held FFEL loans consolidate immediately.
The Biden administration’s latest move represents a significant step in providing much-needed relief to student loan borrowers, and as the IDR Account Adjustment takes effect, many individuals may find themselves on a faster path to debt relief and financial security.
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