Student loan forgiveness: Who is eligible for the $39 billion student debt forgiveness plan?

In a recent announcement, the US President Joe Biden’s Administration revealed a new program that will result in approximately 804,000 borrowers having $39 billion of their federal student loan debt forgiven within a few weeks. This program comes after the Supreme Court's decision in June, which prevented Biden from implementing a more extensive plan to forgive $441 billion in loans.

The program introduced by the Department of Education specifically targets borrowers who are enrolled in income-driven repayment (IDR) plans for their federal student loans. Under an IDR plan, borrowers are required to make consistent payments for a period of either 20 or 25 years. Once this payment period is completed, the government forgives any remaining balance.

The Education Department aims to address the issue of inaccurate accounting that caused many borrowers to lose progress towards loan forgiveness. It also alleges that some loans were mistakenly placed in forbearance by loan servicers. As part of the new program, past payments made by IDR borrowers will be acknowledged and credited towards their progress towards loan forgiveness, which should have been achieved by now.

Who is eligible for Biden’s student loan forgiveness plan?

Under the new forgiveness plan, borrowers who are already eligible for some forgiveness through an existing program will benefit. To qualify, they must have made a minimum of 240 or 300 monthly payments, depending on their specific repayment plan and loan type. Previously, late, partial, or deferred payments did not count towards meeting this requirement.

Eligible borrowers enrolled in income-driven repayment (IDR) plans will receive notification about the new forgiveness plan in the coming days. The discharge process will commence 30 days after an emailed notice is sent. This includes borrowers with Direct Loans or Federal Family Education Loans, including Parent PLUS loans, held by the Education Department.

To be eligible for forgiveness under the IDR plan, the Education Department states that borrowers must meet the necessary threshold based on various payment periods:

• Any month when the borrower was in a repayment status, regardless of the payment amount, loan type, or repayment plan.
• Any consecutive 12-month period of forbearance.
• Any month of forbearance for borrowers with a cumulative total of at least 36 months in forbearance.
• Any month of deferment (excluding in-school deferment) before 2013.
• Any month of economic hardship or military deferment on or after January 1, 2013.
• If any of these circumstances occurred before loan consolidation, they will also count towards meeting the forgiveness requirements.

FAQs:

Q1:Who is Joe Biden?
Joe Biden, a member of the Democratic Party, is currently serving as the 46th President of the United States. Prior to his presidency, he held the position of vice president from 2009 to 2017 under President Barack Obama. Biden also had a long tenure representing Delaware in the United States Senate from 1973 to 2009.

Q2:What is income-driven repayment (IDR) plan in US?
IDR plans are federal student loan repayment options that consider your income and family size to determine affordable monthly payments, offering relief to borrowers struggling with standard payments. The four IDR plans available include PAYE, ICR, REPAYE, and IBR, meaning Pay As You Earn, Repayment Plan for Income-Contingent Repayment, Revised Pay As You Earn and Income-Based Repayment respectively.