Over the last couple of weeks, those of us currently saddled with student loan debt have watched closely as the topic of debt relief has bounced around between the Biden Administration, Congress, and the Supreme Court – which only very recently struck down the Administration’s plan to cancel up to $400 billion in student loans as unconstitutional.
As of Friday, July 14, however, the Biden-Harris Administration announced that over 804,000 borrowers will have a total of $39 billion in federal student loans automatically forgiven in the coming weeks. But what does that mean for you?
Who Qualifies: Income-Driven Repayment Plans
This action is specific to borrowers who have income-driven repayment loans, meaning borrowers whose monthly student loan payment is calculated based on income and family size.
As of April 2022, borrowers with income-driven repayment plans are offered forgiveness upon completion of a specified number of monthly payments, most commonly after 20 to 25 years.
However, this announcement broadens the definition of that forgiveness threshold and counts new circumstances as credit towards loan forgiveness, including:
- If you spent 12+ consecutive months in forbearance
- Months spent in repayment status
- Months spent in military deferments
- Months spent in economic hardship
Note: For a complete list please see the announcement on the U.S. Department of Education
When Will This Happen?
According to the Biden-Harris Administration, this will happen immediately. Eligible borrowers should expect to receive a notification of their eligibility starting Friday, July 14, 2023. They can then expect to receive a discharge 30 days “after emails are sent.”[1]
Why Are These Loans Being Forgiven?
The stated goal from the administration is to address issues with income-driven repayment (IDR) plans and ensure accurate tracking of borrowers’ progress toward loan forgiveness. There has been some question as to whether qualifying payments made under IDR plans were not properly accounted for in the past.
[1] https://www.ed.gov/news/press-releases/biden-harris-administration-provide-804000-borrowers-39-billion-automatic-loan-forgiveness-result-fixes-income-driven-repayment-plans