The Biden administration recently introduced a student loan forgiveness program, amounting to $39 billion, to alleviate the financial burden faced by borrowers with federal student loan debt.
The plan’s specifics were published in the Federal Register, initiating the complex process of modifying federal policies under the Administrative Procedures Act.
The Department of Education’s proposal focuses on the repayment history of borrowers spanning at least two decades.
According to information provided by the Department of Education, individuals who have made a minimum of 240 or 300 qualifying payments, equivalent to 20 or 25 years respectively, will be eligible for this debt relief initiative.
Notably, late, partial, or deferred payments will now be considered in the determination of eligibility. Additionally, repayment pauses and periods of economic hardship will be counted towards meeting these thresholds, representing a significant change in policy.
“By fixing past administrative failures, we are ensuring everyone gets the forgiveness they deserve, just as we have done for public servants, students who were cheated by their colleges, and borrowers with permanent disabilities, including veterans.,” said Secretary of Education Miguel Cardona in a statement.
“We are correcting those errors and as a result, more borrowers will have their loans discharged.”
The newly introduced program is expected to benefit around 800,000 borrowers by canceling their federal student loan debt.
However, individuals who have not been making payments for an extended period may not meet the eligibility criteria. It’s important to note that private loans are not covered by this initiative.
The Department of Education will commence the debt cancellation process immediately and will notify affected borrowers accordingly.
Debt discharges will begin 30 days after the notification emails are sent, and borrowers will be informed by their loan servicers once the process is completed.
This decision comes after President Biden’s initial proposal for broader loan forgiveness, which aimed to cancel up to $20,000 for Pell Grant recipients and $10,000 for other federal borrowers, was rejected by the Supreme Court.
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Concerns primarily revolved around the income limits set for beneficiaries. While the current loan forgiveness program provides some relief to a portion of borrowers, critics argue that it falls short of the comprehensive reforms necessary to address the widespread issue of student loan debt in the United States.