Roughly 150,000 student loan borrowers get an email notifying them their debt has been canceled. (iStock)
President Joe Biden’s Administration announced $1.2 billion in student loan forgiveness for qualifying borrowers enrolled in the Saving on Valuable Education (SAVE) plan, according to a White House statement.
The move will zero out the balance for roughly 153,000 borrowers enrolled in the plan who have been making at least 10 years of payments and initially took out $12,000 or less for college. The administration is implementing this provision nearly six months ahead of schedule – it was originally scheduled for July. Borrowers who qualify will automatically have their debt discharged and will begin receiving emails from Biden this week telling them they are approved for forgiveness.
The latest student debt discharges bring the total amount of loan forgiveness to nearly $138 billion for almost 3.9 million borrowers through more than two dozen executive actions. Student loan forgiveness has come to millions even as the Supreme Court blocked Biden’s original debt forgiveness plan last June. The original plan would have canceled up to $10,000 in federal loans per borrower making less than $125,000 a year (couples making less than $250,000) and up to $20,000 per borrower for those who used Pell Grants in college, eliminating about $441 billion in outstanding student debt.
“As of today, we have approved loan relief for nearly 3.9 million borrowers who were counting on the Biden-Harris Administration to fix the broken student loan system and provide the forgiveness they earned and have been waiting for,” U.S. Under Secretary of Education James Kvaal said. “For too long, the system did not work for borrowers, even when they were eligible for loan forgiveness. Today’s announcement shows that President Biden’s commitment to student debt cancelation continues to deliver.”
Private student loan borrowers can’t benefit from federal loan relief. But you could lower your monthly payments by refinancing to a lower interest rate. Visit Credible to speak with an expert and get your questions answered.
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Community college students will be debt-free sooner
Students attending community college with federal student loans and other borrowers with smaller loans could be debt-free faster than ever under SAVE. The White House said that 85% of future community college borrowers will have no federal student loan debt within 10 years. Borrowers eligible for relief just have to enroll in SAVE.
There are now 7.5 million borrowers enrolled in the SAVE Plan and 4.3 million borrowers have a $0 monthly payment. Beginning in July, undergraduate loan payments will be halved, capping a borrower’s loan payment at 5% of their discretionary income.
The SAVE Plan calculates the monthly payment amount based on a borrower’s income and family size, according to the Department of Education. That means that for those earning $32,800 a year or less, which translates to roughly $15 an hour, their monthly payment would drop to $0 immediately.
The program promises at least $1,000 a year of savings for borrowers earning above that threshold compared to other Income-Driven Repayment (IDR) plans. The plan also ensures that if borrowers make their monthly payments, their balances cannot grow because of unpaid interest.
If you hold private student loans, you won’t be enrolled in a federal income-driven repayment plan, but you could refinance your loans to a lower rate. Visit Credible to compare options from different lenders without affecting your credit score.
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Millions of borrowers struggle with repayments
Student loan payments resumed in October following a 42-month payment pause. While there are several avenues for relief, millions of borrowers have missed at least one payment. Some borrowers are refusing to pay in the hopes it will pressure the government to cancel their outstanding debt, a recent Intelligent.com survey said.
Over one-third (36%) of borrowers who haven’t made any payment said they planned to resume as soon as possible, with the same number saying they are unsure when they’ll resume payments. Another 12% of these borrowers said they are using the Biden administration’s ‘on-ramp’ to student loan repayment, in which borrowers won’t face penalties like having missed payments reported to credit bureaus until September 2024.
While most borrowers have missed payments because they can’t afford them, 9% have boycotted payments to pressure the government into canceling student debt. Most of these borrowers hope their efforts will bring attention to the student loan debt conversation.
If you’re having trouble making payments on your private student loans, you won’t benefit from federal relief. You could consider refinancing your loans for a lower interest rate to lower your monthly payments. Visit Credible to get your personalized rate in minutes.
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