By Matthew Arrojas
Borrowers enrolled in the newest income-driven repayment (IDR) plan will see over $1 billion in student loan forgiveness.
The Department of Education (ED) will soon discharge $1.2 billion in federal student loan debt for borrowers enrolled in the new Saving on a Valuable Education (SAVE) plan, which creates low monthly payments for borrowers. Under the SAVE plan, borrowers who originally took out $12,000 or less in student loans qualify for automatic debt forgiveness after 10 years of making payments.
Nearly 153,000 SAVE plan borrowers benefited from this mechanism during this latest round of relief, according to ED.
President Joe Biden’s administration initially did not plan on wiping debt for SAVE plan borrowers who took out relatively low loan amounts until July. However, ED announced in mid-January that it would accelerate the timeline and begin erasing debts in February.
Forgiveness doesn’t just apply to those who borrowed $12,000 or less.
For every $1,000 borrowed above $12,000, a borrower must add one year to the timeline for forgiveness. Someone who borrowed $13,000 to attend college, for example, can qualify for forgiveness if they’ve been in repayment for 11 years.
All SAVE plan borrowers are eligible for forgiveness after 20 years of repayment, no matter the original debt size.
With today’s announcement, we are once again sending a clear message to borrowers who had low balances: If you’ve been paying for a decade, you’ve done your part, and you deserve relief,
ED Secretary Miguel Cardona said in a statement. Under President Biden’s leadership, our administration has now approved loan forgiveness for nearly 3.9 million borrowers, and our historic fight to cancel student debt isn’t over yet.
ED added that there are now 7.5 million borrowers enrolled in the new SAVE plan, which became available in July 2023.
Of those 7.5 million borrowers, approximately 4.3 million qualify for $0 monthly payments. That means their income is low enough, relative to their family size, to make progress on the timeline to forgiveness without having to make monthly payments.
Borrowers who qualify for forgiveness through this latest round do not need to take any actions to see their debts settled, ED said. They can expect an email from Biden’s administration soon, and their debts will be automatically wiped.
Biden’s administration has now forgiven $138 billion in federal student loan debt over the past three years through various executive actions, according to a White House statement.
This relief has given borrowers critical breathing room in their daily lives, allowing them to afford other expenses, buy homes, start businesses, or pursue dreams they had to put on hold because of the burden of student loan debt,
Biden said in a statement.
Meanwhile, negotiators will meet for a fourth and final time later this week to discuss a Plan B student loan debt forgiveness plan. ED officials have engaged with higher education stakeholders since late 2023 to develop a new forgiveness plan after the U.S. Supreme Court struck down Biden’s initial blanket forgiveness plan last year.