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Over 800,000 borrowers with $39 billion student loan debts to be forgiven



People rally in support of the Biden administration´s student debt relief plan in front of the the US Supreme Court on February 28, 2023 in Washington, DC. — AFP

Following months of student and government protests, the Biden administration declared on Friday that more than 800,000 borrowers with $39 billion in federal student loans would have their debt forgiven.

According to a Department of Education announcement, starting today, it will begin informing borrowers about the upcoming automatic discharge of their debt.

Two weeks ago, the Supreme Court rejected the Biden administration’s plan for widespread student loan forgiveness, which would have allowed more than 40 million borrowers to each receive up to $20,000 in debt forgiveness.

It was replaced with the debt relief programme.

Additionally, the Biden administration is working to enhance income-driven repayment plans (IDRs), which are designed to lower monthly student loan payments by tying a person’s payment amount to their income. This plan, which was unveiled on Friday, is associated with that initiative.

According to CBS News, the Biden administration announced debt forgiveness for 804,000 people who had signed up for IDRs and had made qualifying payments for 20 to 25 years.

The administration is now cancelling the loans because it claims that the management of the IDRs had “historical failures.”

The administration claimed in a statement that some “qualifying payments made under IDR plans that should have moved borrowers closer to forgiveness were not accounted for”.

“For far too long, borrowers fell through the cracks of a broken system that failed to keep accurate track of their progress towards forgiveness,” said US Secretary of Education Miguel Cardona in the statement.

The Higher Education Act and Education Department regulations allow borrowers to receive forgiveness after making 240 or 300 monthly payments in an IDR plan or standard repayment plan.

The number of months depends on the borrower’s initial loan type and enrollment. However, inaccurate payment counts led to some borrowers not progressing towards loan forgiveness. The borrowers of Direct Loans, Federal Family Education Loans, and Parent PLUS loans are covered.

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