Student loan borrowers are struggling to make repayments
The Department of Education estimates 43 million people in the U.S. owe a collective $1.6 trillion in federal student loan debt.LEARN MORE
The announcement primarily affects borrowers who took out small student loans and have made payments for over a decade.
The Biden administration announced early Friday that it will forgive some borrowers of their student loan debt starting next month.
The White House said that student loan borrowers enrolled in the Saving on a Valuable Education (SAVE) Plan who have made payments for at least 10 years and originally took out up to $12,000 will be eligible. Eligible borrowers will have their loans automatically forgiven.
Officials did not say how many borrowers are impacted by Friday's announcement.
Additionally, the White House said for every $1,000 borrowed above $12,000, a borrower can receive forgiveness after an additional year of payments. That means someone enrolled in the SAVE Plan with an original debt of up to $21,000 would have their loans forgiven by the time they reach 20 years of payments.
Borrowers in income-driven repayment plans have long been eligible for forgiveness after 20 years of repayments, but generally not any sooner.
As part of Friday's announcement, the White House said it will launch outreach efforts to encourage more borrowers to enroll in the SAVE Plan, especially those who may be eligible for immediate forgiveness.
“Beyond being the most affordable student loan repayment plan ever available, the Biden-Harris Administration designed the SAVE Plan to put community college students and other low-balance borrowers on a faster track to debt forgiveness than ever before,” said U.S. Secretary of Education Miguel Cardona.
The announcement comes amid a broad push to get more students to sign up for income-driven repayment plans, which the Department of Education says help lower monthly payments for borrowers. Officials say single borrowers who earn less than $32,800 per year or those in a family of four making less than $67,500 do not have a monthly payment.
The Biden administration says that 6.9 million Americans are enrolled in the SAVE Plan.
The White House has touted the new plans as a response to its failed attempt to forgive up to $20,000 in student loan debt among low and middle-income borrowers. That plan was denied by courts in 2023.
Previously, borrowers using income-driven repayment plans on undergraduate loans were expected to pay 10% of their discretionary income. Discretionary income was previously considered any dollar made above 150% of the poverty level.
Now, borrowers with only undergraduate loans are expected to pay 5% of their discretionary income. The amount considered discretionary income increased to 225% of the federal poverty level.
In July 2023, the government made changes to how it would count how much time borrowers were in repayments. This meant nearly 901,000 borrowers who took out student loans at least 20 years ago became eligible for loan forgiveness.
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