: Biden administration to cancel $9 billion in student debt for 125,000 borrowers

Roughly 125,000 borrowers will have $9 billion in student debt cancelled, the Biden administration announced Wednesday. 

The cohort receiving the relief includes three groups of borrowers who have been eligible to have their debt forgiven for years but struggled to access that benefit. They are public servants who have been working for the government or certain nonprofits for more than 10 years and paying on their student loans during that time; borrowers who have been in repayment on their loans for more than 20 years; and borrowers who are severely disabled. 

The announcement comes as payments are resuming this month for 28 million student-loan borrowers for the first time in three years, now that the pandemic-era payment pause has ended. Some have reported challenges enrolling in repayment plans and getting correct information from their servicers about their payment amounts. 

Student-loan borrower advocates had called on the Biden administration to wipe debt off the books for borrowers who are already eligible for cancellation under the law before resuming repayment. They’ve said that would help alleviate some of the strain the return to repayment is putting on the student-loan system. It wasn’t immediately clear whether borrowers who are part of Wednesday’s announcement will have their debt cancelled right away or need to wait for a period for the discharge to be processed. 

Wednesday’s announcement is distinct from the broad-based debt cancellation that’s grabbed headlines in recent months. Earlier this year, the Supreme Court struck down the Biden administration’s plan to cancel up to $20,000 in debt for borrowers earning less than $125,000.

Last week, officials provided more detail on President Joe Biden’s plan to take another stab at mass debt forgiveness. The process to determine the contours of that relief continues, with a set of meetings next week, and likely won’t be resolved for several months. 

Part of groups already eligible for relief under the law

The borrowers covered by Wednesday’s announcement are part of groups that were already entitled to debt cancellation under the law, but for years have struggled to access it due to paperwork and technicalities. Officials have faced pressure from advocates for years to smooth the path to relief for these borrowers. 

The group includes 53,000 borrowers who are receiving $5.2 billion in cancellations under the Public Service Loan Forgiveness program. That initiative allows borrowers who work for the government and certain nonprofits to have their student debt forgiven after at least 10 years of payments. 

But it was notoriously challenging to access. Roughly 1% of borrowers who applied for relief in the first years of the program actually had their debt cancelled. The Biden administration has taken steps to make it easier for borrowers who meet the spirit of the law to overcome technicalities that in the past had stymied their path to forgiveness. 

In addition, the Department of Education has approved debt discharges totaling $2.8 billion for nearly 51,000 borrowers who made more than 20 years of payments on their loans, officials announced Wednesday.

For decades, the government has offered federal student-loan borrowers the ability to pay their debt as a percentage of their income and have the remainder cancelled after at least 20 years. The idea was to provide an alternative to borrowers who couldn’t afford to pay off their debt in 10 years through a mortgage-style plan. 

But in the first years, borrowers would have been eligible to have their debt forgiven under these income-driven repayment plans, more than 2 million borrowers who were in repayment for more than 20 years were still paying.

Consumer advocates and regulators said that was largely because servicers were steering borrowers towards forbearance — a status that pauses payments, but where the debt still accrues interest and borrowers don’t build credit toward forgiveness — instead of helping them sign up for these plans. 

Last year, the Department of Education said it would review borrowers’ payment history to see whether there were periods when they should have been building credit toward forgiveness, but those months weren’t accurately counted. The agency said it would adjust their payment history accordingly. The 51,000 borrowers are part of this group. Already the Biden administration has cancelled the debt of more than 800,000 borrowers through this initiative. 

Finally, officials said that nearly 22,000 borrowers who have a total or permanent disability will have about $1.2 billion in student loans cancelled. Borrowers with a disability that is so severe they’ll never work again qualify to have their federal student loans wiped out. But for years, many eligible borrowers found the application process, which historically required them to provide proof of their disability, challenging to navigate

In 2021, the Biden administration announced it would match borrowers’ data with data at the Social Security Administration, which through its work administering disability benefits has the information that would indicate whether a borrower is eligible for a total and permanent disability discharge. The roughly 22,000 had their debt discharged approved through this data match, the agency said. 

“For years, millions of eligible borrowers were unable to access the student-debt relief they qualified for, but that’s all changed thanks to President Biden and this administration’s relentless efforts to fix the broken student-loan system,” Miguel Cardona, the secretary of education, said in a statement announcing the relief.

“Today’s announcement builds on everything our administration has already done to protect students from unaffordable debt, make repayment more affordable and ensure that investments in higher education pay off for students and working families,” he added.  

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