July 18, 2023: On Friday, the Biden administration announced that it would automatically discount nearly $40 billion in student debt for the borrowers.
The relief results from fixes to the student loan system’s income-driven repayment plans. Under those repayment plans, borrowers get any remaining debt canceled by the government after making payments for 25 years, depending on when they took it and their loan and plan type.
In the past, payments that should have carried a borrower closer to being debt-free were not accounted for, according to the Biden administration.
“For far too long, borrowers dropped through the cracks of a damaged system that failed to keep accurate track of their progress towards forgiveness,” U.S. Secretary of Education Miguel Cardona said in a statement.
To bring people over the line for forgiveness, the Biden administration counted payments for borrowers who’d paused in certain deferments and forbearances and those who’d caused partial or late payments.
Although the forgiveness is a massive victory for borrowers, it is a relief to which they were entitled, said Persis Yu, deputy executive director at the Student Borrower Protection Center.
″Make no mistake, around 804,000 people are receiving relief with this action because of 804,000 losses, which is only the tip of the iceberg,” Yu said in a report. “Working people have been collateral damage by a dysfunctional student loan system.”
The report comes days after the Supreme Court struck down President Joe Biden’s total student loan release program, which would have relieved almost 37 million people.