Student loan forgiveness: 153,000 to have loans canceled under new repayment plan

Under President Joe Biden’s new student loan repayment program, 153,000 borrowers will be getting emails Wednesday that say their student loan debt is being canceled.

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News of the $1.2 billion in debt cancellation is part of the new provision in the Saving on a Valuable Education (SAVE) income-driven repayment plan, the Department of Education announced Wednesday.

The administration promised last month to accelerate forgiveness for borrowers with low original balances who are enrolled in the SAVE plan.

Instead of paying on loans monthly for 20 to 25 years, enrollees in the SAVE plan who borrowed less than $12,000 can have their debt wiped clean after 10 years of payments.

For every $1,000 a borrower took out above the $12,000 threshold, they can get their loans canceled with another year of payments.

About 7.5 million people are enrolled in SAVE. There are more than 40 million people who have federal student loan debt.

“If you’ve been paying for a decade, you’ve done your part, and you deserve relief,” Education 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.”

According to the DOE, borrowers who get the emails will not need to take any action to get the loan cancellation.

“Moving forward, borrowers who meet the eligibility criteria for forgiveness under the Save plan will have their loans automatically discharged with no action needed on their part,” the DOE said in the news release.

The department will be contacting borrowers next week who would be eligible for early cancellation under the SAVE plan but are not currently enrolled in the plan.

The DOE plans this summer to begin to cap payments for undergraduate loans at 5%. That is down from the prior requirement of 10% of a person’s income above the 225 percent federal poverty threshold.

Borrowers with debt from undergraduate and graduate studies will pay a weighted average between 5 and 10 percent toward their debts, the department said.

The plan is the latest in a series of moves the administration has implemented since the U.S. Supreme Court ruled that President Joe Biden overstepped his authority when he initially attempted to cancel up to $20,000 for an estimated 43 million people with incomes under $125,000. Biden asked the Education Department to craft a new plan under a different legal basis.

A plan announced by Biden in July aims to adjust how the Education Department calculates certain student loan payments. The adjustments were being made, the department said, to correct past errors in counting payments and the result would show that borrowers made payments that were not counted correctly toward their debt.

In November, around 813,000 borrowers were notified that their loans had been forgiven under the Education Department’s one-time account adjustment.

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