West News Wire: In an effort to correct what it says “administrative failures” that prevented student loan borrowers from receiving the relief they were entitled to under their repayment schedules, the Department of Education will cancel the debts of 804,000 people on Friday.
Those 804,000 borrowers have been repaying their debts in accordance with income-driven repayment plans, which, depending on the plan, permit debt forgiveness after 20 or 25 years of on-time payments.
However, officials said that many borrowers had been forced to make payments much past their due dates as a result of tracking problems.
Miguel Cardona, the secretary of education, said in a statement on Friday that “borrowers fell through the cracks of a broken system for far too long that failed to keep accurate track of their progress towards forgiveness.”
“By fixing past administrative failures, we are ensuring everyone gets the forgiveness they deserve, just as we have done for public servants, students who were cheated by their colleges, and borrowers with permanent disabilities, including veterans,” Cardona said.
The Department of Education offers a number of different income-driven repayment plans, but all of them aim to erase any outstanding debt after 20 to 25 years of payments and base a borrower’s monthly payment on their income.
The debt relief announced on Friday for more than 800,000 people acknowledges that the cancellation component of the plan frequently doesn’t take place, a problem that has also been extensively documented by government watchdogs.
The Department of Education “has had trouble tracking borrowers’ payments and hasn’t done enough to ensure that all eligible borrowers receive the forgiveness to which they are entitled,” the Government Accountability Office stated in a 2022 report.
A government agency said, “We discovered thousands of borrowers still in repayment who may now be eligible for forgiveness.”
The Department of Education will automatically relieve $39 billion of debt as a result of Friday’s changes to the income-driven repayment plans.
The Department of Education stated that borrowers will be informed on Friday and that relief will start 30 days later.
The department recommended debtors to get in touch with their loan servicers if they did not want their obligations dismissed. Once a borrower’s debt has been forgiven, servicers are responsible for informing them.
“Millions of debtors had earned loan forgiveness at the start of this Administration but never got it. James Kvaal, the under secretary of the Department of Education, stated in a statement on Friday that this was unacceptable.
We are upholding the deal we gave debtors who have finished decades of repayment today.
The debt relief announced Friday is part of a wave of fixes to programs that weren’t holding up their end of the deal. That includes $45 billion to people enrolled in Public Service Loan Forgiveness who weren’t getting the debt relief they were promised, and $22 billion to borrowers who were defrauded by for-profit colleges.
According to the agency, the changes made for persons on income-driven repayment programmes on Friday brought the overall amount of debt relief to $116.6 billion. More than 3.4 million borrowers now have relief.
Corrections to the Department of Education’s loan system are being made as the Supreme Court in June rejected President Joe Biden’s plan to massively roll back debt relief.
For those earning below a specific income, that program a Biden campaign promise would have cancelled loans totaling between $10,000 and $20,000, but it was rejected as being outside the president’s purview.
Since then, the White House has announced a new income-driven repayment plan that will lower monthly payments to 5% of a person’s discretionary income, down from 10%, and decrease the timeline for forgiveness down to 10 years of payments, from 20 or 25, if the initial loan was less than $12,000.
The Department of Education is also in the rulemaking process to attempt debt forgiveness again through a different law, the Higher Education Act, though it’s likely to face legal challenges.