“The Biden administration on Tuesday announced changes to federal student loan repayment plans that will make it easier for millions of borrowers to have their debts forgiven after being required to pay for 20 or 25 years.
Education Department officials said they would make a one-time revision to millions of borrower accounts to compensate for what they called longstanding failures of how the agency and its contracted loan servicers managed the income-driven repayment programs. Democrats and consumer groups have been calling on the Biden administration to enact such a policy in recent months.
The income-driven repayment programs are designed to provide loan forgiveness to borrowers who have been making payments tied to their income for at least 20 or 25 years. But few borrowers have successfully received relief under those plans, which Democrats have long promoted as an important safety-net for struggling borrowers.”
“The Education Department said it would make a one-time adjustment to borrower accounts to provide credit toward loan forgiveness under income-driven repayment for any month in which a borrower made a payment. Officials will credit borrowers regardless of whether they were enrolled in an income-driven repayment plan.”
“Department officials said they would credit borrowers for months in which borrowers were in long-term forbearances or any type of deferment before 2013. But borrowers will not receive automatic credit for months in which they were in default or enrolled in shorter-term forbearances or certain types of deferments after 2013.”
“The Education Department said the changes lead to “immediate debt cancellation” for at least 40,000 borrowers under the Public Service Loan Forgiveness program and “several thousand” borrowers under income-based repayment programs.
A further 3.6 million borrowers will receive at least three years of retroactive credit towards loan forgiveness under income-driven repayment. The credit will be automatically applied to borrower accounts, regardless of whether a borrower is currently enrolled in an income-driven repayment plan”