- 804,000 student-loan borrowers will get $39 billion of automatic debt relief through reforms to income-riven repayment.
- The Education Department said it will begin notifying borrowers in the coming weeks.
After the Supreme Court struck down President Joe Biden's broad plan for student-loan forgiveness, his administration just announced a new form of relief for borrowers.
On Friday, the Education Department said it will be automatically canceling $39 billion in student debt for 804,000 borrowers as a result of changes to the department's income-driven repayment plans. Income-driven repayment plans were intended to forgive borrowers' debts after at least 20 years of qualifying payments, but flaws in the system — like administrative errors and difficulties tracking payments — have left many borrowers in repayment far longer than necessary.
Friday's announcement applies to borrowers who have "accumulated the equivalent of either 20 or 25 years of qualifying months," according to the press release.
"At the start of this Administration, millions of borrowers had earned loan forgiveness but never received it. That's unacceptable," Under Secretary James Kvaal said in statement. "Today we are holding up the bargain we offered borrowers who have completed decades of repayment."
Borrowers receiving notices of forgiveness in the coming days are those with direct student loans or loans in the Federal Family Education Loan program — all loans held by the Education Department — who have reached the necessary forgiveness threshold during any of the following periods:
- Any month when the borrower was in repayment status, regardless of whether the loans were partial or late
- Any period when the borrower spent 12 or more consecutive months in forbearance
- Any month in forbearance when borrowers were in forbearance for 36 or more cumulative months
- Any month in deferment before 2013
- And any month spent in economic hardship or military deferment on or after January 1, 2013.
Any those months spent prior to loan consolidation into the federal direct loan program will also be counted toward forgiveness, the department said.
The Education Department said that discharges will begin 30 days after it sends emails to eligible borrowers, and borrowers who want to opt out of the relief have to contact their student-loan servicer. Eligible borrowers will also have repayment on their loans paused until the relief is processed.
The news comes shortly after the Supreme Court on June 30 struck down Biden's plan to cancel up to $20,000 in student debt for federal borrowers. While the high court ruled that the law Biden used for that relief was an overreach of authority, the department announced it is beginning the process of getting relief to borrowers using the Higher Education Act of 1965, which will take longer than the first time around due to the negotiated rulemaking process.
"For far too long, borrowers fell through the cracks of a broken system that failed to keep accurate track of their progress towards forgiveness," Education Secretary Miguel Cardona said in a statement, adding that "this Administration will not stop fighting to level the playing field in higher education."