The Biden administration has approved $175 billion in student loan forgiveness, which is a welcome relief for almost 5 million borrowers in the United States. This is a positive development regarding the student debt issue, although many are still expecting a broader debt relief. Here’s how this new loan forgiveness program works, who qualifies for it and everything else you need to know.
What is the $175 billion in student loan forgiveness?
The Biden administration has used various existing programs to cancel student debt for different categories of borrowers. So far, $175 billion in loans has been forgiven, benefiting public service workers, people with disabilities, and those defrauded by certain colleges.
This debt forgiveness covers about 11% of all outstanding federal student loan debt. While it falls short of the $430 billion that would have been wiped out under Biden’s one-time forgiveness plan that was struck down by the Supreme Court, it still marks a historic achievement for millions of people.
Who qualifies for this student loan forgiveness?
Several groups of borrowers are eligible for this relief, including:
- Public Service Workers: More than 1 million borrowers have qualified for debt relief through the Public Service Loan Forgiveness (PSLF) program. This program forgives the remaining balance on federal student loans for people who work in public service—like teachers, nurses, and government employees—after they make 10 years of qualifying payments.
- Disabled Borrowers: The Department of Education has also provided loan forgiveness to approximately 572,000 borrowers who are permanently disabled. These individuals are entitled to full loan forgiveness, but previous administrative hurdles made it difficult for them to access this benefit. The Biden administration has streamlined this process, making it easier for disabled borrowers to receive relief.
- Borrowers Defrauded by Colleges: More than 1.6 million borrowers who were defrauded by their schools, often for-profit institutions, have also received loan forgiveness. Many of these borrowers were left with significant debt and no meaningful education or job prospects. The administration has worked to clear a backlog of claims from these borrowers, which had built up under the Trump administration.
How does the Public Service Loan Forgiveness (PSLF) program work?
The PSLF program guarantees the cancellation of debts for persons who devote 10 years of work in public service and make the necessary payments. However, there have been several complaints regarding the functionality of this program, with many borrowers getting denied forgiveness as a result of administrative issues. Before the inception of President Joe Biden, less than 7,000 borrowers received loan forgiveness via PSLF, in spite of the fact that this program is more than 10 years old.
The program under Biden has undergone massive transformations in relation to the PSLF enabling more and more borrowers to qualify for loan forgiveness. The new regulation explains that even if payments were made under a wrong payment plan or loan type, the borrower will get a credit for the specific number of payments made. The efforts of the Biden administration toward student loans is to make sure that loan forgiveness is accessible to tons of thousands of borrowers.
Why is there still no broad student loan forgiveness?
While the Biden administration has made some progress in canceling some of the student debt that is existing through current programs, the wider plan of loan forgiveness was turned down by the Supreme Court. The plan was aimed at offering as much as $20,000 in student loans forgiveness for many low-and middle-income earners but was dismissed owing to opposition from republican states in the courts.
Regardless, Vice President Kamala Harris has assured the public the fight for more student loan relief goes on. “We are fighting, and I am going to continue to fight for student debt relief,” she stated in a recent interview. Harris and other officials see making higher education affordable as a need which, in the long run, will reduce the financial strain of higher education on millions of Americans.
What’s next for student loan borrowers?
The Biden administration is focused on assisting borrowers under existing programs such as the PSLF and the disability loan forgiveness schemes even in the face of legal battles with the student loan forgiveness initiative. The administration will continue to provide further information where federal borrowers seek new and different forms of relief.
