U.S. unveils more student debt relief
White House announces $1.2 billion in forgiveness for 153,000 borrowers
President Joe Biden's administration announced that 153,000 borrowers will receive $1.2 billion in student loan forgiveness under a program unveiled in January seeking to provide relief for Americans who had been making payments for at least a decade.
The move — which benefits those enrolled in the government's Saving on a Valuable Education (SAVE) plan — wipes out loans for those who borrowed less than $12,000 for their higher education after doing 10 years of payments. Other income-driven repayment plans also forgive balances, but only after 20 or 25 years of repayment.
The Education Department had originally planned to begin forgiveness in July but started identifying eligible borrowers this month.
“With today's announcement, we are once again sending a clear message to borrowers who had low balances: If you've been paying for a decade, you've done your part, and you deserve relief,” said Education Secretary Miguel Cardona in a statement.
The latest round pushes the total relief approved by the Biden administration to nearly $138 billion, benefiting 3.9 million borrowers. That number could grow as more people become eligible for forgiveness under the SAVE program, which has 6.9 million people enrolled. Administration officials have declined to estimate how many borrowers will eventually see loans forgiven under the program.
So far, about 7.5 million people of the over 40 million with federal student loan debt are enrolled in SAVE. The plan pegs monthly student loan payments to earnings and family size, just like other income-driven plans. One big difference is that the new plan increases the amount of income protected from the calculation of debt payments from 150% to 225% of the federal poverty line.
That means a single borrower earning less than $15 an hour will be spared from payments. Those earning more would save an estimated $1,000 a year, according to the department. Even if borrowers' monthly payment is $0, they will still get credit toward forgiveness. According to the Education Department, 4.3 million people enrolled in the plan have a $0 monthly payment.
The department began introducing some features of the SAVE plan in time for the resumption of student loan payments in October. This summer, the federal agency will start capping payments for undergraduate loans to 5% — down from 10% — of income above the 225% federal poverty threshold. Borrowers with debt from undergraduate and graduate studies will pay a weighted average between 5 and 10 percent toward their debts.
Yet the efforts fall short of the president's proposal for more sweeping student loan cancellation — as much as $20,000 in relief per borrower — that was struck down last year by the U.S. Supreme Court. That forgiveness plan was estimated to cost $400 billion.
That disconnect may have eroded support for Biden, particularly among young voters.
A plurality of Gen-Z voters — 43% — said Biden was doing too little to address student loans, according to a Bloomberg News/Morning Consult poll of swing-state voters released in December. Yet 46% of swing-state voters overall said they supported the administration's student loan forgiveness programs, showing divides over the issue.
The Education Department may further expand loan forgiveness in the coming months, with Cardona telling reporters last week that it was pursuing new rules that could help additional borrowers.
While the administration has not yet revealed specifics of those new proposals, they're expected to help borrowers facing financial hardship or substantial accrued interest, as well as those with older loans or who went to for-profit college programs with a history of providing little value.
Still, the White House wants to capitalize on the actions Biden has already taken. Borrowers who had their debt forgiven would receive an email from the president letting them know starting Wednesday.
“From day one of my Administration, I vowed to fix student loan programs so higher education can be a ticket to the middle class — not a barrier to opportunity,” Biden wrote in the email that was sent out to all 153,000 borrowers.
In his email, Biden described his list of actions to help students, touting “everything else my Administration has achieved for students and borrowers,” from debt cancellation to expanding Pell grants. “I promise you that I will never stop fighting for hardworking American families, and I will never stop working to make sure my Administration delivers for the American people.”