Biden administration changes to student loan programs could bring millions of millions closer to getting out of debt

The Department of Education on Tuesday announced corrections to several student loan programs, giving thousands of borrowers immediate relief from student loan debt and bringing millions of years closer to having their student loans forgiven. This comes as the Biden administration continues to examine student loan debt cancellation for millions of Americans.

Changes are being made to Utility Loan Forgiveness programs and Income-Oriented Repayment plans. According to the Department of Education, the corrections will provide immediate forgiveness to 40,000 borrowers and bring at least 3.6 million borrowers closer to relief in at least three years through income-based payments.

“Student loans were never intended to be a life sentence, but it certainly is for borrowers who are not entitled to the debt relief they are eligible for,” Education Secretary Miguel Cardona said in a statement. He said the measure begins “to remedy years of administrative failures” and the actions demonstrate the government’s commitment to providing “significant debt relief and ensuring that federal student loan programs are administered fairly and effectively.”

A review by the Federal Student Aid office found that some servicers were putting borrowers facing financial hardship into forbearance, violating regulations that require borrowers to obtain clear and accurate information about their options to stay out of default. This happened even when monthly payments under income-based payment plans could have brought their payments to zero dollars, the Department of Education said.

To address the issue, the Department of Education will perform a one-time account adjustment to account for certain long-term tolerances regarding income and public service related forgiveness. The changes will automatically apply to borrowers’ accounts later this year. Borrowers who have been targeted for short-term tolerances will also be able to pursue account reviews. At the same time, management will increase oversight of servicers’ abilities to enroll borrowers on forbearance, including working with the Department of Consumer Financial Protection to conduct regular audits of forbearance use.

Meanwhile, in its review of the income-based repayment program, the Department of Education found “significant flaws” suggesting borrowers were missing progress toward forgiveness. The Federal Student Aid office will conduct a one-time review of income-directed payments, so any month a borrower makes payments will count toward forgiveness, no matter what payment plan they are on. This includes payments made prior to loan consolidation. For those who have made the required number of payments – typically 120 – the loans will automatically cancel.

In an effort to permanently fix the problem, the Department of Education will issue new guidance to attendants. Starting next year, borrowers will be able to log into their accounts through the Federal Student Aid office to view their own progress toward income-based payment forgiveness online. In addition, the Department of Education plans to take steps to further simplify payment counting, allowing more loan statuses to be accounted for for income-based forgiveness.

The efforts announced Tuesday come as the Biden administration has canceled more than $17 billion in debt to some 725,000 borrowers since President Biden took office.

Earlier this month, the White House also announced an extension of the federal student loan repayment pause until August 31. White House press secretary Jen Psaki recently said that the administration would make a decision between now and after student loan debt cancellation, or the break would be extended even further.

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