President Joe Biden’s administration will automatically wipe a total of $39 billion in federal student loans for more than 804,000 borrowers in the coming weeks, the U.S. Department of Education announced on Friday.
The relief comes just a few months before borrowers have to start repaying their federal student loans after the COVID-19 pandemic triggered a three-year pause.
The administration’s move is a result of fixes to the student loan system’s income-driven repayment plans that ensure all borrowers have an accurate count of the number of monthly payments that qualify toward forgiveness.
“Nearly a million borrowers who have been trapped in decades of never-ending payments will finally get the relief Congress intended,” Persis Yu, deputy executive director and managing counsel at the Student Borrower Protection Center, said in a statement.
“This is only the tip of the iceberg,” Yu said. “Working people with student loan debt have been made collateral damage by a dysfunctional student loan system.”
The Biden administration and education department have also created a new repayment plan called Saving on a Valuable Education (SAVE).
The SAVE plan will cut payments on undergraduate loans in half, ensure that borrowers’ balances don’t grow as long as they keep up with their required payments and allow borrowers to save more of their income for basic needs, according to the Department of Education.
Unfortunately, the new payment system (SAVE) is only for those who make less than $32,800 per year ($67,500 for a family of four). The rest of us are going right back to getting bent over, making payments on loans that never seem to go down.