Just over two weeks have passed since the U.S. Supreme Court rejected a student loan forgiveness plan proposed by Joe Biden’s administration. However, the Department of Education wasted no time and introduced new measures to alleviate student debt. Nevertheless, the Supreme Court’s rejection of the previous plan has caused skepticism and led beneficiaries to wonder if there will be another legal block imposed.
The Department of Education announced last week that $39 billion in federal student loans will be forgiven in the coming weeks. This is actually the result of a plan announced in the spring of 2022 to correct errors in income-driven repayment plans.
Income-driven repayment plans allow borrowers with limited income to make monthly payments that are lower than the initial loan terms prescribed. Four repayment plans cover individuals close to or at the federal poverty line. After 20 or 25 years of payments, any remaining balance is eliminated.
Federal officials claimed that many borrowers did not receive credit for the payments they had made, leaving them with longer monthly payments than they should have, and stated that this adjustment would correct the errors. According to the Department of Education, the 800,000 borrowers who qualify for this loan forgiveness plan were not informed that they no longer needed to make payments.
This is different from the plan that the Supreme Court struck down last month.
That plan promised up to $10,000 in loan forgiveness for those earning $125,000 or less, and up to $20,000 for those who received Pell Grants while in school. After challenges from several states, arguing that the Biden administration exceeded its authority, the Supreme Court ruled that the Department of Education needed Congressional approval first because the law did not grant it permission to unilaterally forgive debt.
How to know if you are among the 800,000 who received student loan forgiveness?
The types of borrowers eligible for this plan include those with Direct Loans and those with Federal Family Education Loans held by the Department (including any type of Parent PLUS loans).
According to the Higher Education Act and the Department of Education, a borrower is typically eligible for forgiveness under income-based plans after making 240 or 300 monthly payments – equivalent to 20 or 25 years in a standard repayment plan.
Those who are eligible will be notified by the Department of Education that they qualify to have the remainder of their loans forgiven without any further action on their part.
Source: WUSA9